Practice

Continuing the same companies (Company A: Enterprise Value $180M, Equity Value $150M, EBITDA $18M, Net Income $7.5M; Company B: Enterprise Value $70M, Equity Value $70M, EBITDA $14M, Net Income $3.5M; 50% tax rate for both), if Company A instead uses 100% Debt at an 8% interest rate to fund the deal with no premium, what are the new Combined TEV/EBITDA and P/E multiples?

Company A has an Enterprise Value of $150M, an Equity Value of $120M, EBITDA of $15M, and Net Income of $6M. Company B has a Purchase Enterprise Value of $60M, a Purchase Equity Value of $54M (implying $6M of Net Debt), EBITDA of $10M, and Net Income of $3M. Both have the same tax rate. Calculate the Combined TEV/EBITDA and P/E multiples in a 100% Stock deal.

Company A has 10 million shares at $20.00 (a $200M Equity Value) and Net Income of $20M (a $2.00 standalone EPS, a 10x P/E). It acquires Company B for a $60M Purchase Equity Value in a 100% Stock deal; Company B's Net Income is $8M (a 7.5x Purchase P/E), same tax rate. Calculate the accretion. Then, suppose Company A were instead twice as big, with an Equity Value of $400M and Net Income of $40M (same $20.00 share price, so 20 million shares), acquiring the SAME Company B on the same terms. Calculate the new accretion, and compare the two results.

Company A has $300M of projected Operating Income and $15M of projected Interest Income. Company B has $120M of projected Pre-Tax Income. Company A acquires Company B using $150M of Cash (4% Foregone Interest Rate) and $200M of new Debt (6% Interest Rate). Company A's tax rate is 25%. Calculate the Combined Pre-Tax Income, Combined Net Income, and Combined EPS, given Company A has 40M shares outstanding.

Continuing the same scenario (Acquirer Equity Value $600M, Enterprise Value $720M; Target Purchase Equity Value $150M, Purchase Enterprise Value $210M; $30M premium later deemed unjustified), how would the Combined Equity Value and Enterprise Value differ if the deal had instead been funded with 100% Debt or Cash rather than Stock?

Company A has a P/E of 12x, a Debt interest rate of 7%, a Cash interest rate of 3%, and a 25% tax rate. It wants to acquire Company B at a purchase P/E multiple of 14x using 1/3 Stock, 1/3 Debt, and 1/3 Cash. Determine whether the deal is accretive or dilutive.

A Combined Company has $500M of Debt and $100M of EBITDA immediately after a deal closes (5.0x Debt/EBITDA). It generates $80M of annual Free Cash Flow available for Debt repayment, and its EBITDA grows 5% per year. Calculate its Debt/EBITDA ratio at the end of Year 1 and Year 2, assuming all Free Cash Flow each year goes toward Debt repayment.

Company A: Enterprise Value $180M, Equity Value $150M, EBITDA $18M, Net Income $7.5M, 50% tax rate. Company B: Enterprise Value $70M, Equity Value $70M, EBITDA $14M, Net Income $3.5M, same tax rate. Company A acquires Company B using 100% Cash, paying no premium, with a 4% Foregone Interest Rate on Cash. Calculate the Combined TEV/EBITDA and P/E multiples.

A private Target has a Purchase Enterprise Value of $800M, Cash of $60M, Debt of $180M, and a Minimum Cash requirement of $40M. Calculate (a) the Purchase Equity Value the selling shareholders receive, and (b) the total deal funding required on the Uses side in a cash-free, debt-free structure, including $15M of Transaction/Financing Fees.

An Acquirer has a Current Enterprise Value of $2,400M and contributes 80% of the Combined Company's Revenue in a proposed 100% Stock deal. Calculate the Combined Pro-Forma Enterprise Value based on Revenue, and the Target's Implied Enterprise Value.

An Acquirer has an Equity Value of $600M and Enterprise Value of $720M, with 120 million shares outstanding at $5.00 per share. It acquires a Target with an Equity Value of $120M and Enterprise Value of $180M, paying a 25% premium in a 100% Stock deal. A few months later, the market decides this 25% premium wasn't justified. Calculate the Combined Equity Value and Enterprise Value immediately after announcement and again after the market's reaction, and find the Acquirer's new share price.

Company A has 15 shares outstanding at a $30.00 share price and Net Income of $22.5M (a $1.50 standalone EPS). It acquires Company B for a $180M Purchase Equity Value using 100% Debt at a 6% interest rate. Company B's Net Income is $12M. Both companies have a 25% tax rate. Calculate the Combined EPS and the accretion/dilution percentage.

An Acquirer has a Current Equity Value of $600M, Cash of $150M (Minimum Cash of $40M), Debt of $120M, and EBITDA of $40M (3.0x Debt/EBITDA). Peer companies average 5.0x Debt/EBITDA. Estimate the maximum deal size this Acquirer could realistically fund, assuming it limits its Stock issuance to half its Current Equity Value.

An Acquirer has a Current Enterprise Value of $1,800M and a Current Equity Value of $1,500M (implying $300M of Net Debt). It contributes 72% of the Combined Company's EBITDA in a proposed 100% Stock deal. The Target has 40 million shares outstanding and, for simplicity, no Net Debt of its own. Calculate the Combined Pro-Forma Enterprise Value, the Target's Implied Enterprise Value, its Implied Equity Value, and its Implied Offer Price per Share.

An Acquirer purchases a Target for a $900M Equity Purchase Price. The Target has $500M in Common Shareholders' Equity, $20M of existing Goodwill, and a $15M existing Deferred Tax Asset that gets written off in the deal. The Acquirer writes up the Target's PP&E by $80M, at a 25% tax rate. Calculate the Goodwill created.