SHAREHOLDER EQUITY — VALUING YOUR COMPANY

The buyer is acquiring the business and the associated balance sheet subject to certain adjustments. The seller usually keeps the cash, cash equivalents and marketable securities. The buyer expects to assume a balance sheet without interest-bearing debt.

Therefore, if the seller receives the total enterprise value, the seller enhances that amount with the cash and marketable securities, and must liquidate all of the interest-bearing debt. It is like an algebraic equation and the deal can be structured in various ways; but the end result is that the seller only gets the cash, marketable securities and the portion of the enterprise value applicable to shareholders’ equity. The buyer gets the remainder of the balance sheet without any interest-bearing debt.