Adjust entry metrics for the acquisition of operating entities that make incremental changes to the company’s effective balance sheet and P&L.
Module Category: M&A and Transaction Adjustments
Key Concept: When private equity GPs complete add-on acquisitions, it changes the value creation starting point. Effective Entry metrics must represent a combination of the portfolio company’s initial capital structure and income statement at acquisition, and the incremental impact of the acquired capital structure and income statement. The mathematics of the combination depend on whether the add-on is financed by equity, debt, cash on the portfolio company’s balance sheet, or a mix of these three sources.