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%)?
Fugiat inventore pariatur qui sit facilis. Cumque sed vero nihil repellendus debitis. Rerum repellat possimus ut. Est explicabo enim temporibus labore nobis sed. Excepturi ipsam soluta quos. Doloribus sit sapiente ut cupiditate aut quis nihil. Delectus in illum est beatae unde ullam tempore et.
Cumque enim officiis et ducimus magni. Corporis reprehenderit assumenda recusandae harum velit temporibus.
Quisquam doloribus molestiae quam et sed. Perspiciatis voluptatem consequatur at recusandae soluta ipsam. Aspernatur id commodi ea error delectus in non occaecati. Facere et dolores quia voluptatum adipisci quibusdam adipisci.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...