LBO Modeling - SG&A vs. OpEx

Hey All,


Currently at a LMM PE fund and have been working on my LBO modeling, one thing that has been confusing is some model templates that simply define EBITDA as (Gross Profit - SG&A and "other" expenses) whereas we're traditionally thought of defining it as EBITDA = EBIT+Dep+Amor.

Being at a LMM fund i obviously get a lot of raw data in the form of operating expenses, assuming i strip out D&A are there other common OpEx items that can be stripped away to find a pure SG&A value? Or is it easier just to rework the template into the traditional structure.

Thanks!

 

Let me give my two cents, although I’m probably less experienced.

Your two metrics should be the same (assuming D&A is a separate line item), which it typically would be for private accounts.

What PE funds really care about with regards to EBITDA is operating profitability excluding capex, so that we can separate cash put in from cash taken out and calculate the capital efficiency from that. So when you here EBITDA in PE, people just mean contributive operating profit from a business/customer/store etc.

It’s not a perfect metric, and indeed every line item would be very closely diligenced post first-round, so it works to get a good high level understanding before diving deeper.

 

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