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Hi, ( i did google before, seems like the previous guy was not sure on the below as well)
I just wanted to confirm in relation to increase in value as a result of takeover.
The wording “shareholders” as opposed to equity holders, is that the reason the answer shows the full value of a takeover rather than deducing percent attributable to equity holders. If the requirement said equity holders?
Shareholders and equity holders are the same thing.
Any gain only ever goes to the shareholders – the only question here is as to how that gain is shared between the two sets of shareholders which depends on the amount paid for the acquisition.
Ok, seems like I got it. I was not reading it properly.
Here the question states the” total value ” where as one of the question in the kit stated the “equity value” created through acquisition.
Hence we didn’t just sought the equity value created which I was misinterpreting and hoping to see in the answer. As you said gains goes to shareholders that allowed me to look into where I was going wrong and seems like that’s it. We needed total value created nor just equity?
Given that the question asked for a free cash flow to the company approach, we calculate the total market value of the company and the gain in MV resulting belongs to the shareholders 🙂
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