Preliminary Quick LBO`(Quick and Dirty, Pre-IC)
If you're whipping up a quick LBO to grab returns on a potential TargetCo - What does a preliminary LBO Model (Quick and Dirty, Pre-IC) look like?
- How simple a model is this?
- What would something like this contain? ie how detailed would sources and uses be?
Bonus Q:
- What is most likely to change to model after data room access?
Operating model: take CIM forecast and haircut it a lot, typically looking to historical growth as a rough guide. Maybe do a few expert calls / desktop DD to get smarter around industry growth to help benchmark if you like the asset. Depending on how easy it is, build in some light revenue and COGS build (price X quantity, monthly bookings -> billings ramp, recurring revenue buildup, etc) or other simple implied metrics) that can be played around with. You’ll have a base, implied seller case, maybe downside.
S&U - usually assume something very simple and you look at precedents. If you like the deal you grab a quick call with a few bankers to get their view and just input whatever their first read is on leverage and pricing.
Think of it like your typical 3-hr PE interview case study, except make sure it’s damn correct. And also the random assumptions you get in the prompt (“assume the market grows at X%,” trading comps, etc) you get your own justification for. At least that’s how I’ve seen it done.
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