Leases in LBO Modeling

Hi guys,

I have a quick quesiton on how to deal best with leases in an LBO model. I totally undertstand that under IFRS 16 everything is capitalised / on the balance sheet and flows via D&A and interest into the IS. My thinking now is that if you move to the Cashflow statement you add the D&A incl. the lease portion again. But isnt it the case that you still have a normal cash outflow related to lease payments and and this capitalisation is just an accounting way to present it. Therefore shouldnt you represent a cash lease payment as cash outflow in the CFS? How do you deal with leases in LBOs?

Many thanks in advance!

 

IFRS16 does not have an impact on CF as it is an accounting treatment, as you suggested.

If your EBITDA incl. IFRS16, then you would normally subtract the IFRS16 amount if you calculate FCF (based on EBITDA - Capex - Change in NWC - Tax). 

If your EBITDA already excl. IFRS16, then no need to adjust FCF

If you start from NI to FCF, you will add-back the whole D&A amount excl. the D&A amount related to the leases. 

Hope it helps

 

hey! Thank you that helps a lot! Just one one follow-up - What exactly do you subtract if the EBITDA is incl. IFRS16. Do you subtract the D&A portion + the interest portion as cash outflow in the CFS?

 

No then it’s already subtracted as an opex within EBITDA. So you show nothing in CFS as it’s already accounted for in P&L

 

Odio autem eaque blanditiis esse eligendi deleniti id. Laborum tenetur aut alias possimus. Ad corporis facilis ipsam dignissimos. Et minima quasi aut nobis quam esse.

Quis tempore est sed quod odio commodi. Velit sint laborum quaerat earum aspernatur saepe. Illum ut perferendis fuga quisquam.

Error est quos modi mollitia. Laudantium vitae cumque non molestias. Necessitatibus officia et est consequatur explicabo dolor fugiat. Repellat enim non maxime debitis omnis sapiente ut. Omnis eum blanditiis est blanditiis vel.

Career Advancement Opportunities

April 2024 Private Equity

  • The Riverside Company 99.5%
  • Blackstone Group 99.0%
  • Warburg Pincus 98.4%
  • KKR (Kohlberg Kravis Roberts) 97.9%
  • Bain Capital 97.4%

Overall Employee Satisfaction

April 2024 Private Equity

  • The Riverside Company 99.5%
  • Blackstone Group 98.9%
  • KKR (Kohlberg Kravis Roberts) 98.4%
  • Ardian 97.9%
  • Bain Capital 97.4%

Professional Growth Opportunities

April 2024 Private Equity

  • The Riverside Company 99.5%
  • Bain Capital 99.0%
  • Blackstone Group 98.4%
  • Warburg Pincus 97.9%
  • Starwood Capital Group 97.4%

Total Avg Compensation

April 2024 Private Equity

  • Principal (9) $653
  • Director/MD (22) $569
  • Vice President (92) $362
  • 3rd+ Year Associate (91) $281
  • 2nd Year Associate (206) $266
  • 1st Year Associate (387) $229
  • 3rd+ Year Analyst (29) $154
  • 2nd Year Analyst (83) $134
  • 1st Year Analyst (246) $122
  • Intern/Summer Associate (32) $82
  • Intern/Summer Analyst (314) $59
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
Betsy Massar's picture
Betsy Massar
99.0
4
BankonBanking's picture
BankonBanking
99.0
5
kanon's picture
kanon
98.9
6
CompBanker's picture
CompBanker
98.9
7
dosk17's picture
dosk17
98.9
8
GameTheory's picture
GameTheory
98.9
9
numi's picture
numi
98.8
10
Kenny_Powers_CFA's picture
Kenny_Powers_CFA
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”