LBO Case Study Interview
Curious if anyone has experience with case studies for interviews. I have one for a lateral position (IBD) but have never worked on LBOs before so I have some questions and a bit confused. I have Silver Bananas for your help
Interested as well
Really depends on banks in terms of how detailed the case study will be. To play it safe, I suggest you prepare the case study as if you are interviewing for a PE shop - so something like a complete/3 statement model from scratch + brief write-up of investment thesis/supporting calculations, charts, etc. Grab K/Q of a company you aren't familiar with, and sit down for 3 hrs to work it thru. If you can't even finish the modeling part, practice speed and skill on simplification, then move upward on the "thinking part" i.e. why you recommend buying/not buying, and use data/analysis from the model to justify your recommendations/thesis.
There should be plenty of free resources online re PE case study/modeling, so do spend sometime on those. Just google them. The one on Macabacus is decent.
If you have never done an LBO before, key "technical" aspects of the model you need to practice on are really two parts: 1 - S&U and pro forma cap structure, and 2 - debt schedule/cash flow waterfall. Last thing is learn what trivial details to strip under timing constraint.
Good luck!
OP, it's your lucky day.
https://www.wallstreetoasis.com/event/rewind-private-equity-case-lbo-mo…
LBO Case HELP!!! (Originally Posted: 09/17/2011)
Hey all,
Got to be pretty comfortable with building models over the last while, but I've been modelling stable and healthy cash companies thus far and came across a case for a company that is not able to sustain the regular levels of debt (70-80%).
Question, how should I approach this case? Should I put more equity? Assume the company can only pay interest only on some debt/PIK?
What is a typical amount a revolver can be in terms of % of total capital structure?
Please help, i would really appreciate some guidance
Bobo
Any takers?
What is the EBITDA and how much FCF.
FCF is approximately 25% of EBITDA for the projected period. What i dont understand is how my DCF comes up with such a low value of equity, like 20% of BV of Equity.
Its a private company right? Your DCF is filled with garbage assumptions. Again, what is EBITDA...
yes the company is private, all assumptions are in line with previous results. The EBITDA is approx 100 and the EBITDA margin is 3%. TEV is approximately 650
What are you assuming as a purchase price - 650? It is not typical to fund the revolver at close. You can always just finance with HY / Mezz structure. Not trying to be rude, but are you sure you are calculating FCF correctly? Unless this is a restructuring or distressed shop they wouldnt give you a company that doesnt cash flow very well as a case study.
So, $3.3 billion of revenue, $100mm EBITDA (razor thin margins), and FCF is 25% of EBITDA or 25mm? High capex or crazy working capital assumptions (likely high capex)....
doesn't look like a great LBO candidate or something that could be levered if the TEV is 650
TEV to EBITA is 6.5x but TEV to FCF is 26x
there is your problem....
who would buy this piece at 26x FCF? crappy LBO
Question, if purchasing it for less than its worth...can i reduce existing goodwill or will i have to make adjustments to other assets
the company is really a crappy one....over the past few years it had EBITDA margins of 2% and the Capex is eating up most of its depreciation.
I checked liked 10 times and it seems that I am calculating UFCF correctly
EBIT(1-t) + DA - Increase NWC - Capex
The problem is Operating expenses are eating up all the margins...the company has unions etc and are overstaffed...there is just not enough cash flow for it to pay down interest and debt nevermind expand
Can my conclusion be not to bid for the company and give a lower valuation than BV for it to make sense
Yeah of course you can recommend not bidding 650 for the company...i would probably pay $100mm MAX for the company, but i work with distressed stuff....compared to PE which bids stuff up...
Personally, i like to see what the value is unlevered - and in this case i can't justify 650mm...are you just applying a 6.5x multiple....analyses that base things solely off EBITDA are pretty shotty...its like capex doesn't exist and someone will magically pay it off...i base things off cash flow, not pure EBITDA
your company seems like a crap business - terrible returns on invested capital, no real competitive advantages (low margins)...
I would look at a liquidation value as well on this one - how much their assets are really worth...if you can buy a bunch of cash and receivables for below book, might be interesting, but if you buy inventory and PP&E below book, likely is more illiquid and not as interesting
LBO interview case study (Originally Posted: 10/12/2017)
Hey,
I was wondering if anyone has an example LBO case study that they could share?
I am about to have an interview where I have to produce an LBO from scratch on the basis of some broker forecasts and make simple assumptions where required. It will be remote and I have 3 hours to complete it from home.
I don't have much experience in LBO modelling less how the case studies are typically structured, so if anyone could share some input I would be very grateful.
Thanks, SBJ
Hi pitchme, yes, I'm a bot, but I'm also good looking. Hopefully, these threads help you:
More suggestions...
I hope those threads give you a bit more insight.
LBO interview cases (Originally Posted: 12/28/2014)
Hey guys,
I know this has been asked a thousand times before, but I'm looking for PE practice LBO cases and would greatly appreciate your input. After searching through WSO, I've come across the following:
WSO PE prep package BIWS PE case studies (included in the modelling/advanced modelling courses) AskIvy Macabacus
Are there any other good sources I missed out on?
Thanks!
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