IFRS 16 impact on LBO valuation
Hey guys
How are you guys handling IFRS 16 impact in an LBO model? So if i want to value a company where the operational model is based on IFRS 16 figures, what is the easiest way to do this? I guess just deducting the leasing charge from the cash flow and ignoring the assets/liabilities resulting from IFRS 16 would be one way - so essentially value the company on a non IFRS 16 basis. I guess this would mean that i can use normal (or historical) EBITDA multiples for exit and leverage? If i value the company based on a IFRS 16 EBITDA i have to adjust EBITDA multiple assumptions to reflect this right, as EBITDA is now significantly higher?
Any thoughts on this? Would be appreciated
Thanks
Hi infrab1, whoops, looks like nobody chimed in here.... maybe one of these discussions below is relevant:
If those topics were completely useless, don't blame me, blame my programmers...
You can indeed restate everything to pre IFRS 16 numbers and proceed from there. The issue is that companies report post IFRS 16 so you can only delay transition for so long.
To forecast CF post IFRS 16 just use post IFRS 16 EBITDA in your FCFE calculation but then make sure to include ROU capex and lease interest.
Regarding the entry and exit multiple, adjust historical multiples for IFRS 16 to benchmark. You can do this by checking what the lease mulitiple is (lease liabilities / rent) over the last year or half year periods and assume it to be similar historically. Then you can just muliply past rent figures to get an assumption of past lease liabilities and proceed from there.
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