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non-contr olling int erest1 of 48
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represents owner ship of less than
50% of another comp any
refers to the int erest paid on a loan
TRANSACTION COMPS MODELLING WALL STREET PREP EXAM NEWEST 2024 ACTUAL EXAM ALL 50 QUESTIONS AND CORRECT DETAILED ANSWERS Term
Garth 's Micr o Brewery, whose shar es are currently trading at $40 per
share, is considering acquiring Wayne's
Beer Bottl ing Co. You ha ve compil ed a group of comp arable
transactions within the beer bottl ing sp ace and ha ve
calculated that since 2014, acquisitions simil ar (or comp arable!) to the
one Garth 's is currently considering ha ve
had transaction values (offer value of target plus any target debt , net of
cash) that are, on average, 8 .0x target's
EBITD A.
• Wayne's shar es currently trade at $34 per shar e
• Wayne's has 50 mil lion diluted shar es outstanding
• Wayne's LTM EBITD A was $250 mil lion
• Wayne's Net Debt was $200 mil lion
What is the offer value per shar e and the offer premium?2 of 48is an expense on the income
statement and equity o the
balance sheet
is the pr ofit earned by a comp any in a
fiscal year
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7.5 per shar e under valued
2.5 per shar e under valued Term
An acquisition creates shar eholder value:3 of 48
Term4 of 48$36.00 per shar e; 5.9%
beginning cash b alance + pr e-debt
cash flows - min. cash b alance -
requir ed princip al payments of LT and
other debt
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when a comp any acquir es a business
solely based on br and r eputation
when a comp any acquir es a
business whose fundament al
value is higher than the
purchase price
value of all capit al invested in a
business
Stand-al one LBO may overestimate
strategic sal e value by ignoring
synergies with acquir er
Don't know? On December 30, 2013:
• Company Y trades at $10 per shar e
• Enterprise Value / EBITD A multiple of 5.0x
• Leverage ratio of 0.6x (Net debt /EBITD A)
• 2013 EBITD A = $2. 0 billion
• Assume no cash on comp any Y's balance sheet
On December 31, 2013:
• Company Y under goes an LBO and is recapit alized
• The comp any's new leverage ratio becomes 5.0x
• Financial sponsor exit is planned for Year 5. Assume that the E V/
EBITD A multiple at exit year is the same
as the current multiple.
• Requir ed rate of return is 25%
• Exit year EBITD A project ed to be $3 .0 billion
• The comp any's year-end l everage ratio is 1.6x
How much debt is paid down by the e xit year (since the LBO
announcement )?
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2951.2 mil lion
5.2 billion
8.8 billion
1 and 3 only
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