If I remember correctly, the acquirer has to refinance the seller's debt (so repay current debt by issuing new debt or paying for it with cash). Is this correct?
What about if a company is only selling a division? Will the buyer not take on any of the seller's debt, will it take a proportional amount, or does it vary from case to case?
This came up in a BB workshop that I attended recently. We calculate the EV of the division (by using the debt ratio of the seller as a whole), but got kinda stuck when it came to handling the debt. I suggest we assume that the buyer takes on a proportional amount, I'm just curious whether this is correct.