Question regarding purchase price

So I am a bit confused on what the actual price paid for a full company is.
Example:
Company A: 50 million market cap, 20 million cash, 0 debt
Company B: 50 million market cap, 0 cash, 20 million debt

Would the actual amount paid (assuming all cash transaction) be 70 million for company A and 30 million for company B (making the effective purchase price of both the same)? Or would the actual amount paid be 50 million for both, making the effective purchase price of company A be 30 million and the effective purchase price of company B be 70 million?

Thanks so much!

 

So in the second case, the sellers receive $50 million, pay off the debt, and then distribute the $30 million remaining to shareholders?

 
Most Helpful
Airdux B:
It always was the shareholders cash and it still is. Yes, the sellers do end up receiving $70M, but only $50M is paid by the buyer.

This is incorrect. A company with a $50MM market cap (equity value) and $20MM in cash is a $30MM company (enterprise value) that happens to be sitting on $20MM cash. Once the sellers sweep the $20MM of cash out pre-sale, the market cap of the company falls to $30MM.

Enterprise value is: Equity Value (Market cap) + Debt - Cash.

Company A's Enterprise Value is: $50 + $0 -$20 = $30MM Company B's Enterprise Value is: $50 + $20 -$0 = $70MM

To buy Company A you need $30MM in financing. To buy Company B you need $70MM.

 

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