In which scenario must the equity value be grossed up to calculate the implied equity value?
A)The target is a private company
B)The acquirer is a private company
C)The acquirer purchases less than 100% of outstanding shares
D)The acquirer purchases all outstanding shares

Question

Quizplus · Accepted Answer

When an acquirer purchases less than 100% of outstanding shares, the equity value must be grossed up to reflect the implied equity value of the entire company. This is because the acquirer does not own all of the outstanding equity and is only purchasing a portion of the company. In scenarios where the acquirer purchases all outstanding shares, there is no need to gross up the equity value. Private company status does not necessarily determine whether the equity value needs to be grossed up.

In Which Scenario Must the Equity Value Be Grossed Up