LBO steps - building a LBO model Find i d more on CoachingAssembly.com hi bl KEY STEPS IN BUILDING A LBO MODEL
Here are the primary steps involved in building a LBO model:
1 Purchase Price Assumptions
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First step is making assumptions on the purchase price, debt interest rate, etc.
Create Sources and Uses
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"Sources" lists how the transaction will be financed and "Uses" lists the capital uses.
Financial Projections
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Project out the three financial statements (usually 5 years) and determine how much debt is paid down each year.
Balance Sheet Adjustments
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Adjust the balance sheet for the new debt and equity.
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Last step is calculating exit value based on a EV/EBITDA multiple on year 5 EBITDA and then subtracting net debt to get the company's exit equity value.
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Calculate Interest Expense p and tie this into the Income Statement
2
3
4
5 Exit 6 Calculate CoC and d IRR (x) ( )
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LBO steps - key assumptions Find i d more on CoachingAssembly.com hi bl KEY STEPS IN BUILDING A LBO MODEL
Here are the primary steps involved in building a LBO model:
CATEGORY MAIN ASSUMPTIONS 1
• Entry assumptions
2 Transaction Funding 3
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• •
Earnings metric (P/E or EBITDA) Entry multiple or premium Net Debt
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Debt / Equity funding %
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Dependent on size of transaction (Growth equity vs. LBO) and financing market
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Debt funding mix RCF Senior Debt High Yield Mezzanine
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Total leverage ranges from 3-7x Total Debt/EBITDA
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Transaction Expenses Cash (available, minimum cash)
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NA
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M Management t model d l
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M Management t
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Exit multiple Time Horizon
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Typically same as entry multiple coupled w/ sensitivities Dependent on markets
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Management roll-over equity Management incentive option pool
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NA
Debt Capital Structure 4 Sources and Uses 5 Growth Projections 6 Exit assumptions 7 Other
RANGES / FACTOR
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Public companies - % premium to current share price Private companies - LTM EBITDA multiple dependent on precedent transactions and public comparables
CoachingAssembly. All rights reserved. Any unauthorised copying, duplication, reproduction, re-selling, distribution or other commercial use will constitute an infringement of copyright