Post LBO capital structure question
Hi guys, would appreciate any help with the below question which should be very simple but I still struggle with some logic behind it.
My understanding is that in anof the target should not change post acquisition, but the split between equity and debt is what will obviously change (with debt being a much larger % of ), but looking at below S&U of a simple transaction, the EV before LBO ($800) and EV post LBO is different ($810). Obviously I understand that the difference of $10 is coming from extra financing needed to be raised to cover $10 transaction fees but still I just can't logically get if it even makes sense that before the transaction the EV was $800 at 8x multiple, but after LBO the EV became $810 with a slightly higher multiple now. It just seems wrong to me or my logic is incorrect somewhere. I have been thinking about it for 2 days straight now. Could someone please explain? Thank you!
8x multiple paid - $800 EV
$300 debt, $100 cash, implying 800-300+100= $600 equity purchase price
Assume no mgmt/investor rollover, 100% acquisition
$10 transaction fees and $15 cash to the
Financing: 5x EBITDA debt
$600 purchase equity
$200 refinance net debt
$15 cash on the balance sheet
$10 transaction fees
Total = $825
$325 sponsor equity
Total = $825
EV post LBO = 325 (new equity) + 500 (new debt) - 15 (new cash on the BS) = $810