Transaction Details

A summary of the main Transaction Details are shown below. Details and assumptions are further below, which you can cross check against the spreadsheet - to see how it has been built:

Details & Assumptions

The following assumptions have been made:

Initial Equity Value

• Due to the depressed macroeconomic and investing environment, you the investor (let’s say some Partner of a P.E. or V.C. fund) are only able to acquire ABC Company for the inexpensive purchase price of 5.0x 20X1 EBITDA (assuming a cash-free debt-free deal), which will be paid in cash.
• The transaction is expected to close at the end of 20X1.

Funding

• A Senior Revolving Credit Facility: 3.0x (2.0x funded at closing) 20X1 EBITDA; LIBOR + 400bps Floating Rate; 20X7 maturity; Commitment fee of 0.50% for any available revolver capacity. The RCF is available to help fund operating cash requirements of the business, but only as needed.
• Subordinated Debt: 1.5x 20X1 EBITDA; 12% annual interest (8% cash, 4% PIK (Payment in Kind) interest); 20X7 maturity; $1 million required payment per year.
• All remaining funding comes from the financial sponsor.
• Existing management expects to roll-over 50% of its pre-tax exit proceeds from the transaction. Existing management’s ownership pre-LBO is 10%

Uses

• A minimum cash balance (Day 1 Cash) of $5 million (this needs to be funded by the financial sponsor as the transaction is a cash-free / debt-free deal).
• An M&A fee for the transaction is $1.5 million. We assume that the M&A fee cannot be expensed by ABC, but will be paid out of the sponsor equity contribution upon closing the deal.
• A financing syndication fee of 1% on all debt instruments used. This fee will be amortized on a five-year, straight-line schedule.

Other

• New Goodwill equals Purchase Equity Value less Book Value of Equity.