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Should a fund pay PLN 600 million for a packaging maker?
The prompt
A private equity fund, which buys whole companies, asks whether to pay PLN 600 million for a family-owned packaging maker in Poland (fictional, with no debt). Last year it had EBITDA of PLN 80 million, depreciation of 20 million and capex of 25 million. Working capital rose by 5 million. Tax is 20 percent (illustrative). Invested capital is PLN 400 million. The fund's cost of capital is 9 percent. Is the price sensible?
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