Took an LBO modeling test without assumptions provided
I recently took a modeling test for a higher profile PE firm. They provided me a CIM without full balance sheet info with the only guidance being: build a 3 statement LBO model in an hour. To build an LBO you need financing assumptions, and a myriad of other assumptions, so I was/am a bit confused on how they wanted me to build the LBO.
I literally just used assumptions from previous LBOs I have built including cap structure, mgmt roll, tax rate, etc….
Does anyone know if I was suppose to build this any other way?
Yes
Yes what ?
Yes
For financing assumptions and similar I would have used sensitivity tables with medians around what’s average for a buyout of that size.
For other assumptions, I would have used context clues from the CIM and explained my reasoning in the comments (e.g. project capex to increase if the CIM mentions that the firm is growing rapidly, investing in a new segment, etc.)
Sensitivity tables have nothing to do with assumptions for base case or general modeling, just the results of factors on your model. You could theoretically sensitize from 0-100x leverage or whatever you want
Not sure what you’re talking about. It’s literally a way to allow for variation in assumptions when you aren’t sure about something, and I was suggesting varying the assumptions within a reasonable range instead of randomly grabbing your other model’s assumptions.
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