Reference no: EM132577813

EBITDA €50

Agreed EBITDA Transaction Multiple 10.0x

Inventory €120

Liquid securities/Cash Equivalents €14

Cash €16

Debt €70

A/Receivables €120

A/Payables €80

Shares Outstanding 200

Signing of the SPA is anticipated for June 30th 2020;

Closing of the transaction is anticipated for September 30th 2020 and the B/S data (above) are as expected at closing;

• Company declared dividends of €0.3/share in April 2020; they will be paid in November 2020.
• Closing W/C balance is equal to 2x the LTM average. LTM average is what both parties agreed to.
• Verification of Company financials at closing showed that the average monthly Capex spent between signing and closing was 80% of the €50/month agreed to and listed as a covenant to in the SPA).
• At closing there is a (verifiable) surplus in the Employee Pension Fund of €50.
• Target owns 80% of a subsidiary company with a market capitalization (at closing) of €500.

Question 1: Assuming that the seller and the buyer are both rational individuals and that they will manage to negotiate what economically belongs to each of them ...

what will be the:

Price listed in the SPA;

Will it (point 1 just above) be a Firm Value or Equity Value price listed in the SPA?

Ultimate price paid to the seller at/around closing