{"id":23737,"date":"2021-07-11T10:51:35","date_gmt":"2021-07-11T15:51:35","guid":{"rendered":"https:\/\/breakingintowallstreet.com\/biws\/?post_type=biws_kb&#038;p=23737"},"modified":"2024-10-18T18:54:56","modified_gmt":"2024-10-18T23:54:56","slug":"bolt-on-acquisitions","status":"publish","type":"biws_kb","link":"https:\/\/breakingintowallstreet.com\/kb\/leveraged-buyouts-and-lbo-models\/bolt-on-acquisitions\/","title":{"rendered":"Video Tutorial: Bolt-On Acquisitions"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_81 counter-flat ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Video Tutorial: Bolt-On Acquisitions<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/breakingintowallstreet.com\/kb\/leveraged-buyouts-and-lbo-models\/bolt-on-acquisitions\/#Why_Do_Private_Equity_Firms_and_Other_Investment_Firms_Complete_Bolt-On_Acquisitions\">Why Do Private Equity Firms and Other Investment Firms Complete Bolt-On Acquisitions?<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/breakingintowallstreet.com\/kb\/leveraged-buyouts-and-lbo-models\/bolt-on-acquisitions\/#A_Simple_Bolt-On_Acquisition_Example\">A Simple Bolt-On Acquisition Example<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/breakingintowallstreet.com\/kb\/leveraged-buyouts-and-lbo-models\/bolt-on-acquisitions\/#When_Do_Bolt-On_Acquisitions_Matter\">When Do Bolt-On Acquisitions Matter?<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/breakingintowallstreet.com\/kb\/leveraged-buyouts-and-lbo-models\/bolt-on-acquisitions\/#How_Do_You_Model_Bolt-On_Acquisitions_in_Leveraged_Buyouts_and_Other_Deals\">How Do You Model Bolt-On Acquisitions in Leveraged Buyouts and Other Deals?<\/a><\/li><\/ul><\/nav><\/div>\n\n<blockquote><p><strong>Bolt-On Acquisitions Definition:<\/strong> Bolt-on acquisitions refer to deals in which a private equity-owned or backed company acquires smaller companies to become a &#8220;platform business&#8221; and grow more quickly than it could via organic means.<\/p><\/blockquote>\n<h2><span class=\"ez-toc-section\" id=\"Why_Do_Private_Equity_Firms_and_Other_Investment_Firms_Complete_Bolt-On_Acquisitions\"><\/span><strong>Why Do Private Equity Firms and Other Investment Firms Complete Bolt-On Acquisitions?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>When a private equity firm acquires a company, it aims to earn a certain <a href=\"https:\/\/breakingintowallstreet.com\/kb\/leveraged-buyouts-and-lbo-models\/cash-on-cash-return-vs-irr\/\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">internal rate of return (IRR)<\/a> on the deal (in this context, the IRR is similar to the annualized rate of return).<\/p>\n<p>For example, maybe a PE firm is targeting a 20-25% IRR on all its deals.<\/p>\n<p>It is considering a new deal where it plans to contribute $400 million of Equity, fund the rest of the price with $600 million of Debt, and sell the company in 5 years.<\/p>\n<p>So far, the IRR is below the targeted range:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-23766 size-full\" title=\"LBO Returns\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075128\/01-LBO-Returns-A.jpg\" alt=\"LBO Returns\" width=\"892\" height=\"324\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075128\/01-LBO-Returns-A.jpg 892w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075128\/01-LBO-Returns-A-300x109.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075128\/01-LBO-Returns-A-768x279.jpg 768w\" sizes=\"(max-width: 892px) 100vw, 892px\" \/><\/p>\n<p>The private equity firm could achieve the 20% IRR by increasing the Exit Enterprise Value or by reducing the amount of Debt that must be repaid upon exit.<\/p>\n<p>To increase the Exit Enterprise Value, it could get the company&#8217;s EBITDA to grow more quickly or aim for a higher exit multiple by improving the company&#8217;s financial performance, such as its <a href=\"https:\/\/breakingintowallstreet.com\/kb\/financial-statement-analysis\/roic-return-on-invested-capital\/\" target=\"_blank\" rel=\"noopener\">Return on Invested Capital (ROIC)<\/a>.<\/p>\n<p><strong>Growth<\/strong> is not necessarily a requirement if the company can use its capital more efficiently and\/or repay more Debt.