Transaction assumptions:
Sources & uses ✅Sources: cash on hand, revolver draw (which should be zero), term
loan, senior notes, subordinated notes, mgmt rollover, sponsor equity
Uses: purchase equity, refinance existing debt, refinancing expenses, fund cash
balance, transaction expenses, financing fees
Transaction assumptions:
Transactions assumptions ✅LTM adj. EBITDA X transaction multiple = transaction
value
Transaction value - debt + cash = equity value
Memo: Mgmt rollover in % and $
Transaction assumptions:
Purchase accounting ✅Total equity value - total assets (excl. goodwill) + total liabilities
= PF goodwill
Value paid for an asset must be capitalized on the B/S (in the case of an acquisition, the
asset being acquired is the company itself). When calculating goodwill, remember to
subtract out the existing goodwill (goodwill functions as the plug and we don't care
about the prior plug).
Transaction assumptions:
Financing assumptions ✅Rows: revolver, term loan, senior notes, subordinated notes
(type of debt)
Columns: leverage, term, interest type, interest rate, annual amort, years PIK, financing
fees
Formula to get nice, round debt balances for each tranche
=mround (leverage * EBITDA, minimum debt increment)
PF income statement:
Rows ✅Revenue
% growth
Adj EBITDA
% margin
% growth
(-) D&A
Adj EBIT
% margin
% growth
(-) Net interest expense (build in circuit breaker)
Adj EBT
(-) Tax expense
Adj net income
% margin
% growth
Memo:
Revenue growth (%)
COGS (% of sales)
EBITDA margin (%)
D&A (% of sales)
CapEx (% of sales)
PF income statement:
Steps ✅Grow Revenue by multiplying the prior year by (1 + growth rate)
Calculate projected EBITDA by multiplying margin by Revenue
Calculate D&A with the % of sales
Subtract D&A from EBITDA to arrive at EBIT
Leave Net Interest Expense blank for now, but calculate EBT as EBIT + blank Net
Interest Expense row
EBT equals EBIT for now, but we will add Net Interest Expense in the future
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