Lbo modelling - Study guides, Class notes & Summaries

Why do PE firms use leverage when buying companies? Amplify returns using leverage Less capital upfront => greater upside potential + greater risk Walk me through a basic LBO model 1. Make assumptions about purchase price, funding sources, interest rate on debt, and growth 2. S&U to back into Equity Contribution. PPA to calculate GW and Other Intangibles created 3. Adjust target's B/S for new debt and equity figures, allocate the purchase price, and add GW and other Intangibles s.t. A = L +...

LBO Modelling Exam Questions With 100% Correct Answers What is the biggest difference between an LBO and an M&A? - answerUnlike an M&A, we're not assuming the PE firm will keep the company long term What makes a good LBO candidate? - answer-opportunity to cut costs -stable cash flows -good base of assets -undervalued/low-risk Walk me through a basic LBO model. - answer1. Make assumptions about the Purchase Price and how much debt to use 2. Create a Financial Sources & Uses section 3....

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LBO MODELLING EXAM FROM WALL STREET PREP 2024 How do you use an LBO model to value a company, and why do we sometimes say that it sets the "floor valuation" for the company? - ANSYou use it to value a company by setting a targeted IRR (e.g., 25%) and then back-solving to determine what purchase price the PE firm could pay to achieve that IRR. This is sometimes called a "floor valuation" because PE firms almost always pay less for a company than strategic acquirers would. Give ...

LBO Modelling Exam Questions With 100% Correct Answers What is the biggest difference between an LBO and an M&A? - answerUnlike an M&A, we're not assuming the PE firm will keep the company long term What makes a good LBO candidate? - answer-opportunity to cut costs -stable cash flows -good base of assets -undervalued/low-risk Walk me through a basic LBO model. - answer1. Make assumptions about the Purchase Price and how much debt to use 2. Create a Financial Sources & Uses section 3....

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Introduction to leveraged finance Leveraged finance refers to the financing of highly levered, speculative-grade companies. Within the investment bank, the Leveraged Finance (“LevFin”) group works with corporations and private equity firms to raise debt capital by syndicating loans and underwriting bond offerings to be used in LBOs, M&A, debt refinancing and recapitalizations. The funds raised are used primarily for: 1. Leveraged buyouts (LBOs): Financial sponsors need to raise debt t...

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