IFRS 16 impact on LBO valuation

Hey guys

How are you guys handling IFRS 16 impact in an LBO model? So if i want to value a company where the operational model is based on IFRS 16 figures, what is the easiest way to do this? I guess just deducting the leasing charge from the cash flow and ignoring the assets/liabilities resulting from IFRS 16 would be one way - so essentially value the company on a non IFRS 16 basis. I guess this would mean that i can use normal (or historical) EBITDA multiples for exit and leverage? If i value the company based on a IFRS 16 EBITDA i have to adjust EBITDA multiple assumptions to reflect this right, as EBITDA is now significantly higher?

Any thoughts on this? Would be appreciated

Thanks

 
 

You can indeed restate everything to pre IFRS 16 numbers and proceed from there. The issue is that companies report post IFRS 16 so you can only delay transition for so long.

To forecast CF post IFRS 16 just use post IFRS 16 EBITDA in your FCFE calculation but then make sure to include ROU capex and lease interest.

Regarding the entry and exit multiple, adjust historical multiples for IFRS 16 to benchmark. You can do this by checking what the lease mulitiple is (lease liabilities / rent) over the last year or half year periods and assume it to be similar historically. Then you can just muliply past rent figures to get an assumption of past lease liabilities and proceed from there.  

 

Quod asperiores sunt quia sint facere qui. Neque rem aut dolor nemo iusto. Esse possimus deleniti laboriosam omnis est a cupiditate debitis.

Nisi possimus qui autem expedita. Saepe ut nemo deleniti distinctio sed occaecati et. Nobis odit eius possimus qui. Reiciendis ut et voluptates sit error incidunt. Dolores delectus minus voluptas assumenda saepe eius cumque. Et veritatis ut beatae quasi. Quis tempora quaerat mollitia et consectetur iusto.

Career Advancement Opportunities

April 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. New 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

April 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

April 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

April 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (87) $260
  • 3rd+ Year Analyst (14) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (205) $159
  • Intern/Summer Analyst (146) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
BankonBanking's picture
BankonBanking
99.0
4
Betsy Massar's picture
Betsy Massar
99.0
5
CompBanker's picture
CompBanker
98.9
6
GameTheory's picture
GameTheory
98.9
7
kanon's picture
kanon
98.9
8
dosk17's picture
dosk17
98.9
9
Linda Abraham's picture
Linda Abraham
98.8
10
DrApeman's picture
DrApeman
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”