My friend recently completed a PE case study where he received a CIM extract that contained income statement figures for 2 FY (2020, 2021) and YTD 6 months (YTD June 2022) but only got balance sheet for 2 FY. The LBO transaction closed June 2022. Most of the practice models/tutorials doesn't explain what to do in situations like this.
How does one go about bridging the balance sheet gap of six month? Or do you guys just start with FY 2021 financials and ignore 6 months of income statement data?
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You could calculate key balance sheet line items (AR days and AP days) using the full year numbers you have been provided and roll those ratios forward to June 22 period.
This is how I would do it as well. I would hesitate to say what they are getting at, but it very well could be another test to see (1) if you notice the disparity, and (2) how you handle it.
similar questions here, i'v got 3 years and 1H 2022 income statement and balance sheet, the deal will close on 12/31/2022 (FY end date). do I adjust BS based on June 30, or project a 12/31/2022 BS, and then PF off that.
Would roll everything forward to transaction close
Ok just asked my friend, who asked his friend, who asked his friend who’s dad does case study preps. The dad told his son, who reported back to my friend’s friend’s friend, who reported back to my friend’s friend, who reported back to my friend, who reported back to me.
The message was: You should project out the other 6 months to get full current FY flows, use that to roll the FY balance sheet one FY forward, and use that balance sheet.
so in my case (i have 3 years annual and half year results for both IS and BS), i should project IS to year end, and use this cash flow to project BS to year end as well, and then perform pro-forma adjustment on this projected BS, am i correct?
yes
Yes, exactly what I told him. Also prorate any debt in the six months of projected balance sheet if there is any amort associated with the existing debt
This is incorrect. You are assuming the transaction closes in June this the cap structure changes. Take the average or the FY21 data for AR days / AP days along with other relevant metrics and project that forward to the end of the June transaction. This will serve as your beginning balance sheet then adj for the transaction then project out the rest of the year etc.
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