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LBO MODELING
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BTEC Level 3 National Business Student Book 2
LBO MODELING EXAM FROM WALL STREET PREP EXAM 2024 WITH ACTUAL QUESTIONS AND COMPLETE 100% VERIFIED CORRECT AND WELL EXPLAINED ANSWERS WITH RATIONALES GRADED A+ BY EXPERTS LATEST VERSION 2024 WITH GUARANTEED SUCCESS AFTER DOWNLOAD ALREADYPASSED!!!!!!! (PROVEN ITS ALL YOU NEED TO EXCEL IN YOUR EXAMS...
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LBO MODELING EXAM FROM WALL
STREET PREP EXAM 2024 WITH ACTUAL
QUESTIONS AND COMPLETE 100%
VERIFIED CORRECT AND WELL
EXPLAINED ANSWERS WITH
RATIONALES GRADED A+ BY EXPERTS
LATEST VERSION 2024 WITH
GUARANTEED SUCCESS AFTER
DOWNLOAD ALREADYPASSED!!!!!!!
(PROVEN ITS ALL YOU NEED TO EXCEL
IN YOUR EXAMS)
,
, Give me an example of a "real-life" LBO. The most common example is taking out a mortgage when you
buy a house. We think it's better to think of it as, "Buying a house that you rent out to other people"
because that situation is more similar to buying a company that generates cash flow.
Here's how the analogy works:
• Down Payment: Investor Equity in an LBO
• Mortgage: Debt in an LBO
• Mortgage Interest Payments: Debt Interest in an LBO
• Mortgage Repayments: Debt Principal Repayments in an LBO
• Rental Income from Tenants: Cash Flow to Pay Interest and Repay Debt in an LBO
• Selling the House: Selling the Company or Taking It Public in an LBO
How could a private equity firm boost its return in an LBO? 1. Reduce the Purchase Price.
2. Increase the Exit Multiple and Exit Price.
3. Increase the Leverage (debt) used.
4. Increase the company's growth rate (organically or via acquisitions).
How could you determine how much debt can be raised in an LBO and how many tranches there would
be? Usually you would look at recent, similar LBOs and assess the debt terms and tranches that were
used in each transaction.
You could also look at companies in a similar size range and industry, see how much debt outstanding
they have, and base your own numbers on those.
Let's say we're analyzing how much debt a company can take on, and what the terms of the debt should
be. What are reasonable leverage and coverage ratios? This is completely dependent on the company,
the industry, and the leverage and coverage ratios for comparable LBO transactions.
To figure out the numbers, you would look at "Debt Comps" showing the types, tranches, and terms of
debt that similarly sized companies in the industry have used recently.
There are some general rules: for example, you would never lever a company at 50x EBITDA, and even
during bubbles leverage rarely exceeds 10x EBITDA.
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