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Technical: LBO Model - Advanced 1 (400Q graded A+
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Technical: LBO Model - Advanced 1 (400Q graded A+
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Technicals: LBO Model - Advanced 1(400Q
Tell me about all the different kinds of debt you could use in an LBO and the differences
between everything.
How would an asset write-up or write-down affect an LBO model? / Walk me through how you
adjust the Balance Sheet in an LBO model.
Normally we care about the IRR for the equity investors in an LBO - the PE firm that buys the
company - but how do we calculate the IRR for the debt investors?
Why you would you use PIK (Payment In Kind) debt rather than other types of debt, and how
does it affect the debt schedules and the other statements?
Why might a private equity firm allot some of a company's new equity in an LBO to a
management option pool, and how would this affect the model?
What are some examples of incurrence covenants? Maintenance covenants?
Just like a normal M&A deal, you can structure an LBO either as a stock purchase or as an
asset purchase. Can you also use Section 338(h)(10) election?
Walk me through how you calculate optional repayments on debt in an LBO model.
Explain how a Revolver is used in an LBO model.
You use a Revolver when the cash required for your Mandatory Debt Repayments exceeds the
cash flow you have available to repay them.
The formula is: Revolver Borrowing = MAX(0, Total Mandatory Debt Repayment - Cash Flow
Available to Repay Debt).
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