LBO course

On an LBO course from Financial Training Associates delegates take a case business and imagine it taking on debt as part of the transaction.

Starting from a blank Excel spreadsheet, course attendees build up an operating model, layering in debt, measuring banking ratios and equity returns.

Delegates then flex the spreadsheet, pulling all the model’s levers, competing to optimise the deal and seeing who can achieve the best ‘result’.

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Debt capacity and the equity gap

When estimating debt capacity, fleshing out the LBO modelling structure, and determining the equity gap, there are a number of “right” answers.  Here is one answer: Debt = say 5 x 2.0 EBITDA = 10.0.  Depending on the size and the quality of the business,...

Developing the LBO modelling structure: debt capacity

The next stage is to flesh out the LBO modelling structure by considering the buyout’s debt capacity, and calculating the “equity gap”.  Making some of your own judgements: How much might it be reasonable for management to put into the deal? What...

Valuation – an answer

There is room for lots of debate on valuation here – so no “right” answer! If we worked on say a valuation of 6.5 x EBITDA, 6.5 x 2.0 EBITDA = 13.0 Enterprise value = 6.5 x 2 = 13.0 Price paid for shares = enterprise value minus debt plus surplus cash Price paid for...

Valuation modelling

Management have provided you with some information regarding the business (see the tables below).  They have told you who the competing bidders are, and you have pulled some valuation statistics for those bidders. What are you going to put in the first few boxes for...

LBO modelling course case study

Imagine that you have just been on an LBO modelling course and set up a firm providing corporate finance advice. Your firm has been approached by a management team who think they may have the opportunity to purchase the business they run. You have been given some...
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