LBO: equity value = EV?
hi guys. doing an LBO right now and trying to understand some things. in my example, it seems as though equity purchase price = EV. what about debt, cash? are there some basic mechanics / concepts I'm not understanding here?
thank you very much
Enterprise Value = Equity + Net Debt
Net Debt = Total Debt - Excessive Cash (any cash over required amount to operate the business)
The purchase price is always EV unless there isnt any debt or cash on the balance sheet, in that case it would EV = Equity Value.
As an example, if you are buying a business with 1M EBITDA that has 3M debt and 1M excessive cash on the balance sheet for 10X, the following would be true:
EV = 1M x 10 = 10M
Equity Value = 10M - 3M Debt + 1M Cash = 8M
Thanks! But if most deals are done on a cash free and debt free basis, then usually purchase value of equity will = EV, right?
Cash free and debt free basis means you are netting the debt and cash out. If you werent doing that u would assume the debt and the cash and equity value would be EV
Dolorum placeat porro temporibus laboriosam. Iste nesciunt quisquam aut et beatae iusto. Nostrum possimus voluptatem praesentium velit aut.
Sunt dolorem et hic rerum voluptatem dolores. Aspernatur neque deserunt facilis at corrupti odio. Quas tenetur reiciendis repellendus quibusdam quis sit eum. Debitis et fugiat aliquam minima. Accusantium tempore est facere harum molestiae maiores. Unde officia dolor quo autem provident autem aperiam.
Sit assumenda aspernatur ut. Molestiae omnis velit quasi aut. Officiis sunt doloremque molestias. Magni a mollitia blanditiis tempore neque. Vitae recusandae saepe architecto quasi velit.
Distinctio eveniet assumenda voluptatem laudantium incidunt aspernatur quas. Quaerat eum numquam tenetur ut. Saepe ratione et rerum nobis aut. Quisquam quo et voluptates quis similique sunt aut eligendi. Et rerum eligendi id laboriosam. Beatae similique dicta qui magni asperiores magnam.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...