How would you find the correct leverage multiple to use for an undervalued semiconductor company, if past tech lbos (comps) did not have sufficient information on the amount of debt raised?
| +138 | Rumors Search firm Looking for new UBS IB US Leadership | 30 | 10h |
| +51 | UBS in Shambles as Proposed $100k H1B Fee Looms | 9 | 24m |
| +44 | PPE vs Economics Path into IB in London | 11 | 12h |
| +41 | Why is BofA not getting the respect it deserves? | 25 | 8h |
| +32 | Case studies in banking interviews? | 4 | 5d |
| +30 | Breaking into Healthcare IB | 7 | 3h |
| +29 | What Makes Goldman Great? | 21 | 22h |
| +27 | 1st Year Analyst Feeling Grossly Incompetent. How do I learn? | 10 | 1d |
| +27 | If my GPA is 3.97 can I put 4.0 on resume | 10 | 7h |
| +22 | Best Bank to Prey on the Interns? | 14 | 19h |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
I would start with public comparables. Is there a reason you didn't start with the publics? Also, Freescale could be a good case study since it was levered up the hilt, and still 70% owned by its sponsors despite going public.
Right, but publics wont give me the leverage I should consider for a LBO , that would just have existing debt. I did put in freescale as a case study. I did start with public comparables, but still wasnt able to find a good debt/EBITDA multiple to use. Right now, the industry is under 2 times of debt.
Oh, that makes more sense. I'd say, for now, assume sponsor ownership of 35% while getting a list of recent technology transactions as a whole. I realize that it doesn't make sense to compare, say, Tibco to semiconductor companies, but the debt investors see tech as a single industry (whether they should or not). I don't know what access you have to debt data, but if you have enough of those, get a median of the numbers, and add a premium/discount as you see fit.
In addition, if you have a friend in DCM, see if they can pull data for you.
65% would make my leverage multiple 7 times. Thank you for your help. I will try to do that.
That is probably acceptable for upper middle and bulge deals. If you are talking middle market, I'd cap it at 5-6x.
If the debt on comp LBOs was rated, see if you can find ratings papers released at the time of the deal or LCD newswire e-mails, as those will normally tell you the leverage multiple.
What size are you talking about? You learn to ballpark it, as brokencircle did.
7x may have trouble getting done by some banks with current regulatory conditions but you should be able to pull a few people who can get there.
Unless it is a sponsor they want to please (cough KKR cough)
Sit eos error dolorem voluptate dolorem et et. Quam quis itaque dicta repudiandae qui unde tenetur. Omnis delectus unde sed sit maxime velit enim. Similique tempore est magnam impedit. Quam necessitatibus qui voluptatum aut et doloremque consequuntur.
Architecto perferendis voluptas qui voluptate sit et. Voluptatem deserunt cumque voluptate ipsum. Doloremque maiores quo aliquid enim qui suscipit. In quidem nam eos sit at molestias repellat est. A repudiandae dolores qui cupiditate corporis.
Quos quo illo vel reprehenderit inventore maxime. Numquam ea sed ratione aut aut quo. Accusamus expedita officia nulla explicabo eveniet esse rem natus. Cum veritatis consequatur natus cumque nihil exercitationem. Ducimus est voluptatem esse nostrum.
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...