Lbo Modeling - Leverage Buyout Analysis

Structure and Financing LBO| Valuation Methods| Financial Modeling Build-up of Revenue| Cost Sheet| Equity Schedule

What you'll learn

Determination of the price of purchase as well as the amount of equity and debt

The income statement projections are built on the basis of the assumptions for revenue as well as for expenses

Calculation of the “Free Cash Flow” is done along with the cash that is available for the repayment of debt

The debt schedule is completed and the mandatory as well as the optional repayments are determined

Requirements

Basic introductory knowledge of working in excel

Basic introductory knowledge related to accounting

Description

LBO Modeling is a process that can be divided into 8 steps. These steps consist of –Determination of the price of purchase as well as the amount of equity and debt which will be requiredThe debt tranches are assigned with the repayment percentages, interest rates and percentage totalsA table of “Sources and Uses” is created for tracking the ways the funds will be used in the dealThe income statement projections are built on the basis of the assumptions for revenue as well as for expensesCalculation of the “Free Cash Flow” is done along with the cash that is available for the repayment of debtThe debt schedule is completed and the mandatory as well as the optional repayments are determinedThe debt schedule is then linked to the cash flow statement and also to the income statementThe investor returns are then calculated and the sensitivity tables are createdIdeal Candidates for the Leveraged BuyOutThe “ideal” candidate for the LBO Model should –Have cash flows that are stable as well as predictable for repayment of debtBe undervalued with respect to the industry peers (lower price of purchase)Be a business that is associated with low risks (repayment of debts)The need for ongoing investments like CapEx should not be muchHave the capability of cutting costs and increasing marginsHave a management team that is strongHave a solid asset base for using as collateral for debtOf all the points the first one is of utmost significance as nobody will lend to a company as well as finance an LBO model if the cash flow of the company is unpredictable.An LBO model of leveraged buyout shows what all takes place when a company is acquired by a private equity firm by using a combination of equity or cash along with debt which is then sold off within a period of 3-5 years. By taking such a step, the aim of the private equity firm is to earn a return of 20 -25 percent which is far in excess of the “historical average annual return” in case of the stock markets. The leveraged buyouts are more or less same to the normal deals of merger and acquisitions; the only difference is that in a leveraged buyout, the assumption is that the buyer will be selling the target in future.

Overview

Section 1: Introduction

Lecture 1 Introduction to LBO

Lecture 2 What is Buyout

Lecture 3 Features of an LBO

Section 2: Benefits of Leverage

Lecture 4 Benefits of Leverage

Lecture 5 Benefits of Leverage Continues

Lecture 6 Disadvantages of Leverage

Lecture 7 Simple LBO Exercise

Lecture 8 Returns Generation

Lecture 9 Ideal Candidates

Section 3: Non Ideal Candidates

Lecture 10 Non Ideal Candidates

Lecture 11 Moderate to high EBITDA Multiple

Lecture 12 Exit Options

Lecture 13 Inputting the Inputs

Section 4: Types of Debt

Lecture 14 Types of Debt

Lecture 15 Types of Debt Continues

Section 5: Inputing the Inputs

Lecture 16 Inputing the Inputs

Lecture 17 More on Inputing the Inputs

Lecture 18 High Level Input

Section 6: Initial valuation

Lecture 19 Initial valuation

Lecture 20 Initial valuation Continues

Lecture 21 Inputing Selected Financial Data

Lecture 22 Leverage Buyout Analysis for Siemens

Section 7: Uses and Sources of Fund

Lecture 23 Uses and Sources of Fund

Lecture 24 Uses and Sources of Fund Continues

Section 8: Understanding Fees

Lecture 25 Understanding Fees

Lecture 26 Understanding Preferred Equity and Management Rollover

Lecture 27 Inputing the Historical

Lecture 28 Predicting Future line Items -Income Statement

Lecture 29 Working with schedules

Lecture 30 Working with schedules Continues

Lecture 31 Explain Cash Flow Statement

Lecture 32 Debt Schedules

Section 9: Debt Breakdowns

Lecture 33 Debt Breakdowns

Lecture 34 Debt Breakdowns Continues

Lecture 35 Scenario Analysis

Lecture 36 Final Analysis of LBO

Lecture 37 Understanding Circuit Breakers

Lecture 38 Sensitivity Table

Lecture 39 Common Interview Questions

Novice students who have interest in pursuing a career in the financial sector. Working Professionals. Any other person who may have interest in undertaking the LBO Modeling course