What happens to shareholder's equity items in an LBO?
So I know that in an LBO the target's pre-LBO Common Stock, APIC, and Retained Earnings accounts get wiped out and replaced with the sponsor equity and the transaction fees, but what happens to the other Shareholder's Equity items such as Non-Controlling Interest, Unrecognized Pension Liability, AOCI, and Foreign Currency Translation?
I would imagine AOCI And FX also get wiped out. NCI and pension liability depend on whether they are assumed or paid off?
The way I was thinking of it was that even if I don't wipe out the pension asset/liability in the asset / liability section, I should still wipe out the Unrecognized Pension Liability line item in the Shareholder's Equity section because if I don't my Goodwill will be lopsided, which will make my balance sheet unbalanced in projected years.
Not sure about the specifics of your questions but I always thought of SE to be the equivalent of A - L which should give you the "net book value of assets," which is why you have goodwill as (new equity - old equity .... before other adjustments). It's likely more nuanced that that but I thought think logically it makes sense to wipe all SE accounts based on this idea.
Facere autem facilis omnis et quod in mollitia. Nobis sed veniam ex eligendi qui. Expedita est molestiae et ullam.
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...