Noob LBO model question - pls help!
I've got a bit of a noob question, I hope you can help me out.
Let's say I need to do an lbo model for sometime this year (let's say it can happen anytime from March 2011 to dec 2011), and all I have is an income statement that ends at the operating income level but I have annual #s, and I have a balance sheet where I have just one year's worth of info (Jan 2010 and Jul 2010). Feb is the year end.
So I want to build a LBO model but obviously the balance sheet I would make pro-forma adjustments and then forecast is out of date (latest info is either in Jan or Jul 2010). Balance sheet is also very simplified (so cash is excluded and not shown)
What do I do about the balance sheet? Do I just use a forecasted year end income statement of Jan 2011, and try to make a 'forecasted balance sheet as at Jan 2011' from the change between the years, and assume that's what I work off of? Or do I try and do something with the Jul 2010 balance sheet at the 6mth mark and try to forecast the balance sheet start point from there?
I know how to build the model, but just not sure about the proper protocol with the above...
when does the transaction close?
What periods do you have an income statement for?
Transaction end date is up for me to decide, but has to be present or sometime this year.
The periods I have the income statement for are at year end jan 31, 2008, 2009, 2010 and I can forecast for 2011. But for the balance sheet I only have 1 year's balance sheet (jan 31, 2010, and 6 months later july 31, 2010).
So the confusion is... if I use 2011 income statement as my start (let's say jan 31, 2011) - I don't have the corresponding jan 31, 2011 balance sheet. I'm not sure if that means I just "make up" (make assumptions) on what the supposed balance sheet looks like as of jan 31, 2011. And if I do, do I start with what I know 6 months prior, or 1 year prior (where I at least have a matching I/S to try and figure out change in cash and other items from)? Or can I be lazy and use July 31, 2010's balance sheet (which to me doesn't make sense - because then I wouldn't be matching apples to apples - I/S to B/S dates)
I would forecast your 1/31/2011 balance sheet using the 1/31/2010 balance sheet and the income statement for the period ending 1/31/2011. You need to compare that the 3 balance sheets you then have (1/31/10, 7/31/10 and 1/31/11) to make sure they make sense, but that's the way I would do it.
Then from that point on forecast your BS and I/S out to your transaction date, then quarterly/annually after that.
Alternatively, you could pick 7/31/11 as your transaction date, forecast your 7/31/10 balance sheet out 1 year using 2 6 month stub periods (i.e. 1/2 of the actual FYE 1/31/11 + 1/2 of your projected FYE 1/31/12). Either way works, just depends on which method you like better/think is more accurate.
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