Mechanics of the M&A – Tesco Deal
This section breaks down the key financial mechanics behind the proposed acquisition of Tesco PLC. It explains how Enterprise Value (EV) translates to Equity Value, how funding is structured, and what post-transaction ownership looks like.
🔁 EV to Equity Bridge
The transaction starts with Tesco’s Enterprise Value, which reflects the total value of the business regardless of capital structure. To get to Equity Value (what investors actually pay), we adjust for:
- Minus: Net Debt (debt minus cash)
- Plus/Minus: Other adjustments like leases or pension liabilities
Formula: EV – Net Debt + Other Adjustments = Equity Value
📦 Sources & Uses Table
This table explains how the deal is funded and how the capital will be allocated.
- Sources: Debt, Equity Contribution, and possibly rollover equity
- Uses: Purchase Equity, Refinance Debt, Transaction Fees
Insight: The structure reflects investor appetite, lender comfort, and risk-sharing expectations.
⚖️ Swapping of the Capital Stack
A key concept is that, after raising capital, the Bid Co. acquires the assets of the Target Co.
📊 Post-Deal Ownership
The final capital structure determines ownership split and control. This affects:
- Investor return expectations
- Governance rights
- Exit strategy options
Bottom Line: Understanding this structure is key to evaluating the deal’s feasibility and risk profile.
📎 Download the Full Slide Deck →
M&A Mechanics – Tesco
🔗 Related Modules
Enterprise Value (EV) AnalysisDebt Capacity AnalysisInvestor Rationale – Tesco
🏷️ Tags: #MergersAndAcquisitions #EnterpriseValue #EquityValue #TescoDeal #SourcesAndUses #PrivateEquity #LeverageBuyout #CapitalStructure