<\/p>\n<p><strong>In reality, however, growth makes it much easier to achieve this 20% IRR target<\/strong>.<\/p>\n<p>For example, if the company&#8217;s EBITDA grows from $100 million to $200 million by the end, it&#8217;s easier to earn a 25% return than if its EBITDA grows to only $125 or $150 million.<\/p>\n<p>Deals are typically priced based on a\u00a0<em>multiple<\/em> of EBITDA, so $200 million * [A 5-10x Multiple] is significantly higher than $150 million * [A 5-10x Multiple].<\/p>\n<p>If the company wants to grow, it could do so\u00a0<em>organically<\/em> by hiring employees, expanding into new markets, and developing new products and services.<\/p>\n<p>However, organic growth is risky and time-consuming because the company must spend money on new ideas that may or may not work.<\/p>\n<p><strong>Bolt-on acquisitions<\/strong> provide a &#8220;shortcut method&#8221; to achieve this growth.<\/p>\n<p>They allow the company to acquire promising, smaller companies that could drive EBITDA growth, and they turn this acquirer into a &#8220;Platform Company&#8221; that&#8217;s more appealing to future buyers and public market investors.<\/p>\n<p>These acquisitions are still risky because the integration process could go poorly, or the Platform Company could pay too much.<\/p>\n<p>But some of the risk from organic growth is removed because these smaller companies already have proven products and services that are earning money.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"A_Simple_Bolt-On_Acquisition_Example\"><\/span><strong>A Simple Bolt-On Acquisition Example<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Let&#8217;s say that a private equity firm acquires a Platform Company for a Purchase Enterprise Value of $1 billion, funded with $600 million of Debt and $400 million of Equity.<\/p>\n<p>The Platform Company has $100 million of EBITDA (10x purchase multiple), and it generates $60 million of <a href=\"https:\/\/breakingintowallstreet.com\/kb\/financial-statement-analysis\/how-to-calculate-free-cash-flow\/\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">Free Cash Flow<\/a> per year.<\/p>\n<p>The Platform Company could do any of the following with this Free Cash Flow:<\/p>\n<p><strong>1) Aim for Organic Growth<\/strong>\u00a0&#8211; Spend the money to hire more employees or expand into new markets.<\/p>\n<p><strong>2) Repay Debt<\/strong> &#8211; Repay some of the $600 million of Debt so that, upon exit, the private equity firm has less Debt to repay.<\/p>\n<p><strong>3) Let the FCF Accrue to Cash<\/strong> &#8211; Let the $60 million increase the company&#8217;s Cash balance so that, upon exit, the private equity firm earns more (this Cash balance is assumed to go to the PE firm).<\/p>\n<p><strong>4) Spend the FCF on Bolt-On Acquisitions<\/strong> &#8211; Spend the $60 million to acquire smaller companies that will immediately boost the Platform Company&#8217;s revenue, EBITDA, and other financial metrics.<\/p>\n<p>Options #2 and #3 are &#8220;OK,&#8221; and they&#8217;ll often boost the IRR to acceptable levels.<\/p>\n<p>With these options, the PE firm might earn an extra $60 million * 5 = $300 million in exit proceeds. Here&#8217;s what it looks like in Excel:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-23739 size-full\" title=\"LBO Returns from Debt Paydown\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075141\/02-LBO-Returns-Debt-Paydown.jpg\" alt=\"LBO Returns from Debt Paydown\" width=\"897\" height=\"322\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075141\/02-LBO-Returns-Debt-Paydown.jpg 897w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075141\/02-LBO-Returns-Debt-Paydown-300x108.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075141\/02-LBO-Returns-Debt-Paydown-768x276.jpg 768w\" sizes=\"(max-width: 897px) 100vw, 897px\" \/><\/p>\n<p>On the other hand, if executed properly, Option #4 could provide a\u00a0<em>multiplicative benefit<\/em> because each bolt-on acquisition will boost the company&#8217;s EBITDA.<\/p>\n<p>Potentially, the company&#8217;s exit multiple might even increase to some number above 10x.<\/p>\n<p>If we assume that each acquisition is done at an 8x multiple, $60 million \/ 8 = $7.5 million of extra EBITDA per year.