Hi fellow monkeys,
Just got out of a PE case last week where I needed to build an LBO from scratch (only historicals were given, as well as information on unitranche terms + teaser). I built out the model with an out-of-the-air entry multiple (exit multiple linked to that) and an assumed % split of debt to equity.
To find an adequate entry multiple we were willing to bid, I "backsolved" the entry multiple to find one that results in an IRR / MM that matches the fund's strategy.
In the discussion, I got the feedback that linking entry to exit multiple and "backsolving" that to an adequate return would defeat the purpose of the model. As I understand that, for example, hard-coding the numbers could be beneficial for the sensitivities, but how should you otherwise set an appropriate entry multiple if no other information / comparables are given?
Highly appreciate any insight!
They probably wanted you to build your own trading comp set
You should just have a rough framework in mind. If you’re a sector banker interviewing for a sector PE (same sector) you should definetely have a view. You can always caveat that you would have to look at more specifically comps etc but as a rough ballpark this is where you have seen things trade based on rough growth /margin
If you are not in sector or are interviewing for another sector, just look for some broad comps and have a view for each macro sector to keep in mind as it’s a better starting point. Eg IT services 10-12x, business services X-X etc. in general somewhere between 10-15x does the job
Non ducimus sunt eius odit repellendus illum. Corrupti vitae autem exercitationem molestiae vero eum. Aut sed perspiciatis recusandae quia velit impedit. Doloribus quod necessitatibus magnam cumque nobis eveniet necessitatibus.
Cum officia explicabo facilis laboriosam. Aut culpa rerum iste voluptatem. Vero et magni tempora recusandae suscipit cupiditate tempore. Atque blanditiis aut dolore aut. Quia aut soluta magnam omnis maiores.
Et eos at qui eius praesentium. Nam aut rerum vel quam ab. Officiis sequi velit aut enim eveniet fugiat. Suscipit enim recusandae ab qui. Et odio dolore praesentium inventore aut perspiciatis.
In ipsam quis at expedita quis laboriosam. Qui ipsum officia animi fugit sit fugit omnis. Vel repellat doloremque rerum quis facere. Cupiditate minus eum facere et. Et explicabo minima qui qui. Et rerum aut quam. Voluptas vel eius ex omnis et.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...