LBO help: existing equity & purchasing price?
Hi everyone. At enrtry, LTM EBITDA is $100, I apply 5x debt and 4x equity. So I paid $400 purchase price.
Suppose the target company has $300 equity on its balance sheet when I purchased it (year 0). What's its equity value right after I purchased it (at year o)?
I misinterpreted your question. See my response below for updated answer
Thanks. Whether you can elaborate on the term 'restrict' ?
This will help you.
Say you paid 9x for a 100MM biz which has 0 debt on b/s and cash of 300. Equity purchase price looks like this:
EV = 900
Debt = 0
Cash = 300
Equity Purchase Price = 1200
Uses
Equity PP 1200
Debt Paid Off 0
Min Cash 0 (this # will be decided by sponsor)
Total Uses = 1200
Total Sources
Cash on Target 300 (depends upon how much of this can be used)
Debt 500 (as what's been told to you)
EQuity Value 400 (as what's been told to you)
Total Sources = 1200
As you can see, the answer to your question is what are you defining the equity value as....
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