Hi all,
May be taking a 5 hour-ish test soon wherein you have to create an LBO modeling test (starting from a blank excel) and a few pages of an IC Memo.
Given this is my first time and I have very little experience with LBO models, had a couple of quick questions regarding this.
1. Understand that a proforma FS (goodwill adjustment, retained earnings / SE etc.) is usually made, but do you think this is necessary for the LBO given the time constraint? The limited view I have on LBO so far is that EBITDA and cash flow are the main drivers of an LBO analysis, so not sure how much substance the proforma FS will actually add. I was thinking I would actually do away with projecting a full BS at all and just focus on building schedules for CFO-related items like NWC, etc.
(On a side note, not 100% sure why goodwill is even created in the first place - understand this is needed in a merger model but why is all this adjustment necessary when a sponsor is just acquiring a company's shares? Any color on why this is done would be greatly appreciated.)
2. When calculating goodwill, does the stake % matter? In other words, how do you account for it in a Free LBO Modeling Test (Email Form Below Video)
BTW this is for a 1st year analyst role if that helps any.
Thanks for the response. I am just not sure how much the analysis would differ from building a PF BS and all that vs assuming simple acquisition of the company + debt/cash rollover. Am I missing the bigger picture?
I would just get literally everything else done and perfected first, and if you happen to have time left over, then you can focus on adding in all the bells and whistles like the full PF BS. Honestly if I was reviewing your case study I'd probably not really even focus on that element, particularly for an analyst role, so I wouldn't worry too much about. Just nail everything else and you should be fine.
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