4 Comments
 

As with all comments relating to LMM PE, YMMV. In my experience at a very small LMM shop, there are what I would describe as "tiers" of modelling.

  1. If you get a CIM that a partner wants to learn more about, you might do a small write-up with just a summary income statement
  2. If your team is interested in the deal, you might do a simplified LBO akin to a paper LBO (no BS, simple S&U) - just a simple cash flow analysis and returns calculation. Might only be 50 rows
  3. Once your team decides to throw in a bid, the real modelling will start where you'll do the full LBO working with the assumptions you have in the CIM and pre-IOI VDR if there is one. In my experience this is more looking at financing cases as you have limited diligence materials to work with. If you don't have a lot of info it might just be applying growth rates to various IS lines.
  4. Assuming you get to a round 2 process, that's where the modelling will get the most serious by baking in assumptions about unit growth, pricing, headcount, etc. that will be derived from the VDR. 

Again, this is one anecdote and the theme of LMM PE is that every shop is different. You probably need to clarify in interviews / networking to see how your target firms manage it.

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I would generally say LMM PE probably tends to be even worse in modeling the details.  Meaning because a company is smaller and you tend to have more access to direct owners / management team / sellers, and the likelihood that it's an unbanked deal, the chances of analysis paralysis tends to be higher than UMM / MF.  At some point, if you go deep enough into ultra LMM, then this ends up reversing, because at that point, the companies you're dealing with are so unsophisticated they're not likely to have the data needed to allow you to model with deep granularity.  But I assume you weren't asking about those types of funds.

 

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