Calculate Percentage of Ownership Change

[jmb35]

Hello all. I'm in need of assistance figuring out a percentage change in ownership if one company absorbs another company.

I have two companies with different ownerships and will assign arbitrary names to the owners.

Company A has a valuation of $1,000,000 and Company B has a valuation of $7,000,000.

Company A ownership is:

John 50%
Mike 25%
Julie 25%

Company B ownership is:

John 54.67%
Joe 33.33%
Julie 6.00%
Mike 4.00%
JD 2.00%

As you can see, John, Mike and Julie have ownership in both companies but in Company B, Joe and JD also have ownership. If Company B (valuation of $7,000,000) absorbs Company A (valuation $1,000,000) what would the new percentage of ownership look like for Company B.

John, Mike and Julie's new percentage ownership in Company B should go up because they are the owners of Company A which is being absorbed and JD and Joe's percentage ownership in Company B will go down, but what will the actual new percentages be in Company B?

Thank you for your help.

 

[HallsofIvy]

That's pretty straight forward. Company A is worth $1,000,000 and John owns 50% of it so his share is worth .50($1,000,000)= $500,000. Mike and Julie both own 25% so each has .25($1,000,000)= $250,000 worth.

Company B is worth $7,000,000 and John owns 54.67% so John's share of company B is 0.5467(7,000,000)= $3,826,900. The two companies together are worth $1,000,000+ $7,000,000= $8,000,000 and John owns $500,000+ $3,826,900= $4,326,900. John's percentage share is \(\displaystyle \frac{4326900}{8000000}= 0.5408625\) or 54%, approximately. Do the same for the others.