If you have Enterprise Value and Cash, how do you figure out transaction value?

cthegr8's picture
Rank: Senior Monkey | 79

For paper LBO, let's say you hypothetically have enterprise value = 100 and cash = 50, what is the purchase price? Assume no debt

Assuming you get nothing else for the paper LBO, do you just assume equity value of 150? Equity Value 150 - 50 cash = 100 Enterprise value?

Comments (4)

Nov 10, 2018

That's correct, if EV is 100 and cash is 50 then equity value is 150 (assuming no debt)

Nov 10, 2018

Got it. Thank you. And to be crystal clear, without any other information, that would be purchase price? (e.g., if they bought 50% of the company, they would pay 75)

Nov 10, 2018

This is a bit confusing to me as well. Correct me if I've missed something, but I'd think the purchase price is simply the TEV (enterprise value) in this case. Then you'd look at the debt/equity used in this purchase price to find the sponsor equity % stake. It doesn't matter what the equity value is because as high as it is, it's offset by the cash of the business immediately received, as paying cash to receive cash is redundant. I would appreciate if someone with experience could provide a good answer though.

Nov 10, 2018