Series 79: Maximum Purchase Price

in an M&A transaction, the highest price that an acquirer is willing and able to pay. It is the total of the acquirer’s debt capacity and its equity contribution. However, because the equity contribution is often expressed as a percentage of the total purchase price, calculating the maximum purchase price is not as simple as adding the debt capacity and equity contribution. It may be calculated by dividing the debt capacity in dollars by (100% – equity contribution).