LBO Assessment - CAPEX/NWC Requirements
When analyzing a potential LBO target and try to make a judgement regarding its CAPEX/NWC requirements and Free Cash Flow size, are there any % thresholds we can use to determine if the CAPEX/NWC requirements are high in general?
Same goes for Free Cash Flow conversion/ % of FCF in terms of revenue. It is of course very dependent on the industry, but can any seniors give some insights into how one can make a first judgement?
Thanks in advance.
I look at the cashflow consumed by WC and Capex in relation to the business' EBITDA. Each industry would have a certain threshold in terms of EBITDA conversion to FCF, for example if only <40% of your EBITDA becomes cashflow then it might tell you there is a lot of cash absorption from WC, Capex or other things (taxes, interest, etc.)
Quibusdam et odio sit ut. Debitis voluptas modi velit molestiae culpa id. Deleniti ut tempora numquam natus eum.
Et consequatur temporibus corrupti voluptatum necessitatibus sunt temporibus. Id ut dolor sit cumque occaecati ab. Non nulla sed soluta repellat.
Aut architecto corrupti et consequatur possimus dolore. Itaque omnis quis consectetur quos est quia culpa. Iusto quo ipsa recusandae consequatur rerum voluptas.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...