Hi guys,
Was looking at a couple technical questions and wanted to see if I could get some help.
Say a target company has a equity value of 1,000 and TEV of 1,000 (assume no cash and debt in target company). Management, who previously owns 100% of the company, is looking to roll over 30% of their equity in the LBO. The PE company is funding the buyout with 200 in equity and 500 in debt. As such, this would usually mean the PE company would own 40% of the company post-transaction (Please correct me on this if I'm wrong).
But how would you structure the transaction in order for the PE company to own 70% of equity post-transaction?
Thank you again for your help!
1 - The question does not mean they are rolling 30% of their equity, but their rollover will represent 30% of the post-LBO equity. Then, if $500 of debt is available, the new deal is $500 debt, $500x70% sponsor, $500x30%
2 - if they are actually rolling $300M, the only way for the sponsor to own 70% of the equity post close at $1bn TEV is no debt, $700M sponsor, $300M rollover.
Thank you for answering. Follow-up question that's a bit out of scope.
If the debt was issued at the PE Fund level vs HoldCo (which will probably never happen), will the PE fund then be able to own 70% of the equity post close?
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