Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Ignorant Question
Old 03-12-2011, 08:43 AM   #1
Recycles dryer sheets
Join Date: Feb 2006
Posts: 223
Ignorant Question

Need help with understanding company buyout. When company is bought for an amount. How are the long/short term debt, payables and receivables factored into the actual amount an part owner receives?

For explanation purposes, let's say offer is $10 million, long term debt is $1.5 million, short term debt $0.5 million, payables $0.5 million and receivables $1.0 million. There are 1 million shares. what is the pre-tax price per share.

Do all these factor in, some or what. I know this should be easy to answer, just not for me.


I don't mind coming to w**k,
but that eight hour wait to go home is just bulls**t!
F-One is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-12-2011, 09:03 AM   #2
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
Join Date: Aug 2006
Posts: 2,366
Assuming it's an all cash offer, the buyer is paying $10 million for 1 million shares, or $10 per share. The other things you mention (debt, receivables, etc) are figured into the buyer's per share offer.

I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Old 03-14-2011, 11:01 PM   #3
Moderator Emeritus
Nords's Avatar
Join Date: Dec 2002
Location: Oahu
Posts: 26,636
Originally Posted by F-One View Post
There are 1 million shares. what is the pre-tax price per share.
In an ideal world, buying one million shares for $10M is $10/share.

In the business world that works if all the shares are common shares. But some of those shares may be a different class than the other shares, with different preferences for liquidation.

One example would be the requirement that owners of preferred shares get back the money that they originally paid for their shares before anyone else gets anything, and then the preferred shareholders get an equal share (alongside the other classes of shareholders) of whatever's left.

The book written on, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Old 03-15-2011, 04:27 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 17,866
Agree with other posts if offer is $10m and 1m shares, then $10/share.

Further to your question though, when an acquirer values a business the valuation is commonly "debt-free" using projected operating cash flows but ignoring interest expense - and then the value of the debt is deducted from the debt-free value. So in terms of your OP, it might well be that the buyer valued the business at $12m based on its operating cash flows and then reduced it to $10m to reflect the $2m of debt.

In private transactions, there commonly are purchase price adjustments where the $10m offer might be adjusted up or down based on the level of debt or working capital at closing.
pb4uski is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Ignorant European Elites Fume At Markets haha FIRE and Money 52 05-10-2010 07:58 AM
Macbook Question/Printer Question kaneohe Other topics 5 10-15-2009 07:35 AM


All times are GMT -6. The time now is 03:56 PM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2018, vBulletin Solutions, Inc.