hard · Private Equity & LBOs
During financial due diligence, a 'Quality of Earnings' analyst identifies that the target company's rent is paid to a property company owned by the founder at 50% of market rates.
How should this be adjusted in the EBITDA bridge?
- Make no adjustment, but include the property as an 'Excess Asset' in the Enterprise Value bridge.
- Add back the total rent paid as a non-recurring expense.
- Decrease Adjusted EBITDA by the amount needed to bring the rent to arm's-length market rates.
- Increase Adjusted EBITDA because the low rent is a cost saving for the business.
Sign up free to see the explanation and track your rank →
More Private Equity & LBOs practice
- If the GP receives a 20% carry on the profit from Deal A immediately, and the fund eventua
- Following the investment, what is the investor's ownership percentage in the company, assu
- What is the Interest Coverage Ratio?
- A private equity firm is calculating a 'Public Market Equiva… — If the KS-PME score is 1.1
- A sponsor provides an 'Equity Cure' to a portfolio company. What is the standard purpose o
- What is the new effective conversion price for the growth equity investor?
- Which company will report a higher 'Gross Margin' and a higher ending 'Inventory' value on
- What is the company's Interest Coverage Ratio?