hard · Private Equity value-creation
A buyer's Quality of Earnings (QoE) report identifies that the target's Accounts Payable has increased by $15 million over the last 6 months simply because they stopped paying vendors on time.
How should the analyst treat this in the NWC peg calculation?
- Treat the $15 million as a debt-like item in the bridge.
- Accept the 15 million increase as it represents the 'new normal' for the business's liquidity.
- Subtract 15 million from the historical AP (or add it to NWC) to 'normalize' the working capital requirement.
- Ignore it, as Accounts Payable is always an operating liability.
Sign up free to see the explanation and track your rank →
More Private Equity value-creation practice
- What is the Equity Value of the company?
- Why might the 'Trade Sale' yield a higher valuation?
- What is the target's re-levered beta?
- If the cost of debt is 6% and the tax rate is 25%, what is the total value of the Tax Shie
- Why might the conglomerate's market capitalization be lower than the SOTP value?
- What is the equity purchase price?
- A SaaS company has an ARR of $40M that is growing at 50% per… — According to the 'Rule of
- If the platform and add-ons are the same size, what is the blended entry multiple for the