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Based on acquisition comparables analysis, assume that the appropriate LTM EBITDA multiple for a takeover of...

Based on acquisition comparables analysis, assume that the appropriate LTM EBITDA multiple for a takeover of XYZ Company is 8.0x. Also, assume that XYZ Company has 40 million shares outstanding, no options, $100 million of Net Debt, $125 million LTM EBITDA and a current share price of $18.00. What is the implied premium assuming an 8x EBITDA transaction multiple?

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Answer #1

1. Stock price using LTM EBITDA multiple = (LTM EBITDA * Multiple - Debt) / Shares O/s

Stock price using LTM EBITDA multiple = (125 M * 8 - 100 M) / 40 M

Stock price using LTM EBITDA multiple = (900 M) / 40 M

Stock price using LTM EBITDA multiple = $22.5 per share

2. Implied premium = Stock price under LTM EBITDA multiple - current share price

Implied premium = $22.50 - 18.00

Implied premium = $4.50 per share

*Please comment if you face any difficulty and please don't forget to thumbs up

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