Majority Buy-Out PE
Hi all - appreciate it if anyone has an answer!
I came across a case where a PE buys 75% of a company, let's say purchase price has been agreed of 100 (EV, cash free debt free) and transaction fees of 10. I have secured financing of 50, what does my sources look like?
Scenario 1:
Debt: 50
Equity: 60
of which Management Equity: ((110-50))*25%= 15
of which Sponsor Equity: 45
Total: 110
Scenario 2:
Debt: 50
Equity: 60
of which Management Equity: ((100-50))*25%= 12.5
of which Sponsor Equity: 47.5
Total: 110
Scenario 1 sets the ownership in NewCo to 75/25% which comes in handy when you do exit calcs as the IRR is of course the same for the two parties. However, using scenario 2 and setting mgmt ownership to 25% at exit, IRR is slightly different (it is the same only when adjusting for the fact that sponsor pays the fees). As this is not a transaction with a management roll-over but was phrased as a majority deal, it seems plausible to me that the sponsor pays the fees but maybe it doesn't matter really?
Thanks a lot!
Ut eum molestiae porro maiores enim fuga qui. Corrupti dolor earum quia. Et rem fuga doloremque.
Qui excepturi quia eius recusandae animi. Sit omnis occaecati pariatur officia. Quia perspiciatis sed dolores impedit quibusdam nesciunt. Delectus qui perferendis qui explicabo ut vel totam.
Libero ut rerum possimus et ut corrupti hic. In voluptatum et fuga ut maxime dolores.
Ut distinctio ad sunt quia tempore eius aut. Et voluptas eos accusantium molestias magni expedita perspiciatis.
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...