Does the sale add $13 a share?
Explain a catalyst without counting the same proceeds twice.
The question
Fictional Alder Signal has 20 million shares at $60. Your sum-of-the-parts model values the remaining operations at $1,460m enterprise value. Net debt is $400m before a division sale. The announced sale has a $300m price, $30m of tax and $10m of fees. Net cash will repay debt. Closing is planned in six months, subject to approval.
| Value | |
|---|---|
| Remaining operations EV | 1460 |
| Net debt before sale | 400 |
| Gross sale proceeds | 300 |
| Sale tax | 30 |
| Sale fees | 10 |
| Diluted shares (m) | 20 |
Remaining operations exclude the sold division. All net sale proceeds repay debt. No change in operating value is assumed.
The model is worth $66 per share. The division sale adds another $13 of cash per share, taking the target to $79.
“Is $79 correct? Show the bridge and explain what the six-month closing could change.”
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A strong answer, step by step
Open each step in turn. This is one strong answer, not the only one.
Step 1: Use net proceeds
What would you do here? Open the move you’d make.
Use the $300m headline as cash available.
Tempting, but it misses something. The seller cannot use the $40m owed in tax and fees.
Use $260m net proceeds.
The strong move. Tax and fees reduce what equity holders keep.
See how a strong candidate says it
“The sale generates $300m − $30m − $10m = $260m, or $13 per share.”
Why it works: Tax and fees reduce what equity holders keep.
Step 2: Bridge from operations to equity
What would you do here? Open the move you’d make.
Add $13 to the $66 target.
Tempting, but it misses something. That counts the same $260m twice.
Reduce debt by $260m and get $66 per share.
The strong move. This valuation already uses the sale cash through lower debt.
See how a strong candidate says it
“Net debt falls to $140m. Equity value is $1,460m − $140m = $1,320m, or $66 per share.”
Why it works: This valuation already uses the sale cash through lower debt.
Step 3: Name the catalyst mechanism
What would you do here? Open the move you’d make.
Treat the announcement date as a guaranteed re-rating date.
Tempting, but it misses something. The market can price the event earlier, later or differently.
Explain approval, closing and what uncertainty clears.
The strong move. A catalyst changes information or its recognition; it is not a second valuation asset.
See how a strong candidate says it
“Closing could remove execution doubt and make the remaining business easier to compare. It does not mechanically create another $13 on top of this model.”
Why it works: A catalyst changes information or its recognition; it is not a second valuation asset.
Step 4: Show the unresolved case
What would you do here? Open the move you’d make.
Use $53 as the failure target by removing $13 from $66.
Tempting, but it misses something. Failure also leaves Alder owning the division; simply removing cash drops an asset.
Build a separate no-sale valuation before sizing the trade.
The strong move. A failed sale changes the asset boundary; remaining-operations EV alone cannot value that case.
See how a strong candidate says it
“I need a no-sale value, including the retained division, to quantify failure downside. I would track approval and net proceeds, then revise the model if either changes.”
Why it works: A failed sale changes the asset boundary; remaining-operations EV alone cannot value that case.
The answer, in short
- Decision
- Use $66 for the stated completed-sale model, not $79.
- Because
- The $260m net proceeds already reduce net debt from $400m to $140m.
- What would change it
- Different net proceeds, a change in remaining operations value, or a separately valued failed-sale outcome.
Common traps
- Adding proceeds after they already reduced debt.
- Treating a catalyst as a certain price move.
- Dropping the division from a failure case without valuing it.
Check your answer
- Did I calculate $260m net proceeds?
- Did I bridge to $1,320m equity and $66 a share?
- Did I explain a recognition mechanism and closing risk?
- Did I avoid inventing a no-sale target?
Last reviewed Nov 10, 2026