Looking for any guidance on how to approach an LBO with only a CIM. I understand building the basic LBO but I’m not sure entirely sure how to go about building the debt schedule if I’m not given any info about debt structure. Would appreciate any advice or resources.
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Based on the most helpful WSO content, here are some steps and tips to approach an LBO with only a CIM, especially when you lack specific information about the debt structure:
Analyze the CIM Thoroughly:
Create Assumptions for Debt Structure:
Modeling the Capital Structure:
Building the LBO Model:
Resources and Practice:
By following these steps, you can create a well-rounded LBO model even with limited information from the CIM. Remember, the key is to back up your assumptions with data from comparable transactions and industry standards.
Sources: Private Equity: How to Analyze a CIM Effectively?, Private Credit Resources and Prep, Creating own LBO assumptions, Guide to Lateraling in 2021, Guide to Lateraling in 2021
Just assume cash free debt free and for debt financing use: revolver, TLB and add a tranche with PIK if you feel fun. For the OID, UW fees and margins just take latest or use ones from LBO test. They want to see you understand the mechanisms. To determine how much debt you can put just use 35% or 40% min equity
For something very illustrative, would you say showing a $200-300 revolver + a term loan around 4x-5x LTM EBITDA makes sense?
For revolver assume one turn of ebitda. For the rest it depends on whether you reach appropriate / realistic minimum equity as explained above
I wouldn’t worry about modeling out OID TBH, just keep it simple and reasonable based on whatever your cap markets team has provided in recent pitches / deals.
Below is probably reasonable enough.
4-6x EBITDA at 10-12% for TL, revolver capacity could do 0.5x EBITDA and 1% commitment fee, shouldn’t be drawing on it anyways.
If not much FCF generation early on, as other user mentioned maybe add another tranche of unsecured that PIKs, maybe 10% cash and 5% PIK (3-4x TL , 2-3x Unsecured).
Is this for 2025 or 2026?
DM for case study with solutions on this. Good for prep and from a well-known firm.
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