LBO Model - purchase price deductions at closing?
In an LBO model test I received last week it stated purchase price deductions at closing.
Where would I put that in the model?
Can I just use TEV - net debt = Equity value
Equity value - purchase price deductions = purchase price?
Correct
There are certain items that PE firms use to argue where they will land on price through the merger agreement / SPA at the final part of negotiations. These items can be 'debt-likes' or other items that they will argue don't need to be cash funded at day 1 of the purchase or they'll require the prior owner to 'pay for' (e.g. pension obligations).
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