LBO Question - Drawdown date different than that of acquisition date
Hoping to get some inputs here : Need to put together a simple LBO for a case study where the debt facility drawdown date is a year after the acquisition date of the asset. Think that acquisition takes place on Jan 1 and Debt Drawdown is on Dec 31 of the same year.
The acquisition is being only financed via this Debt and sponsor equity.
Is this an error in assumptions or can you delay paying some part of the EV purchase price until a year later? I’m a bit confused.
Many thanks in advance :)
If this is a simple case study then I would assume that it'd be acquired with 100% equity first and then a dividend recapitalisation (i.e. injecting debt into OpCo to dividend out some of the equity used to purchase the business day 1)
There is a scenario where there is deferred consideration that could be financed by debt but that would be unlikely
Thanks! Would this be still then an LBO transaction if it’s financed by 100% equity initially?
Yep.
When you calculate returns for this deal (IRR / MOIC), consider showing it with and without the initial equity overfunding. Lots of funds will be able to deem that capital as an "equity bridge" if it's returned within a year and disregard it for returns purposes. Like a free loan from the LPs :-)
So would you include debt under the sources & uses? Or is it 100% equity?
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