Just a quick question as I was wondering if M&A product team bankers work on LBO models or do they leave that to the LevFin team? I'm aware that M&A Bankers work primary on valuation and Merger Models but seeing as how an LBO analysis is a type of valuation I'm wondering if M&A Bankers create them.
I'm also wondering if this varies by the firm. Would MS M&A bankers not work on LBO models because they focus purely on the M&A product but would a banker at Lazard have to create LBO models as a means of valuing a company seeing as how they also specialize not only in M&A but also an industry?
Many thanks!
This varies by firm a great deal, but in general: - LevFin bankers will make LBOs using the various capital structures to test what type of structure is suitable given the projected financials, etc (debt pay down works, etc)
M&A bankers will make illustrative LBO models whenever they're doing a sellside that might draw interest from financial sponsors (most assets - depending on industry). This is to see roughly how much sponsors could afford to pay...
Coverage bankers might work with financial sponsors team to pitch various targets in their industry (and create illustrative LBO models - showing returns)
Coverage bankers might also pitch corporates, showing why carve-outs or similar opportunities might be appealing to various financial sponsors (providing liquidity to the corporate)
The short answer is that bankers in M&A, LevFin and coverage should get to make LBO models. In M&A and LevFin, it will typically happen a bit more regularly
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