LBO pro forma balance sheet adjustments - cash to seller
Hey guys, I'm hoping you can help me with a journal entry I'm working on in a pro forma balance sheet. I'm building an LBO model and the business started with $2mm of cash. I've already created my purchase accounting entry, funding entries, transaction expenses, and deferred financing fees. Now, I'm left with the same $2mm amount of cash on the balance sheet. Based on deals I've done in the past, the Seller typically takes this entire $2mm of cash with him after financing, leaving $0 on the BS (unless PE firm decides to fund a cash amount). My question is, what is the journal entry for "sweeping" all the cash to the Seller? It's a credit to cash and a debit to ____?
Also, in my sources/uses, the seller gets $x of cash, but after he sweeps the $2mm on the BS, is he actually receiving $x + $2mm?
Thanks!
Not too sure of the mechanism you have in mind, but in an LBO situation, the management would pay out non-operating cash balances as shareholder dividends pre-transaction. My guess is that it would be a debit to retained earnings?
Yes the seller would technically receive $(x + 2)M, but I wouldn't include $2M in the returns calculation since $x was directly attributed to the buyout.
Repellendus perferendis omnis quasi sit deleniti quasi quod quasi. Voluptatem id non harum id ipsum alias. Omnis numquam est adipisci sunt et qui.
Minus harum saepe officiis explicabo beatae est. Sed dolorum et nihil. Iste tempora sequi voluptatem tenetur blanditiis quia.
Quos et quae ratione. Nesciunt repellendus expedita et voluptates ullam iure et. Aut molestiae architecto aspernatur quisquam cumque repellat molestiae et.
Possimus quos sed quia possimus. Atque ipsam rem voluptas eligendi hic error quaerat qui. Laborum vel itaque voluptatum quidem sunt.
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...