Hello Fellow WSOers,
I am stumped thinking how I can about setting up the following LBO after being given a CIM:
For sources and uses, assume a purchase of 65% of the company and a equity rollover equal to 35% of the purchase price. Assume leverage of 3.5x EBITDA in senior debt.
The task is to build a three statement short form LBO using a given CIM for a private company. The way I was thinking that the purchase price would be 65% of total Debt and Equity which would also include 35% equity rollover but is that a right way to approach it?
Thanks for any and all advice
Update: Thanks for all the incredibly helpful responses. Much appreciated!!!
Your assumptions are very very barebones. Your equity rollover is a source and use. We don't know what EBITDA is or EV is, so the remaining 65% could theoretically be all debt or proportion of debt and equity.
Thanks for the response. My EBITDA is 11 million in this scenario and Total EV is 100 with Net Debt of 35 and Equity of 65.
I can PM you other details given the nature of the question.
Is your question how to set up the S&U? This is how I interpret the info you've provided:
Sources: 38.5 Senior Debt (11mm x 3.5) 35.0 Rolled Equity 30.0 New Cash Equity
Uses: 3.5 Cash to Balance Sheet (to get to your $35 net debt figure) 35.0 Rolled Equity 65.0 Purchase of remaining equity (or refinancing existing debt if there was any)
New Cap Structure 38.5 Senior Debt 65.0 Equity 3.5 Cash
The only question I would have for that is I am only purchasing 65% of the company, so if that ultimately would be the 65% of the Total Enterprise Value (assuming a entry of 8x)? The way I ultimately thought about it:
TEV at 100%: 88 TEV at 65%: 57.2
Source: 5 - Min Cash already on balance sheet
38.5 - Senior Debt (11mm x 3.5) 7.4 - Rolled Equity (35% of TEV at 65%) 30.0 - New Cash Equity
Uses: 3 - Min Cash 57.2 - Purchase of remaining equity (or refinancing existing debt if there was any) 2 - Advisory Fees
New Cap Structure 38.5 - Senior Debt 37.4 - Equity 3.5 - Cash
Am I thinking of this right?
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