medium · Private Equity advanced-lbo
A company has 200 million in Gross PP&E and 50 million in Accumulated Depreciation. In an LBO, the sponsor's 'Purchase Price Allocation' steps up the 'Fair Value' of PP&E to $250 million.
What is the impact on the opening pro-forma balance sheet?
- Assets increase by $100 million, and Equity decreases by $100 million.
- PP&E remains 200 million; a 100 million intangible asset is created.
- PP&E increases by $100 million; Accumulated Depreciation is reset to zero.
- PP&E increases by 50 million; Accumulated Depreciation remains 50 million.
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