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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 23 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.

When there is no working capital adjustment, explain how a working capital movement affects the share price — and why the answer depends on whether the WC movement is reflected in net debt or not.

Write your answer in your own words. It will be graded with Gemini.

Answer freely: concise wording is fine as long as it covers the lecture point.