M&A & Merger Models
How do you determine the maximum cash consideration a buyer can fund? Illustrate: the buyer holds 500 of cash but needs 200 to run the business; pro forma EBITDA is 300; it will not lever beyond 3.0x total debt/EBITDA and already carries 400 of debt.
Model answer
Maximum cash = excess balance-sheet cash + incremental debt capacity. Excess cash = 500 - 200 of minimum operating cash = 300. Debt capacity = 3.0 x 300 = 900 of maximum total debt, minus 400…
The full, human-reviewed answer is in the bank.
Sign up free and Daily 10 serves you 10 questions a day from all 2,300+ — or go Pro for unlimited reps.
Pro unlocks every model answer — $19.99/mo.
More from M&A & Merger Models
- What makes an acquisition accretive or dilutive to EPS?
- An all-cash deal: when is it accretive?
- What are synergies and what are the two types?
- What's the difference between a strategic buyer and a financial buyer?
- What does it mean for an acquisition to be accretive or dilutive?
- Walk me through how you calculate accretion/dilution at a high level.
Try the real thing
1 / 3LBO & Paper LBO
What is a leveraged buyout?
Superday coming up? Take the cheat sheet.
The technicals and stories to have cold before you walk in — free, one email, no mailing list.
Free tier: 20 cards + 10 daily reps + ALL drills — no credit card required.