<\/p>\n<p>That results in $37.5 million of extra EBITDA by Year 5, which equates to $375 million in extra proceeds, assuming the same 10x EBITDA multiple:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter size-full wp-image-23740\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075141\/03-LBO-Returns-Bolt-On-Acquisitions.jpg\" alt=\"LBO Returns from Bolt-On Acquisitions\" width=\"895\" height=\"367\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075141\/03-LBO-Returns-Bolt-On-Acquisitions.jpg 895w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075141\/03-LBO-Returns-Bolt-On-Acquisitions-300x123.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075141\/03-LBO-Returns-Bolt-On-Acquisitions-768x315.jpg 768w\" sizes=\"(max-width: 895px) 100vw, 895px\" \/><\/p>\n<p>And if there&#8217;s <strong>multiple expansion<\/strong> because the company is using its capital more efficiently, the difference could be even bigger.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"When_Do_Bolt-On_Acquisitions_Matter\"><\/span><strong>When Do Bolt-On Acquisitions Matter?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Of course, you can also see the downside of bolt-on acquisitions from the example above:\u00a0<strong>they work well only when they&#8217;re executed at\u00a0<em>the right multiples <\/em> &#8211; ideally, multiples lower than the purchase multiple in the deal<\/strong>.<\/p>\n<p>If the Target Company paid 10x EBITDA for each acquisition, it would earn $6 million in extra EBITDA per year, which would mean $30 million in additional EBITDA by the end.<\/p>\n<p>At a 10x multiple, that is $300 million in extra proceeds, which is exactly the same as the &#8220;Repay Debt&#8221; option:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-23741 size-full\" title=\"LBO Returns from Repaying Debt vs. Bolt-On Acquisitions\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075140\/04-LBO-Returns-Repay-Debt-vs-Acquisitions.jpg\" alt=\"LBO Returns from Repaying Debt vs. Bolt-On Acquisitions\" width=\"888\" height=\"319\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075140\/04-LBO-Returns-Repay-Debt-vs-Acquisitions.jpg 888w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075140\/04-LBO-Returns-Repay-Debt-vs-Acquisitions-300x108.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075140\/04-LBO-Returns-Repay-Debt-vs-Acquisitions-768x276.jpg 768w\" sizes=\"(max-width: 888px) 100vw, 888px\" \/><\/p>\n<p>If the acquired companies are growing quickly, the math may still work even if the Platform Company acquires them for higher multiples.<\/p>\n<p><strong>In general, though, bolt-on acquisitions make the most difference when they are executed at multiples lower than the Platform Company&#8217;s purchase multiple and when they contribute significantly to its EBITDA.<\/strong><\/p>\n<p>If the Platform Company pays a significantly higher multiple for each acquisition, it might be better off repaying Debt or letting its Cash balance build up:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter size-full wp-image-23742\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075140\/05-LBO-Returns-Bolt-On-Acquisitions-High-Multiples.jpg\" alt=\"Bolt-On Acquisitions at High Multiples\" width=\"890\" height=\"321\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075140\/05-LBO-Returns-Bolt-On-Acquisitions-High-Multiples.jpg 890w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075140\/05-LBO-Returns-Bolt-On-Acquisitions-High-Multiples-300x108.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075140\/05-LBO-Returns-Bolt-On-Acquisitions-High-Multiples-768x277.jpg 768w\" sizes=\"(max-width: 890px) 100vw, 890px\" \/><\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_Do_You_Model_Bolt-On_Acquisitions_in_Leveraged_Buyouts_and_Other_Deals\"><\/span><strong>How Do You Model Bolt-On Acquisitions in Leveraged Buyouts and Other Deals?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The modeling process for bolt-on acquisitions depends on how complex your model is.