Why do I have to pay for Cash needed for operations in an LBO. I have seen it appear in sources, but shouldn't that be included in the equity value I pay for? Should it ever appear in uses?
| +36 | Fund going shit but happy with life what to do? | 8 | 22h |
| +35 | Take the Layoff or Quit? | 14 | 7h |
| +34 | PE PortCo Work | 18 | 1d |
| +24 | Rugpulled on Sr. ASO promote - how to fill a year (or two) before B school? | 7 | 2d |
| +16 | Those who exited PE, When did you know it was time? | 6 | 1d |
| +15 | Practical uses of of AI in PE | 1 | 4d |
| +14 | PE on cycle guide | 2 | 3h |
| +14 | NYC or SF for early career? | 5 | 18h |
| +14 | Case Study - HELP! | 4 | 1d |
| +12 | Paper LBO | 3 | 1d |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
If the cash is NOT used in operations, but remains on the balance sheet of target, you pay for it. Indeed increases equity value. If it IS used in operations (cash register of a supermarket for example), you should treat it as working capital (and take the average of a certain period to see if there is a deficit/surplus at transaction date).
In the case that there is a deficit or surplus, what happens?
Let's say equity value is $100, gross debt is $100 and we have $50 in cash, $10 in required cash. In my uses do I have $100+$100-$50+$10?
Is the equity value already reflecting the cash position?
Please make sure to make the distinction between the liquidity to do business (for which you have a RCF with the bank as long as it is 0 at least once a year) and actual physical cash in the business (or on blocked accounts etc).
Sorry for the simple ask but how would each of these affect sources and uses?
Animi dicta eligendi consequatur quia totam. Non corporis quis aut esse modi voluptatem cupiditate. Et et nobis rerum neque deserunt incidunt inventore.
Dolorum aperiam optio debitis laudantium in sapiente eius quam. Qui laudantium expedita odio fuga modi saepe cum. Velit repellendus iusto maxime occaecati reiciendis.
Dolorem et alias deserunt eos pariatur dignissimos et. Amet fugit eveniet quo quia doloribus. In blanditiis optio commodi eos aut quasi. Labore at est tempore dolorem sunt aut. Impedit tempore ipsa magnam. Officia voluptatem omnis rerum aliquid illo libero. Nesciunt vel ipsum voluptates enim facere.
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...
Quo reiciendis delectus voluptates. Et illum id voluptas magnam.
Et nemo sed aut iusto consectetur. Reprehenderit deserunt ad tempora voluptates.