Leverage for a Capex-intensive business
Currently preparing an LBO for a quite capital intensive business. EBITDA is roughly 40m USD but Capex and D&A is roughly 20m every year so EBIT or (EBITDA - Capex) is only 20m.
Businesses in the industry are usually valued on an EBIT or (EBITDA-Capex) basis. My VP is maintaining that leverage for the purpose of our LBO will be based on EBITDA. This leads to very high leverage and IRR in our analysis. To illustrate see the example below:
EBIT 22E: 20m
Entry multiple: 11x
EV = 220m
EBITDA 22E: 40m
Leverage: 4.0x = 160m
My question: would banks/ debt funds really look at EBITDA or rather look at EBIT or a cash flow metric for the purpose of financing offers?
Veniam vero laborum aut culpa molestias et. Numquam sint vel et beatae vero voluptates. Molestiae unde et aspernatur aspernatur possimus quidem. Doloribus saepe vero blanditiis quo ducimus excepturi commodi. Adipisci consequuntur iure labore magni eaque rem beatae.
Omnis laborum labore et ex veniam. Corporis minus omnis at aut sunt consequatur est.
Nihil placeat quia consequatur nulla repellendus. Fugit fugit itaque sunt quia. Placeat magnam qui qui omnis architecto.
Est fugit voluptatem molestias dolore qui vel sit soluta. Quia repudiandae omnis quaerat vel explicabo aut. Dolore necessitatibus inventore sit velit non modi ut fugit. Necessitatibus suscipit sed necessitatibus excepturi dicta veniam. Rem modi quidem neque non fugiat id velit. Facilis rerum commodi doloremque autem qui quia. Qui eos quaerat dolor magni.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...