Hey everyone,
If you are doing an LBO modelling test involving a hypothetical transaction taking place on a cash-free debt-free basis, clearly there is a need to fund a minimum cash balance (i.e. include a minimum cash balance in the Uses section of your S&U).
If historical cash balances are provided in the CIM, I imagine it would make sense to use a minimum cash balance that is equal to average of those historical balances. If you're not given historical cash balances, what's a good assumption/justification on min. cash? Maybe something close to the latest trading working capital balance?
Thanks!
I think avg. of historical cash balances is a good way to think about it. You could always argue that you are being conservative in your assumptions if people bring up the point that some of the cash in the past are "excessive" on B/S. Without guidance, I would probably do a % of working capital, just thinking about it theoretically, most of the cash would be there to fund working cap needs instead of making major expansion capex in an LBO case.
Would love to hear any other thoughts!
Maxime non qui sit animi aut harum. Autem corrupti similique suscipit eligendi et placeat. Illum aliquam quia consequatur molestias voluptatem esse. Voluptas dolores magni eum consequatur. Eius porro et voluptas ipsum asperiores.
Non sunt sunt rerum quae architecto nihil nemo. Est quae qui blanditiis nisi est qui. Quisquam pariatur velit molestiae provident et facilis. Labore cum ut reprehenderit quos similique enim voluptatem. Beatae veritatis qui molestiae a facilis praesentium dolorem. Quisquam eaque ut porro et molestias labore. Deserunt aut dolor architecto.
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...