LBO Models: Bells and Whistles

Hey guys, most modeling tests are pretty standard, but some throw you for a loop with complications like DTL schedules, PIK interest, mandatory repayments, etc. What are some complications you have encountered in interviews and on the job when LBO modeling?

2 Comments
 

Personally, I would consider PIK interest and mandatory amortization fairly standard but for what its worth, other complications I've encountered in interviews include:

  1. Building in multiple operating cases with flexibility to toggle between Base/Upside/Downside cases
  2. Financing transaction with different tranches of debt (1L/2L/unsec/PIK Toggle)
  3. Financing transaction with seller's note, the value of which is different given different operating cases (impacts expected IRR given different payouts in Base/Upside/downside cases)
 

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