<\/p>\n<p>If it&#8217;s a &#8220;cash flow only&#8221; model, such as a <a href=\"https:\/\/breakingintowallstreet.com\/kb\/financial-statement-analysis\/debt-schedule\/\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">leveraged buyout where you have only the Income Statement and a partial Cash Flow Statement<\/a>, it&#8217;s a fairly simple process, as shown in the example for Cars.com below:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-23743 size-full\" title=\"Bolt-On Acquisition Projections in an LBO\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075139\/06-Bolt-On-Acquisition-Projections-in-an-LBO.jpg\" alt=\"Bolt-On Acquisition Projections in an LBO\" width=\"854\" height=\"489\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075139\/06-Bolt-On-Acquisition-Projections-in-an-LBO.jpg 854w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075139\/06-Bolt-On-Acquisition-Projections-in-an-LBO-300x172.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075139\/06-Bolt-On-Acquisition-Projections-in-an-LBO-768x440.jpg 768w\" sizes=\"(max-width: 854px) 100vw, 854px\" \/><\/p>\n<p>We project the acquisition price and revenue and EBITDA contribution each year and then incorporate the additional items into the full model:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-23744 size-large\" title=\"LBO Bolt-On Acquisitions on the Income Statement\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075137\/07-LBO-Bolt-On-Acquisitions-Income-Statement-1024x694.jpg\" alt=\"LBO Bolt-On Acquisitions on the Income Statement\" width=\"1024\" height=\"694\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075137\/07-LBO-Bolt-On-Acquisitions-Income-Statement-1024x694.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075137\/07-LBO-Bolt-On-Acquisitions-Income-Statement-300x203.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075137\/07-LBO-Bolt-On-Acquisitions-Income-Statement-768x520.jpg 768w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075137\/07-LBO-Bolt-On-Acquisitions-Income-Statement.jpg 1120w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/p>\n<p>As a result, the company&#8217;s EBITDA is significantly higher by the end, resulting in a successful deal:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-23745 size-full\" title=\"LBO Bolt-On Acquisitions in the Cars.com Returns Calculations\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075137\/08-LBO-Bolt-On-Acquisitions-Cars.com-Returns.jpg\" alt=\"LBO Bolt-On Acquisitions in the Cars.com Returns Calculations\" width=\"956\" height=\"388\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075137\/08-LBO-Bolt-On-Acquisitions-Cars.com-Returns.jpg 956w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075137\/08-LBO-Bolt-On-Acquisitions-Cars.com-Returns-300x122.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075137\/08-LBO-Bolt-On-Acquisitions-Cars.com-Returns-768x312.jpg 768w\" sizes=\"(max-width: 956px) 100vw, 956px\" \/><\/p>\n<p>In a full 3-statement model, the process is more complicated because you must complete the <a href=\"https:\/\/breakingintowallstreet.com\/kb\/ma-and-merger-models\/purchase-price-allocation\/\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">purchase price allocation<\/a> process for each acquired company and adjust the Platform Company&#8217;s Balance Sheet for items like Goodwill and Other Intangible Assets.<\/p>\n<p>There&#8217;s an example of how to do this in <a href=\"https:\/\/www.mergersandinquisitions.com\/growth-equity\/\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">our growth equity tutorial for Atlassian<\/a>, but to summarize, you start by projecting each acquisition&#8217;s price, average multiple, and average margins, similar to the Cars.com example:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-23746 size-full\" title=\"Bolt-On Acquisitions - Projections for Atlassian\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075136\/09-Bolt-On-Acquisitions-Projections-Atlassian.jpg\" alt=\"Bolt-On Acquisitions - Projections for Atlassian\" width=\"850\" height=\"453\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075136\/09-Bolt-On-Acquisitions-Projections-Atlassian.jpg 850w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075136\/09-Bolt-On-Acquisitions-Projections-Atlassian-300x160.