LBO exercise question
Well, I have got a question. I dont know if this the right place to ask so dont be angry at me if it isn't. I have been training LBO models lately, so easter holidays have been a real blast ahaha. I am currently doing a carlyle lbo exercise and there's something that I am not sure about it.
My question is about Equity Value and Goodwill:
1) Carlyle will buy a publicly traded firm with a 25 % premium. Imagine Stock Price = 10$ and 50 Basic Shares Out. and 10 stock options at 5$. Using the Treasury Stock Method, new shares issued is 5 (using the 10$) and so fully diluted shares outstanding = 15. Equity value would be 10$ * (1+25%) *15. But I have seen other people's solutions where they completely ignore the stock options, while others use the 10$ * (1+%premium = 25%) as the repurchase price, which hecking baffles me. How would you tackle it?
2) Now about Goodwill = Equity Value - Total Assets + Liabilities + (Existing Goodwill?), so does Goodwill accumulate? It is the only way my BS balances after 2 hours looking at what the heck was wrong on the model.
Bonus Question: They also mention that this is a stock deal so "no step-ups in the basis of the assets". So we don't do anything to PP&E, Intangible assets, and other L.T assets, right?
I'm happy to share the Carlyle exercise and my model as soon as I have finished (although I am still a rookie on this). I am in a recruitment process of a small PE firm so any help would be appreciated! Thank you!
some thoughts
1. if repurchase price = 10*1.25 is higher than option exercise price, then will exercise, repurchase 50+10 shares
2. goodwill is an insert number in BS when you can't balance equity and asset in pro forma model
seriously this is from Carlyle?
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