M&A Modeling Question

M&A Modeling Question - Net Debt

Macabacus: Purchase price ratio analysis.

PPR - Enterprise Value | M&A Model | Macabacus

Hi, could someone explain to me why BuyerCo's Net Debt is negative, while TargetCo's  Net Debt is positive? This is from Macabacus. 

Is it because we are assuming BuyCo's cash & equivalents is > than gross debt, and although this is the case for TargetCo as well, BuyerCo needs to assume the net debt of TargetCo during the M&A process, so the net debt of target co is positive?

Thanks. 

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Comments (5)

Jun 21, 2021 - 9:16am

Not 100% positive, but taking a stab at it.  It appears to me that BuyerCo net debt is simply negative because, as you said, cash&equivalents > debt, whereas targetco has more debt than cash.

BuyerCo Net Debt = 450 + 2.2 - 1181.8 = -729.6

TargetCo Net Debt = 230 - 146.6 = 83.4

All figures were taken from the LTM balance sheets. If you look, targetco cash is actually less than debt, which is why net debt is positive. If you look at the sources and uses tab, the Buyer assumed target debt, and left target cash on the B/S.

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