Advanced LBO modelling – 2 day course
- Overview of the market for private equity LBOs
- Traditional players
- New investors
- Contrasting hedge funds/ private equity fund characteristics
- LBO modelling: an overview
- Overview of an LBO model
- Links between the income statement, cash flow and balance sheets
- Understanding the uses & sources statement
- Understanding the pro-forma balance sheet
Modelling case study: introduction to the case study and detailed LBO modelling
- Uses of finance: purchase equity
- Current pricing trends
- Target characteristics
- Typical valuation metrics
- EBITDA
- DCF (discounted cash flow)
- Size/ control/ liquidity discounts
- Buying shares or assets
- Explaining cash free or debt free purchases
- Common issues with completion balance sheets: what are you actually buying?
- Structuring the purchase to maximise fund returns
- Tax issues
- Managing the investment
- Refinancing needs
- Existing debt – when can/ should you keep it?
- Capex requirements
- Working capital needs
- Financing fees
- Typical trends in arrangement fees and commitment commission spreads
- Private equity fees
- Typical transaction advisor costs
- Stamp duty costs
LBO case study: modelling the uses of finance
- Sources of finance: management and private equity
- Typical funding terms (dividend, capital and voting rights) and target returns
- Protecting the fund’s investment
- Incentivising management, management exits/ ratchets
- Debt providers and their typical characteristics
- Traditional/ new lenders
- Senior tranche profiles
- A, B, C, RCF (revolving credit facility)
- Subordinated tranche profiles
- Second lien mezzanine (with/ without warrants)
- PIK (payment in kind)
- High yield bonds
- When to issue public or private debt
- Current trends & issues
- Capital structure
- Optimum capital structure?
- Stressing for defaults
- Typical financial covenants
- General covenants
- Ideal capital structure
- Calculating the weighted average cost and duration of a lending structure
LBO case study: choosing the best capital structure from three competing offer letters
LBO case study: modelling the sources of finance
- Modelling the pro-forma balance sheet
- What changes?
- Treatment of costs/ purchased goodwill
LBO case study: modelling the pro-forma balance sheet
- Modelling the cashflows
- Estimating cashflows from operations and investing
- Calculating the funding shortfall/ surplus
- Modelling the new debt balances after mandatory and discretionary debt & interest payments/ new issues
- Incorporating the cash working capital needs
- Flexing the sources of funds: modelling the management, institutional, preference equity,
- Modelling revolver, senior and subordinated debt
- Estimating an optimum financing structure – maximising all parties’ IRR and lenders’ ratios
- LBO exits – contrasting the different options
- De-gearing investment
- Refinancing/ secondary buy outs
- IPO
- Trade sale
- Private equity securitisation
- Liquidation: what happens when it all goes wrong?
LBO case study: estimating your pay back from a work out
Case study: modelling LBO exit valuation and IRR
- LBO modelling sensitivity analysis
Enquire about an in-house advanced LBO modelling training course
This course is offered in-house. If you have 4-5 staff who are interested in advanced LBO modelling, in-house training will prove cost-effective for your company. To enquire about an in-house advanced LBO modelling course for a small group of your firm’s employees, please click on the blue “enquire” button:
Book on a public LBO course
For details of our public courses (which accept individual registrations), and to book yourself on another LBO training program, please click on the red “book” button:
Other LBO modelling courses
For further details regarding our programs in modelling LBO & MBO transactions, please see our LBO course training page.
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