medium · Private Credit fund-structures-returns-economics
In a 'Locked-Box' transaction mechanism, a buyer agrees to a purchase price of $150 million based on a balance sheet dated six months prior to the expected closing.
If the company generates $10 million in cash flow and pays a $2 million dividend to the seller during that six-month gap, how is the final price at closing affected?
- The price is adjusted via a working capital audit performed on the day of closing.
- The price remains exactly $150 million regardless of any payments.
- The price is reduced by $2 million to account for 'leakage'.
- The price is increased by $10 million to reflect the cash generated.
Sign up free to see the explanation and track your rank →
More Private Credit fund-structures-returns-economics practice
- What is the Dividend Coverage ratio?
- If management achieves a 6.0x Money Multiple (MOIC) on their personal investment, while th
- A BDC (Business Development Company) is required to distribu… — What is the primary benefi
- What is the fund's TVPI (Total Value to Paid-In) multiple?
- An investor is reviewing a fund's performance and sees a DPI… — What does this suggest abo
- What is its current Debt-to-Equity (Leverage) ratio?
- If the fund's net TVPI is only 1.15×, what is the most likely explanation?
- A GP is managing a fund with a 'European' (whole-fund) water… — How much carried interest