Mergers & Acquisitions
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I'm trying to understand why in an M&A transaction, we are only acquiring the equity portion of a company? For example, if your target company is worth EV of 100, Equity=500, Debt=700 and Cash =200. Why are we not buying the company at 1000 as opposed to a (usual) premium over equity value? Is this b/c in a transaction, the debt gets blown out and refinanced so the acquirer will be bearing the burden of the new debt? As for the cash portion, what is the logic behind not paying for the cash? Is it b/c it's not an operating asset? Can you please explain? Thank you.
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