Leverage Multiple
How would you find the correct leverage multiple to use for an undervalued semiconductor company, if past tech lbos (comps) did not have sufficient information on the amount of debt raised?
How would you find the correct leverage multiple to use for an undervalued semiconductor company, if past tech lbos (comps) did not have sufficient information on the amount of debt raised?
+1,218 | Bank of America - Juniors Strike to start Monday May 6th | 143 | 59s | |
+573 | BOFA ALREADY TRYING TO COVER UP THEIR TRACKS | 73 | 4h | |
+362 | This is a dark day for Wall Street. | 36 | 28m | |
+154 | Investment Banking US League Table YTD 2024 (FactSet) | 85 | 14h | |
+148 | Big Layoff at Barclays - 5/1/24 | 86 | 4m | |
+91 | “Americans just work harder” | 54 | 12h | |
+83 | Would comitting to ATL İB be stupid? Please give feedback. | 45 | 4d | |
+69 | Sleeping on Jefferies??? | 35 | 11h | |
+61 | BofA List | 7 | 10h | |
+60 | What's up with RBC nowadays? | 28 | 8h |
Career Resources
I would start with public comparables. Is there a reason you didn't start with the publics? Also, Freescale could be a good case study since it was levered up the hilt, and still 70% owned by its sponsors despite going public.
Right, but publics wont give me the leverage I should consider for a LBO , that would just have existing debt. I did put in freescale as a case study. I did start with public comparables, but still wasnt able to find a good debt/EBITDA multiple to use. Right now, the industry is under 2 times of debt.
Oh, that makes more sense. I'd say, for now, assume sponsor ownership of 35% while getting a list of recent technology transactions as a whole. I realize that it doesn't make sense to compare, say, Tibco to semiconductor companies, but the debt investors see tech as a single industry (whether they should or not). I don't know what access you have to debt data, but if you have enough of those, get a median of the numbers, and add a premium/discount as you see fit.
In addition, if you have a friend in DCM, see if they can pull data for you.
65% would make my leverage multiple 7 times. Thank you for your help. I will try to do that.
That is probably acceptable for upper middle and bulge deals. If you are talking middle market, I'd cap it at 5-6x.
If the debt on comp LBOs was rated, see if you can find ratings papers released at the time of the deal or LCD newswire e-mails, as those will normally tell you the leverage multiple.
What size are you talking about? You learn to ballpark it, as brokencircle did.
7x may have trouble getting done by some banks with current regulatory conditions but you should be able to pull a few people who can get there.
Unless it is a sponsor they want to please (cough KKR cough)
Quis qui recusandae illo veritatis aliquid. Ipsa doloremque dolor harum corrupti animi aperiam nisi. Architecto non occaecati inventore sunt alias sed natus.
Dolorem tempora repudiandae quasi doloribus dignissimos. Qui consectetur illum expedita deserunt. Et ipsa voluptatem dolorem quae fugit vel porro ea.
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...