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LBO MODELING | FINANCEABLE EXAM QUESTIONS AND ANSWERS WITH COMPLETE SOLUTIONS VERIFIED GRADED A++ $9.99   Add to cart

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LBO MODELING | FINANCEABLE EXAM QUESTIONS AND ANSWERS WITH COMPLETE SOLUTIONS VERIFIED GRADED A++

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LBO MODELING | FINANCEABLE EXAM QUESTIONS AND ANSWERS WITH COMPLETE SOLUTIONS VERIFIED GRADED A++ LBO Leveraged buy out - Is an acquisition of a business which a meaningful portion of the purchase price through debt - Executed by PE funds (holding period for 5 years) - Late stage businesses ...

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  • October 31, 2024
  • 9
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers
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LBO MODELING | FINANCEABLE EXAM QUESTIONS AND

ANSWERS WITH COMPLETE SOLUTIONS VERIFIED

GRADED A++


LBO

Leveraged buy out

- Is an acquisition of a business which a meaningful portion of the purchase price

through debt

- Executed by PE funds (holding period for 5 years)

- Late stage businesses

The LBO Process

1. Purchase price (usually EBITDA * Multiple = TEV)

2. Fund the deal

3. Use cash flow to pay down debt

4. Sale of the company (calculate TEV)

5. Pay the lender

6. MOIC (multiple of invested capital - multiple) or IRR

LBO Sources & Uses

Sources: Funding available

Uses: Funding needed (start with uses)

, - Advisor fees, financing (lender) fees

- Impacts all 3 financial statements

The impact of debt

- Amplifies outcome (good or bad)

- The more debt, the less cash flow

Purchase price as a LBO value driver

EBITDA growth as a LBO value driver

Cash Flow (ie. Paydown) as a LBO value driver

Secondary value drivers (less control over it as a buyer)

1. Level of debt at purchase

2. Interest rate on debt

3. Exit multiple

Private Equity Fund

- Pooled investment vehicle that gathers money from investors and invests that money

in return for fees

- Usual refers to LBO funds

- PE funds typically buy entire companies with the aim of selling the company in 5 years

- 2%/20% -> management fee/profit generated

PE Fund Structure

PE Process

LBO Candidate Characteristics

1. Stable business (visible/predictable business)

2. Growth opportunities + competitive advantages (rev increase, cost decrease -

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