Purchase Price Allocation in an LBO Model

This video explains how to link the information contained in the sources and uses table to the balance sheet adjustments required to record an acquisition in an LBO model.
More Detail on Purchase Price Allocation:
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This video is Part 3 of 3:
Part 1: • Simple Purchase Accoun... ​
Part 2: • Build a Sources and Us... ​
Part 3: • Purchase Price Allocat... (this video)
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Course on ASM: Recording the Transaction (Excel Template and Notes)
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[@chrisreillyfinancialmodeling]

Hey Peter, great video here. A couple questions:
1) What happens if your pre-closing operating assumptions change? You've deleted your original 12/31/20 pre-closing balance sheet from the model
2) Why is seller proceeds (i.e., transaction value less oldco debt) the basis for goodwill instead of the enterprise value if it's a cash free / debt free transaction?
3) Where would you record step-ups in basis or FMV adjustments to the working capital? Pre-close?
4) Figured out any fancy ways to make the pre & post-closing balance sheets update automatically with formulas instead of copy/pasting values? I've built a workaround for my models that is date-based but I'd love to know what you've built here.
Thanks!

[@jd5787]

Just going back to this video. How do you treat SBC in the LBO model? How would you go about capturing rollover equity and earnouts (if any) in a neat way?

[@ASimpleModel]

I generally do not worry about running these through the model (the three statement portion) for an LBO. If you want to know how that works, you can check out the PDF notes here for an actual illustration: (www.asimplemodel.com/model/32/integrating-financial-statements/projecting-stockholders-equity/). But for an LBO model you can generally capture it on the sources and uses, and on the exit analysis tab. I should have more on this topic up on the site soon.

[@enricoquinzani7432]

What about the cash used to pay Transaction Expenses? Why is it not recorded?

[@ASimpleModel]

Transaction expenses are the 5th step on the list. Skip to 04:52.

[@enricoquinzani7432]

@@ASimpleModel But shouldn't the transaction expense reduce the cash balance as well as retained earnings?

[@ASimpleModel]

@@enricoquinzani7432 ah, I think I understand the confusion. Transaction expenses do not come out of the cash balance on the target company's balance sheet. It can be a little confusing because you have so many transactions taking place simultaneously in those two columns, but Transaction Expenses are a use of cash from the $90,016,644 raised (sources), which is why total sources is equal to total uses. To see this broken down step by step please see this video (www.asimplemodel.com/model/28/leveraged-buyout-model/simple-lbo/) and click on the chapter titled "BS Adjustments" just beneath the video player on the right hand side.