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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 preliminary information on the business ahead of a first meeting with the management team.
  • During the course of the meeting, the managing director tells you what the team knows about other interest that has been expressed by trade purchasers.  “How much could a management-led bid afford to pay for the business?” he asks.
  • It’s a very sensible question, but you know that the answer is not necessarily simple!
  • Very quickly you need to map out a structure for a possible deal, ahead of your detailed LBO modelling:
- Sources of funds

  • Senior debt
  • Mezzanine
  • Management equity
  • Private equity
 - Uses of funds

  • Fees
  • Other needs within the business (e.g. to fund expansion, extra working capital, headroom)
  • Refinance of existing debt*
  • Price paid for equity*

*Note: debt + equity = enterprise value.

  • Our starting point is valuation modelling.

LBO modelling course case study

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