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Package 6: Leveraged Buyout Modeling

Package 6: Leveraged Buyout Modeling

Our LBO modeling courses introduce critical skills required for properly understanding and quantifying capital structure changes from simple share repurchases to the extreme of a leveraged buyout. The techniques and concepts learned in building proper, robust, dynamic and flexible LBO models are highly valued given the relative difficult nature of setting up, quantifying and articulating the complex relationships and intricacies of the LBO. We clearly convey the complexities involved in understanding the deal structure, sources & uses, refinancing options, credit ratios and the all-important debt sweep.

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Last 10 posts

Valuation Summary - Private Company Differences
Hello. What differences are there in Valuation Summary for a private company vs. a public company (as shown on slide 14)?

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by Charles Z.

added 7 years ago

Credit/Leverage Statices
The video does not go over the credit leverage ratios section. Can you send me the answers? Know its self explanatory, really just interested in cumulative debt paydown

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by Ajay S.

added 8 years ago

Leveraged Buyout Overview: about goodwill
hello I am a little unclear about the accounting treatment. You mentioned the goodwill is the difference between the purchase price and the book value. But from my knowledge:if the M & A is viewed prospectively (restate everything and look forward) by treating the transaction as a purchase. ... Read More

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by Guest 1.

added 10 years ago

Leveraged Buyout Overview: About LBO Overview
Hi there, As usual, I have a couple of questions/validations to make sure I fully understood the concepts here to move on to the Q&D Basic LBO Model course: (1). Is goodwill created only when when we purchase 100% of the target company? What's the relationship between GW creation and the %... Hi there, As usual, I have a couple of questions/validations to make sure I fully understood the concepts here to move on to the Q&D Basic LBO Model course: (1). Is goodwill created only when when we purchase 100% of the target company? What's the relationship between GW creation and the %age bought? And if less than 100% creates GW, do I account for it proportionally? (2). When explaining the Purchase Accounting you said that the target Balance Sheet is blown out. But what if you are not purchasing 100% of the company? Do you still blown it out or do something different in this case? (3). Rollover: let's say that there is a rollover of 3%. In this case, Should I consider it a purchase accounting (once the acquirer bought more than 94.9%)? But I'm confused here because the slide says Purchase accounting occurs only when you buy 100% of the target. To be a purchase accounting do you have to buy 100%? Could please clarify all that for me? (4). If you have a rollover of 4%, let's say. Should you adjust your purchase price (in the uses) and the equity funding (in sources) to reflect that you're not buying the whole company? (5). On the slide that you talk about the IRR, the EBIIDA used to calculate the Exit Enterprise Value is the one porjected as a Status Quo or the one which incorporates any efficiency/cost reductions achieved by the new management (PE firm)? (6). In this LBO overview, why didn't you mention any of the deal structures discussions that we had in the M&A deal structuring module (in relation to whether or not it is an asset deal, stock deal or to treat it as a 338(h)10 election)? Does it matter here (for LBO) or not? (7). Can we have an LBO in a privately held company? If yes, what are the factors that can make it more difficult than doing an LBO w/ a public company? Actually, is it usual to have LBO in private companies? (8). Why the Pro Forma Total Debt / EBITDA ratio (6.38x - 2004PF) in our credit statistics table is above the 6.0x ratio assumed in the debt capacity? I appreciate your assistance on each of these questions as usual. Thanks again for all your support. Regards Read More

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by Guest 1.

added 10 years ago

Emerging Markets
During the LBO class discussion, it wasn't clear to me what the recommended treatment for adjustment for valuing an emerging market company. Are you saying to use not the US risk free rate and therefore adjust for the country specific rate, adjust the market risk premium, or adjust to the total numb... Read More

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by Guest 1.

added 10 years ago

Modeling/Projecting Floating Rates
I just completed the quick and dirty and advanced LBO courses and had a real world question: With bank debt being at a spread above LIBOR, how do u usually deal with projecting/modeling floating rate interest rates (for bank debt) in leveraged models? Do you assume a constant libor for say 5 yea... Read More

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by Guest 1.

added 10 years ago

adv lbo model questions
a bunch of questions in the advanced lbo model. Sources and uses: uses: this is likely a stock (not asset) purchase (as debt is refi'd/purchased/needs to be taken care of...)? what is the equity prem based from? if co has lot of cash, them would this affect eq prem? don't see cash or min int in u... a bunch of questions in the advanced lbo model. Sources and uses: uses: this is likely a stock (not asset) purchase (as debt is refi'd/purchased/needs to be taken care of...)? what is the equity prem based from? if co has lot of cash, them would this affect eq prem? don't see cash or min int in uses of funds .75% for debt fin fees, .75% for tender costs & accrued int, and .5% for trans costs? also trans costs based on pre-deal EV? sources: [target] cash is in uses because it assumes after [target] eq purchase, the acquirers (eg sponsors) own/control the assets [cash] and could use it during deal to pay off uses (eg equity)? valuation summary: the TEV multiples would be / are same as deal comp multiples in a deal comp analysis (and is [target] debt always included - or basically yes as most lbos are stock purchases AND also yes in more rare lbo asset purchases w assumption of debt)? P&L: D&A doesn't contain debt fin fee amort, as the latter is shown as separate item? P&L projections: what is purpose of showing PF (using y1 projections for y0) for year 0 (before transaction date), for net int ex & debt fin fees? PF tax rate - this based generally on historical last full year (assuming no major tax change event)? PPA: In LBOs (also the LBO model), we should ignore FMV & intangibles allocation b/c -GW less important as it is not amort -not public co, after LBO --not have to abide by GAAP for intang valuation & FMV step, as doesn't affect taxes and no need to screw up numbers (eg FASB 141/142 may mess up GAAP num v IRS) --co is revalued after LBO exit SCF: debt fin fee amort is added back to NI as it is non-cash ex (as debt fin fee was orig capitalized in BS)? Also what are offsetting accounts in the BS assets & liabilities (in the orig capitalized debt fin fee in BS)? credit & leverage stats: I calc Cumulative Debt Paydown as =SUM(Q30,Q36,Q56) I calc Cumulative % of Initial Debt Paid as =Q86/SUM($P$37,$P$42,$P$47,$P$52,$P$57) Just confirm these are correct, as answers are not provided? Read More

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by Guest 1.

added 10 years ago

Cost of Equity and Debt
How does the cost of equity of the target affect an LBO or investment decision? This is a private company and I know that publicly traded entities with the same risk characteristics have a cost of equity of 8.5%. I am wondering if it affects anything other than the initial standalone valuation used ... Read More

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by Guest 1.

added 10 years ago

Quick & Dirty Basic LBO Model: Modeling Private Cos
In the Core Merger Modelling Topics module, the models you build concern public listed companies either as acquirors or as targets. What are the effects on a model when the target is a private (not listed company) or a Business Unit that a corporation wants to dispose. For example let's as... Read More

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by Guest 1.

added 10 years ago

Quick & Dirty Basic LBO: transaction enterprise value
Hi. when you are calculating the transaction enterprise value,you use the sum of the equity acquisition and the existing net debt refinanced to arrive at the transaction enterprise value. But the $750 maintained on books has the significant effect on the amount of the existing net debt refinanced... Read More

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by Guest 1.

added 10 years ago