Lbo candidate - Study guides, Class notes & Summaries

Walk me through a basic LBO model? - ANSWER 1) Assumptions of purchase price, debt/equity ratio, interest rate on debt, and other variables and you might assume something about company's revenue growth or margins. 2)Create sources & uses section 3) Adjust company's balance sheet for the new debt, equity, Goodwill, and other intangibles. 4) Project company's income statement, balance sheet, and cash flow statement and determine debt schedule. 5)Assumptions about EBITDA exit multiple and calcul...

What is a leveraged buyout (LBO)? - ANSWER A leveraged buyout is the acquisition of a public or private company with a significant amount of borrowed funds. A private equity firm (or group of private equity firms) acquires a company using debt instruments as the majority of the purchase price. After the purchase of the company, the debt/equity ratio is generally greater than 1.0x (debt generally constitutes 50-80% of the purchase price). During the ownership of the company, the company's cash f...

LBO MODEL EXAM QUESTIONS AND VERIFIED COMPLETE ANSWERS GRADED A++ LATEST UPDATE how to PE firms make money? buying businesses with a combination of cash and more importantly, debt raised from investors spending on average 3-5 years to make improvements to the business (increase growth and/or improve margins), while using the cash flow to make interest payments selling the business for a higher price through M&A or IPO, and then repaying the balance of the debt with the proceeds why do...

Walk me through a basic LBO model - ANS "In an LBO Model, the first step is making some key assumptions about entry and exit multiple, leverage for the deal, interest rate on debt, and other variables. Next, you create a Sources & Uses section, which shows how you finance the transaction and how much sponsor equity is required. After that, you adjust the company's Balance Sheet for the new Debt and Equity figures, and also add in Goodwill & Other Intangibles on the Assets side to...

What is an LBO? - ANSWER Acquisition of another company using significant amount of debt. 90% debt - 10% equity Walk me through an LBO model - ANSWER 1. Make assumptions about purchase price, debt/equity ratio, and interest rate on debt 2. Create a sources/uses section, which shows how the transaction is financed and how much investor equity is required 3. Adjust balance sheet for new debt/equity figures 4. Project out company's financial performance and determine how much debt woul...

Can you walk me through how you might make an investment decision based on the output from an LBO model? 1) Determine investment criteria (IRR and MoM multiple) 2) Build projections and look at LBO model output for Base Case. If numbers work, build projections for Downside Case 3) Back up decision with qualitative criteria. Why might you recommend AGAINST a deal even if the IRRs and MoM multiples are favorable in the Downside, Base, and Upside cases? You might recommend against a deal if there...

What is a leveraged buyout, and why does it work? - ANSWER "In a leveraged buyout (LBO), a private equity firm acquires a company using a combination of Debt and Equity, operates it for several years, and then sells the company at the end of the period to realize a return on its investment. It works because leverage amplifies returns: If the deal performs well, the PE firm will realize higher returns than if it had bought the company with 100% Equity. But leverage also presents risks because i...

What is an LBO? - ANSWER Acquisition of another company using significant amount of debt. 90% debt - 10% equity Walk me through an LBO model - ANSWER 1. Make assumptions about purchase price, debt/equity ratio, and interest rate on debt 2. Create a sources/uses section, which shows how the transaction is financed and how much investor equity is required 3. Adjust balance sheet for new debt/equity figures 4. Project out company's financial performance and determine how much debt woul...

Walk me through a basic LBO model? - ANSWER 1) Assumptions of purchase price, debt/equity ratio, interest rate on debt, and other variables and you might assume something about company's revenue growth or margins. 2)Create sources & uses section 3) Adjust company's balance sheet for the new debt, equity, Goodwill, and other intangibles. 4) Project company's income statement, balance sheet, and cash flow statement and determine debt schedule. 5)Assumptions about EBITDA exit multiple and calcul...

LBO Model (Breaking into Wall Street) 100%accurate! LBO Model (Breaking into Wall Street) 100%accurate! LBO Model (Breaking into Wall Street) 100%accurate! Walk me through a basic LBO model? - ANSWER 1) Assumptions of purchase price, debt/equity ratio, interest rate on debt, and other variables and you might assume something about company's revenue growth or margins. 2)Create sources & uses section 3) Adjust company's balance sheet for the new debt, equity, Goodwill, and other intang...