Coaching assembly lbo steps

Page 1

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

First step is making assumptions on the purchase price, debt interest rate, etc.

Create Sources and Uses

"Sources" lists how the transaction will be financed and "Uses" lists the capital uses.

Financial Projections

Project out the three financial statements (usually 5 years) and determine how much debt is paid down each year.

Balance Sheet Adjustments

Adjust the balance sheet for the new debt and equity.

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.

Calculate Interest Expense p and tie this into the Income Statement

2

3

4

5 Exit 6 Calculate CoC and d IRR (x) ( )

CoachingAssembly. All rights reserved. Any unauthorised copying, duplication, reproduction, re-selling, distribution or other commercial use will constitute an infringement of copyright


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

• •

Earnings metric (P/E or EBITDA) Entry multiple or premium Net Debt

Debt / Equity funding %

Dependent on size of transaction (Growth equity vs. LBO) and financing market

Debt funding mix  RCF  Senior Debt  High Yield  Mezzanine

Total leverage ranges from 3-7x Total Debt/EBITDA

• •

Transaction Expenses Cash (available, minimum cash)

NA

M Management t model d l

M Management t

• •

Exit multiple Time Horizon

• •

Typically same as entry multiple coupled w/ sensitivities Dependent on markets

• •

Management roll-over equity Management incentive option pool

NA

Debt Capital Structure 4 Sources and Uses 5 Growth Projections 6 Exit assumptions 7 Other

RANGES / FACTOR

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


Turn static files into dynamic content formats.

Create a flipbook
Issuu converts static files into: digital portfolios, online yearbooks, online catalogs, digital photo albums and more. Sign up and create your flipbook.