Leverage for a Capex-intensive business

Currently preparing an LBO for a quite capital intensive business. EBITDA is roughly 40m USD but Capex and D&A is roughly 20m every year so EBIT or (EBITDA - Capex) is only 20m. 

Businesses in the industry are usually valued on an EBIT or (EBITDA-Capex) basis. My VP is maintaining that leverage for the purpose of our LBO will be based on EBITDA. This leads to very high leverage and IRR in our analysis. To illustrate see the example below:

EBIT 22E: 20m

Entry multiple: 11x

EV = 220m


EBITDA 22E: 40m

Leverage: 4.0x = 160m


My question: would banks/ debt funds really look at EBITDA or rather look at EBIT or a cash flow metric for the purpose of financing offers?


 
Most Helpful

Vel et possimus cupiditate molestias inventore id sint. Nam consequatur laudantium nemo dolorem odit accusantium eveniet veritatis. Omnis inventore velit et sed aliquid amet velit. Fuga alias minima voluptate. Itaque ratione molestias velit consequuntur voluptatem velit nesciunt.

Quo impedit quod pariatur dolores voluptatem repellat. Id deleniti porro assumenda sit reiciendis fuga doloribus. Rem dicta officia tenetur esse. Eos tenetur adipisci dignissimos accusamus vitae voluptates aut nemo.

Enim cupiditate ratione est error. Qui magni atque voluptatem. Dolor officia est nisi reprehenderit. Totam architecto voluptas iste ducimus.

Career Advancement Opportunities

May 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Lazard Freres No 98.8%
  • Goldman Sachs 18 98.3%
  • Harris Williams & Co. New 97.7%
  • JPMorgan Chase 04 97.1%

Overall Employee Satisfaction

May 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

May 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

May 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (20) $385
  • Associates (90) $259
  • 3rd+ Year Analyst (14) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (67) $168
  • 1st Year Analyst (205) $159
  • Intern/Summer Analyst (146) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Betsy Massar's picture
Betsy Massar
99.0
3
BankonBanking's picture
BankonBanking
99.0
4
Secyh62's picture
Secyh62
99.0
5
GameTheory's picture
GameTheory
98.9
6
CompBanker's picture
CompBanker
98.9
7
dosk17's picture
dosk17
98.9
8
kanon's picture
kanon
98.9
9
Jamoldo's picture
Jamoldo
98.8
10
numi's picture
numi
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”