LBO Equity Value Creation Analysis for Negative EBITDA Purchase
Hey all -
Currently trying to build an LBO equity value creation analysis for a take private transaction with negative EBITDA. Struggling to figure out how to bridge the various components in this case, as the general formulas don’t apply with entry / exit EBITDA multiples, given the purchase is just happening as premium % of market value.
How would I go about breaking down the value creation from revenue growth, EBITDA growth, leverage, and the exit value? Thank you
Would suggest to review your understanding of LBO as a concept first
Thanks but not helpful - I understand how LBOs work, this is just a more nuanced case where the equity return is more difficult to break down versus purchasing and exiting off EBITDA
How do you plan to pay interest on debt exactly?
Negative FCF SaaS LBOs with ARR financing have been a thing for about 15 years now. It is definitely possible.
Exactly ^ + additional financing during the forecast period when the company does go EBITDA positive
Echoing above, don’t structure your LBO on an EBITDA basis. ARR should be used in this case, assuming you are talking about an unprofitable SaaS company which you most likely are
EBITDA does NOT pay interest, CFO (after adjusting for capex) does and assuming no equity injections
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