Hello,
I am just an intern in a boutique, but I was surprised to see that my bank did not use an LBO analysis while advising a PE fund in its acquisition of a company. How come ? Is it normal ? ( add on acquisition with no debt )
Many thanks
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PE fund is likely to conduct an LBO analysis on its own. Your boutique may be hired to provide industry knowledge and relevant comps in addition to sourcing this potential acquisition
My guess would be that it is in a sector where revenue multiples are more common (high growth) or the company is losing money / has negligible EBITDA.
Otherwise it would be an odd omission.
As you say, it’s an all-cash transaction, where none of the cash is financed through debt, and a bolt-on for a platform investment - it’ll just trade on EV/EBITDA (or EV/Rev potentially since it’s a TMT co). It’s not an LBO.
sounds like the sponsor you're advising has a similar strategy to a PE firm i interned for before, if it's primarily growth equity - or even investing across the capital structure but without the extensive leverage component of an LBO, there would be no point in an LBO analysis, most likely comps based on earnings multiples.
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