This might sound like a dumb question - but during a PE interview, are paper LBOs actually done on paper or can it be done on excel.
The assumptions and mechanics in a typical paper LBO seem straight forward enough, but having to do basic arithmetic (e.g. calculating tax expenses, etc.) on paper seems like it could be a waste of time.
Would appreciate anyone who could confirm either way!
Usually they just say assume all cash is swept at the end of the period and use simple numbers. For example, company has 100mm in revenue, growing $10mm per year, ebitda margin of 20% and improving with 50% operating leverage per year. Company has no change in working capital but has capex of $15mm per year. If you enter and exit at 10x, what is the return if you can lever to 4x. Assume 25% tax rate and 10% interest expense.
Edit: so yes you do just do it on paper right there on the spot.
Correct. Big thing is you're almost always allowed to round (ask first), just do it to like the nearest 5 if they're ok with that.
They give you clean numbers or you just ask if you can round and they say yes
If you can't do basic arithmetic... Everyone knows you use a calculator on the job but still, if you were hiring, wouldn't you want someone who could do basic arithmetic?
Yep go in prepared with some toilet paper just in case
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