medium · Investment Banking rx-dcm-ecm
How is the Original Issue Discount (OID) handled during the 're-balancing' of the Balance Sheet in a Pro-Forma M&A model?
- OID is simply ignored for Pro-Forma modeling purposes, and the new debt is instead recorded at its full stated par value.
- The target company's existing unamortized OID balance is carried over and added directly to the new acquirer's own OID schedule.
- The existing target debt and any associated unamortized OID are removed, and new debt is recorded net of the new transaction OID.
- The OID amount is instead recorded as a standalone Intangible Asset on the Balance Sheet and then amortized on a straight-line basis over 15 years.
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