LBO (Leveraged Buy Out) Modelling
Learn the intricacies of an LBO transaction and build the financial model to help structure and analyse a deal.
LBO (Leveraged Buy Out) Modelling free download
Learn the intricacies of an LBO transaction and build the financial model to help structure and analyse a deal.
The aim of the course is to show delegates how to assess the feasibility of a potential LBO transaction and how to flexibly model the acquisition and leveraging of a company by private equity investors.
Delegates will build an integrated LBO model and a value bridge, disaggregating value added/destroyed into the various components, namely – growth, margin improvement, “multiple arbitrage” and fees. We will then use the model and some leverage comparables to structure a bid and also consider a potential competing Unitranche offer from a debt fund.
The course is practical and pragmatic: we look at the typical mandates of Private Equity Funds and how that drives the structures of deals – their return requirements, hold periods and exit routes and very importantly, the range of opportunities that this gives to the Bank. We also review and model the full range of funding sources available to borrowers, including products like Unitranche which are a strong competitor for the more “traditional” cash flow lending structures offered by banks through A & B loans.
Specifically, we will:
Build a transaction sources and uses;
Derive a pro forma opening balance sheet;
Overlay a detailed pro forma financing structure on the target company comprising a mix of senior and subordinated debt. Specifically, we will model debt with PIK components such as mezzanine debt;
Review current leverage market practices and structures – what financing is available and on what terms? Who are the Bank’s competitors? What is the significance of the different products: A& B loans, Second lien, HY, Mezzanine and Unitranche?
Explain structural and contractual subordination and explain how they are used in creating different classes of debt and indeed how shareholder loans are used to create preferences amongst the different “equity” providers such as “rollover” equity, sweet equity and institutional funding and what, if at all, is the typical role of vendor loan notes.
Build an integrated forecasting model
Calculate standard return metrics, IRRs and money multiples and investigate the operating model using RoCE;
Measure the contribution of different value drivers to the total return using a “value bridge” calculation
Use the model and some leverage comparables to structure a leveraged financing for an LBO.
At the end of the course delegates will:
Understand the drivers of leveraged buyout structures and the specific constraints of private equity funds
Understand the relevance of different funding options -A & B loans,
Be able to build and use an LBO model to assess deal feasibility
Using comparable transactions as a basis, be able to assess the feasibility of a deal
Assess management incentive structures
Be able to assess the likely competitive threat from alternative debt providers
