Minority interest Question?
Company A: 0 EBITDA / 0 Net debt Company B: 10 EBITDA / 20 Net debt Company C: 5 EBITDA / 15 Net debt
A acquires 75% of B (10x EBITDA); B owns 100% of C. How would you calculate this?
My thoughts/ questions: - it depends if C is already consolidated reported in B? - assuming not, combined EBITDA A+B = 15 / combined Net debt A+B= 35.
Buying at 10x combined EBITDA = EV = 150 Less: Net debt -35 Equity value = 115
A has to report a MI (due to the 25% not owned in B); 25% of ?
Please help!
Rover-S Tamara_S
Thanks for the tag. First of all, in general you need to consolidate if you own >50% (or have control - Tamara_S is more knowledgeable on US GAAP accounting standards I believe). But for the sake of this example, let's assume these are separate, individual accounts of each company.
You indeed buy 15x10 = 150m EV, 35 of net debt so 115 equity value. Let's, for simplicity, assume 0 acquisition debt.
Thank you! On the BS of company A, assuming this is not "buyout" situation; wouldnt the 28.8 net debt show up and increase leverage of Company A since acquring B and through B C as well?
And: what is the financial asset on your BS?
See sources and uses where I repay the debt of B and C. This is single entity balance sheet (non-consolidated) of A so the investment in B and C is a financial asset for company A. Consolidated it would be assets (including goodwill)
Okay, but wouldnt we need to consoldiate as its >50% (75%)?
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