Paper LBO Find i d more on CoachingAssembly.com hi bl LBO Parameters and Assumptions
OpCo is acquired by a financial buyer for 5.0x NTM (next twelve months) EBITDA at the end of Year 0 The financial buyer raised 40/60 debt to equity. Cost of debt @ 5.0% OpCo is projected to reach GBP 100.0m in Revenue at the end of Year 1. EBITDA margin @ 40.0% Revenues expected to grow @ 10.0% Y-o-Y for the next 5 years EBITDA Margins expected to remain flat going forward (in line with historical level) CAPEX (capital expenditures) are 20% of revenues each year Working capital remains the same every year The D&A is GBP 20.0m every year Tax rate @ 30.0% Exit multiple same as entry multiple (based on LTM EBITDA)
STEP-BY-STEP I- Transaction Metrics (Purchase Price & Funding) Compute the purchase price using the NTM EBITDA and acquisition multiple Here purchase price is GBP 200.0m Sources of funding: Equity: Equit GBP 120 120.0m 0m Debt: GBP 80.0m SUMMARY EBITDA NTM 40.0 Equity 60.0% 120.0
Multiple Purchase Price
5.0x 200.0
Debt 40.0% Total Funding
80.0 200.0
II- Build the P&L (or Income Statement) and CFS (Cash Flow Statement) GBP m, Dec-YE D YE Revenues Growth EBITDA Margin D&A EBIT Margin I t Interest t EBT Margin Taxes Net Income
GBP m, Dec-YE Net Income + D&A - CAPEX - Delta WC Levered FCF
Year 1 Y 100 40 40.0% (20) 20 20.0% (10) 10 10.0% (3) 7
Year 2 Y 110 10.0% 44 40.0% (20) 24 21.8% (10) 14 12.7% (4) 10
Year 3 Y 121 10.0% 48 40.0% (20) 28 23.5% (10) 18 15.2% (6) 13
Year 4 Y 133 10.0% 53 40.0% (20) 33 25.0% (10) 23 17.5% (7) 16
Year 5 Y 146 10.0% 59 40.0% (20) 39 26.3% (10) 29 19.5% (9) 20
Year 1 7 20 (20) 7
Year 2 10 20 (22) 8
Year 3 13 20 (24) 9
Year 4 16 20 (27) 10
Year 5 1) 20 20 (29) 2) 11 3)
1)
2) 3)
4)
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Use the assumptions to calculate revenues and EBITDA for the forecast period Subtract D&A to get to EBIT Interest expense is based on debt p principal p and cost of debt: leads to EBT Use the assumed tax rate and find the Net Income Start with Net income, then add back D&A (non cash expense) Subtract CAPEX Subtract Change in WC
Paper LBO Find i d more on CoachingAssembly.com hi bl III- Enterprise & Equity Value at Exit
Compute the Enterprise Value at Exit using the LTM EBITDA and same multiple as the acquisition multiple: Enterprise Value= 5.0 x 58.6= 292.8m Net debt at exit is debt at entry minus cumulative levered FCF Net Debt= 80.0 - 43.8= 36.2m Equity Value= Enterprise Value – Net Debt Equity Value= 292.8 - 36.2= 256.7m
IV- IRR & CoC LTM EBITDA @ Exit
58.6
Exit Multiple Enterprise Value @ Exit
5.0x 5 0x 292.8
BoP Debt
80.0
Cumulative FCF Net Debt @ Exit
43.8 36.2
Entry Equity Value
120.0
Exit Equity q y Value
256.7
CoC (x)
2.1x
IRR (%)
16.4%
1)
CoC (x)
2)
CoC (cash on cash) multiple is defined by Exit Equity / Entry Equity To approximate the IRR you can use the below conversion table
### 1 2 3 4 5 6
1 100.0% 200.0% 300.0% 400.0% 500.0%
2 41.4% 73.2% 100.0% 123.6% 144.9%
Year 3 26.0% 44.2% 58.7% 71.0% 81.7%
4 18.9% 31.6% 41.4% 49.5% 56.5%
5 14.9% 24.6% 32.0% 38.0% 43.1%
6 12.2% 20.1% 26.0% 30.8% 34.8%
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