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Private Equity

Lecture 9 - 10: LBO Model, EV to Equity and Exit

Comprehensive quiz covering LBO model construction, types of EBITDA, value creation strategies, the EV-to-Equity bridge, net debt and working capital adjustments, completion mechanisms (locked box vs. completion accounts), governance, and exit routes.

Question 22 of 52

Case

Case study: Working capital between signing and closing

Expand / collapse

A company is acquired at an Enterprise Value of 1,000. At signing, net debt is 100 and working capital sits at a level of 100. At closing, working capital has risen to 150 and net debt has risen to 150. The parties are considering whether to reference a normalised working capital level of 150 in the deal.

Suppose the parties agree no working capital adjustment of any kind, and the seller is free to choose whether the deal completes at signing or at closing. Which date does a rational seller choose, and what price results?

Pick one: press 1-4 on your keyboard or click an option.
A

Closing — price of 850

B

Either — the price is 850 regardless

C

Signing — price of 850

D

Signing — price of 900