LBO Balance Sheet post acquisition

I am just starting to practice to build lbo models and wondering if someone can suggest how to account for Negative goodwill. Do I reduce the market value of other assets?

For SE adjustments, do I leave Retained Earnings as they were pre-acquisition and just adjust the Common Stock with the equity contribution?

Would appreciate some guidance...

 

How do you end up with negative goodwill from the transaction? What is the calculation you are using for goodwill? Your retained earning should be adjusted to zero and the common stock should reflect the equity contribution less any fees that you are using equity to pay.

 
goalieman688:
How do you end up with negative goodwill from the transaction? What is the calculation you are using for goodwill? Your retained earning should be adjusted to zero and the common stock should reflect the equity contribution less any fees that you are using equity to pay.

Thanks this is what i was looking for.

For the goodwill calculation I am taking the Purchase P - FMV of Net Assets.

I know there are some new rules around capitalizing transaction fees, should I be capitalizing financing fees only and expensing the rest?

 

Negative goodwill is allocated as a pro-rata reduction to non-current assets, but there's a good chance you're overvaluing the assets you're acquiring. Negative goodwill implies that your enterprise is worth less than the sum of its parts.

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