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Company B has $100 in assets, $60 in liabilities, $30 of existing goodwill, and EBITDA of $50. Acquired at 10x EBITDA. What's the pro-forma goodwill?
Answer
Book equity (excluding existing goodwill, since that gets wiped on acquisition): ($100 − $30) − $60 = $10. Purchase price = $50 × 10 = $500.
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goodwillM&A math