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LBO Model Template

The document provides an overview of Leveraged Buyout (LBO) modeling, which is used to assess company acquisitions financed primarily through debt. It outlines key components such as acquisition costs, financing structure, projections, and outputs like Internal Rate of Return (IRR) and equity returns. Additionally, it emphasizes the importance of modeling to maximize returns while managing financial risks.

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Omji tmtj
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0 views9 pages

LBO Model Template

The document provides an overview of Leveraged Buyout (LBO) modeling, which is used to assess company acquisitions financed primarily through debt. It outlines key components such as acquisition costs, financing structure, projections, and outputs like Internal Rate of Return (IRR) and equity returns. Additionally, it emphasizes the importance of modeling to maximize returns while managing financial risks.

Uploaded by

Omji tmtj
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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PRIVATE EQUITY

LBO MODEL TEMPLATE

FREE DOWNLOAD
LBOs EXPLAINED

A LBO model is a financial analysis used to assess


the acquisition of a company using a significant
amount of debt.

The objective is to maximize returns for equity


investors by leveraging the purchase, which
enhances potential gains but also increases
financial risk.

Modelling an LBO is vital prior to a deal as the


potential buyer will need to service the deal debt
from cash flows generated from the company.

It is likely that the deal will rely on using assets in the


company as debt collateral which also needs
assessing.
LBO MODEL TEMPLATE: KEY INPUTS

Use this model to complete the calculations for the


given data and explore potential returns from a debt-
financed acquisition.

It can be used to model alternative companies and


create multiple scenarios for detailed LBO analysis.

Download the free LBO Template by following the link


below this post.

FREE DOWNLOAD
LBO MODEL: ASSUMPTIONS

Acquisition Cost: determine the purchase price and


potential exit value

Purchase price: must consider all options and share


classes

Acquisition cost: based on entry multiple, LTM EBITDA and


company debt

Exit Assumptions: based on exit multiple and exit year

Financing Structure: decide on the mix of debt and equity,


interest rates, and associated fees

Operational Assumptions: forecast revenue growth,


EBITDA margins and working capital needs
LBO MODEL: SOURCES & USES

Sources:

Identify the debt and equity components used to


finance the transaction

Uses:

Allocate funds to the purchase price, refinancing


existing debt, transaction fees, and any capital
expenditures
LBO MODEL: PROJECTIONS

Income Statement:

Project revenue, expenses, EBITDA, and net income over


the investment period

Balance Sheet:

Include projections for assets, liabilities, and equity,


adjusting for the new capital structure

Cash Flow Statement:

Focus on free cash flow, as this will be used to pay down


debt over time
LBO MODEL: DEBT SCHEDULE

Repayment Plan:

Outline the timeline for paying down the various


tranches of debt, utilizing excess cash flow generated
by the business

Interest Expense:

Calculate the interest costs associated with each debt


tranche and its impact on net income
LBO MODEL: OUTPUTS

IRR (Internal Rate of Return):

Estimate the return on equity investment by calculating


the IRR based on projected cash flows and the expected
exit value

Debt Metrics:

Track key metrics like Debt/EBITDA and Interest Coverage


Ratios to assess the financial health and risk of the
transaction

Equity Returns:

Evaluate the multiple of equity (MOE) and compare it


against the target returns
LBO MODEL TEMPLATE: STEPS

Set Up the Model: input all relevant assumptions related to


acquisition price, financing mix, and operational
performance

Build Financial Statements: develop pro forma income


statement, balance sheet and cash flow statement to
forecast the company’s performance

Create A Detailed Debt Schedule: structure the debt


repayments, including interest expenses and principal
payments, based on the company’s cash flow

Analyze Model Outputs: calculate key metrics including


IRR, equity multiple, and debt ratios to determine the
viability and attractiveness of the LBO

Perform Sensitivity Analysis: adjust key assumptions to


understand how changes in variables like purchase price,
exit multiple, or EBITDA growth impact the overall return

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