Determining max price in LBO
When doing a LBO model, how do you determine the maximum price at which an LBO is attractive? I understand making assumptions on an entry price based on a multiple of EBITDA, but once I have the model built out and financial statements, what should I tactically be doing to determine the maximum price at which an LBO is attractive? Thanks in advance
Any tips on how to execute would be greatly appreciated -
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oh read it off ur sensitivity table
maybe ur fund only underwrites 30% IRR, so you back into the implied max purchase multiple that way
Other than sensitizing the IRR (where you would be willing to take a lower return), you can adjust the case you are modeling to include the most optimistic performance assumptions that you have some evidence for.
most aggressive financing scenario and the smallest IRR you are willing to accept will get you there.
First you need the Taxes of the Business. Then generally I would research what other companies in the space have sold for? And look specifically at the X-ebitda
Lots to add here but this is a start.
Never over pay for a Business unless it’s just obvious you can’t live without this in your Portfolio.
Cheers 🥃 and happy new year 🎉
It’s simple....
Quite honestly it’s whatever you+your attorneys+your accountants = can persuade the buyer to accept as an offer.
Make sure your basing you X-Ebitda off Taxes not Perceived value.
Hope this helps.
Have a Happy New Year!
delete
Hey Dude Are you a Betting Man?
We can tell you are not a principal. Accountants who run models all day are Desk Monkeys.
Entrepreneurs like myself go out there and put our families asset's on the line and either FAIL SPECTACULARLY or WIN!
My Partner is a Fortune 500 Founder and we have our own Fund, and we have a Family office and PE FUND. It's my first year as a Partner. I don't blame you for not believing me. Many people don't at first. Attorneys who I call are real jerks to me at first.
I do look at Modeling from time to time. But we make our decisions on if the deal makes sense? Can we add value and or sell it down the road?
Modeling is helpful. At the end of the day. Modeling is modeling and a Guess at best. Making Decisions with a Board is where the magic happens.
Im in Kansas and Federal Politics as well.
Wish you a good Day Sir!
Most people don't believe I am in PE until they meet my team.
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