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075136\/09-Bolt-On-Acquisitions-Projections-Atlassian-768x409.jpg 768w\" sizes=\"(max-width: 850px) 100vw, 850px\" \/><\/p>\n<p>And then you assume a percentage of the purchase price is allocated to Goodwill, Other Intangibles, and other Balance Sheet line items, and you project the Amortization of Other Intangibles:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-23747 size-large\" title=\"Bolt-On Acquisitions - Goodwill and Other Intangibles\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075136\/10-Bolt-On-Acquisitions-Goodwill-Intangibles-1024x488.jpg\" alt=\"Bolt-On Acquisitions - Goodwill and Other Intangibles\" width=\"1024\" height=\"488\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075136\/10-Bolt-On-Acquisitions-Goodwill-Intangibles-1024x488.jpg 1024w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075136\/10-Bolt-On-Acquisitions-Goodwill-Intangibles-300x143.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075136\/10-Bolt-On-Acquisitions-Goodwill-Intangibles-768x366.jpg 768w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075136\/10-Bolt-On-Acquisitions-Goodwill-Intangibles.jpg 1179w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/p>\n<p>Finally, you make the &#8220;Acquisitions&#8221; line item on the <a href=\"https:\/\/breakingintowallstreet.com\/kb\/accounting\/cash-flow-statement\/\" target=\"_blank\" rel=\"noopener\">Cash Flow Statement<\/a> increase the corresponding Balance Sheet lines:<\/p>\n<p><img decoding=\"async\" class=\"aligncenter wp-image-23748 size-full\" title=\"Bolt-On Acquisitions on the Cash Flow Statement\" src=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075135\/11-Bolt-On-Acquisitions-Cash-Flow-Statement.jpg\" alt=\"Bolt-On Acquisitions on the Cash Flow Statement\" width=\"851\" height=\"647\" srcset=\"https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075135\/11-Bolt-On-Acquisitions-Cash-Flow-Statement.jpg 851w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075135\/11-Bolt-On-Acquisitions-Cash-Flow-Statement-300x228.jpg 300w, https:\/\/biwsuploads-assest.s3.amazonaws.com\/biws\/wp-content\/uploads\/2021\/07\/19075135\/11-Bolt-On-Acquisitions-Cash-Flow-Statement-768x584.jpg 768w\" sizes=\"(max-width: 851px) 100vw, 851px\" \/><\/p>\n<p>Yes, it takes a lot of time and effort if you include bolt-on acquisitions in a full 3-statement model.<\/p>\n<p>The irony is that they&#8217;re nearly\u00a0<em>useless<\/em> for Atlassian because all these deals are done at <em>20x revenue multiples.<\/em><\/p>\n<p>As a result, there&#8217;s virtually no EBITDA contribution from these acquired companies.<\/p>\n<p>These bolt-on acquisitions might still make sense in the long run if the companies grow significantly, but from a short-term financial perspective, it&#8217;s tough to justify the business case.<\/p>\n<p><em><strong>This tutorial is a small taste of the knowledge you&#8217;ll gain in our paid courses. <\/strong><\/em><strong>Breaking Into Wall Street<\/strong><em><strong> uses real-life modeling tests and interview case studies to prepare you for investment banking and private equity interviews \u2013 and a leg up once you win your offer and start working. Find out more about our advanced training by via the button below:<\/strong><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In this tutorial, you&#8217;ll learn how bolt-on acquisitions work in both leveraged buyouts and growth equity deals, and you&#8217;ll see Excel-based examples for Atlassian and Cars.com.<\/p>\n","protected":false},"featured_media":29356,"template":"","class_list":["post-23737","biws_kb","type-biws_kb","status-publish","has-post-thumbnail","hentry","kb_category-leveraged-buyouts-and-lbo-models"],"acf":[],"_links":{"self":[{"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/biws_kb\/23737","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/biws_kb"}],"about":[{"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/types\/biws_kb"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/media\/29356"}],"wp:attachment":[{"href":"https:\/\/breakingintowallstreet.com\/wp-json\/wp\/v2\/media?parent=23737"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}