Can the seller request the PE to share its LBO analysis on itself?
I haven't slept for 30 hours now and I am wondering whether the seller can ask to show the model on itself that the private equity has done?
I guess no...? I don't think the buyer can share this with the seller since all the buyers projections will be exposed...?
Definitely not... as my MD once told me, a PE firm's view of value (especially before bids go in) is the most proprietary information they have, and we guard it with our lives.
I am only half kidding - we rip out the the equity section when we send it to our diligence advisors just to be safe.
As in you send the model just from an EV point of view? Wouldn’t that still give away what kind operational performance you expect, and if the diligence advisors are smart they could add in a few debt tranches with simple assumptions to calculate the incremental value gained from deleveraging?
We rip out the EV/Debt section as well, it's just an unlevered operating model, often set to the most aggressive case.
They can add whatever debt tranches they want but they don't have the actual financing indications we receive from banks. In terms of managing diligence, its usually better to keep advisors in silos and be the link when they need info from each other. .
It can vary by firm. In the last deal my team did. Sanitized the model a bit and shared with the target because we wanted the founder to feel included in the process and more like a partner in the transaction. It can definitely help with developing rapport with the seller if that's important to your process. I know a lot of firms won't even share the sanitized model though, as the above posted said how a PE thinks about valuation and their methodology for determining it is part of the secret sauce.
No. We never even share return metrics for our portcos
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