I have read most of the Rosenbaum book, but I skipped the LBO sections originally. Have you ever had to talk about an LBO or any aspect of them in an IB 1st year analyst interview?
I know it probably doesn't hurt to learn it. But I just want to spend my time wisely and I'd rather focus on networking than learning LBO if it is unnecessary.
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Yeah when I interviewed FT I had most banks quiz me on basic LBO technicals. Nothing crazy, just know high level basics like what general characteristics make a good LBO target, know how different levels of leverage impact returns, etc.
Learn the basics, more if you're aiming for lev fin or sponsors
Got the same as Raptor: what is a LBO, what makes a company the right target, what is IRR...
The real meat and potatoes of DCF / LBO is the Operating Model and even to some extent Acc./Dil., even though you're smashing two companies together. IMO, if you understand the Operating Model, then you can conceptually plug in all the additional schedules necessary to drive an LBO or DCF.
They're all cash flow based valuations, but with the back-of-the-envelope type LBO questions you'll get in an interview all you need really need to know is that you're adding transaction assumptions, wiping some shit out on the balance sheet, hitting up the P&L to reflect the changes, and watching it flow through to drive some returns.
But I think the understanding for LBO really comes from have a solid foundation in the 3-Financial Statements. So you'd be better suited at this point developing comfort w/ the Operating Model, and then pivoting to LBO and obviously DCF.
Probably not the answer you want to hear, just my two cents.
ok, thanks guys. I will be sure to go back and read those sections
Not sure the Rosenbaum book will help you understand LBOs from a high level. There have been a ton of materials posted here that have primers and research written about it that can help you better than learning how to model an LBO
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