Hi All
Anyone who can help me to answer this question?
The buyer had acquired 80% of the shares of Company A. At the acquisition date, there is a shareholders agreement which crafted a buyer call option and vendor put option on the remaining 20% shares own by the minority shareholder. Both option is exercisable in one year.
For Buyer Call Option:
The agreement states that if Co A outperformed EBITDA target of US$50M at the end of one year, the buyer has the right but not the obligation to require Vendor to sell their shares to buyer at the earn out value based on US$YYM x Multiple of 10 x 20% of shares outstanding in Co A.
For Vendor Put Option:
The agreement states that if Co A outperformed EBITDA target of US$50M at the end of one year, the vendor has the right but not the obligation to require the Buyer to buy their remaining 20% shares at the Earn out value based on US$YYM x Multiple of 10 x 20% of shares outstanding in Co A.
If Co A performed worst below EBITDA target of US$50M at the end of one year, both the call and put option will not exist.
Question:
- What is the amount we need to provide at Acquisition date?
*Where US$YYM > US$50M.