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IRR decomposition / Attribution in LBO
Dear all, I am currently finishing an LBO model and included an overview of value creation in terms of MOIC (equity value bridge incl. ebitda growth, multiple expansion, debt paydown etc.). So far so good. However, I am getting stuck at the following and would love to hear your input: I am trying to...
IRR Approximation for Multiple Years Sell Down
Hi Monkeys, I am struggling with the below question (to be done on paper) and thought I could lend some help with this community. My question specifically is how do you approximate a IRR with multiple period cashflows? How would you go about solving this? "A PE firm acquires a $150 EBITDA company...
LBO Technical Question - Whats the answer?
If a P/E firm buys a company 50/50 debt and equity, and the price is $100M and the IRR is 20% what would be the selling price (assume all debt paid is paid off)?
PIPE (Private Investment in Public Equity) Modeling Question
People, Can you help me with the situation below? Situation - PIPE investment by Fund A in Company B - Company B Mkt Cap @ Transaction: $1 bn - Company B Shareholders' Structure @ Transaction: 45% Controlling & 55% Free Float - Company B Total Debt @ Transaction: $700 mm - Company B Cash @...
Sources & Uses - Cash Free / Debt Free LBO (picture included)
Hi all - Been trying to fully understand the sources & uses of CF/DF LBOs vs. Non-CF/DF LBOs. The picture is an example. Am I approaching this the right way? Thanks.
"Profit Sharing" Line Item Rolled into Cash & Equivalents
In a similar way to restricted cash, since profit-sharing is done by company choice, are there any accounting rules or other regulation that would prevent this line item from effectively being treated as Cash & Equivalents in an LBO ? In other words, when "Profit Sharing" is listed on a 10-K , does...
LBO Models - Forecast Period
This may seem like a silly question, but I'm currently working on an LBO model that also includes various valuation methods, such as a DCF using levered cash flows. My question is, how long should my forecast period be for the DCF? Would it be incorrect to explicitly forecast 10 years of cash flows,...
IRR Math (Payout in Multiple Years) Question
Hey guys, quick question. Let's say I'm a sponsor and I have the following cash flow profile when investing in a business Entry (i.e. inital equity investment): (100) Y1: 0 Y2: 0 Y3: 200 Y4: 0 Y5: 300 The IRR of the above profile, as calculated on Excel is 50%. I am trying to reconcile this mentally...
LBO - Impact of Entry/Exit Multiple Increase if Both Are the Same
How does the IRR change if your model goes from 8x entry and 8x exit to 12x entry and 12x exit? (Still assuming no multiple expansion as entry multiple = exit multiple). All that is different now is that absolute multiple you enter and exit at is higher. After running this mechanically in an excel...
Net cash position at LBO exit
Is having a net cash position at the exit year of the LBO normal if leverage is capped at a relatively low multiple and how can this issue be solved?
LBO implied purchase multiple from IRR
Once you have a functioning lbo model , with the EBITDA multiple as an input and IRR as an output, whats the best way to turn it around to ask the question- if this is the required IRR , what is the multiple? I tried goal seek on the IRR using the purchase multiple as the input, but get ridiculous...
% Change on IRR Breakdown
A quick question...at a high level, how would you approach the calculation of the breakdown of the % change on an IRR from one scenario to another? i.e. how do you attribute the % change to the changes you made in the model. For example, IRR changed 100 bps ...and there was change A, B, C, D to the...
Equity Multiple Interview Question?
Just had an interview. Question was something as follows: "You're choosing between two investments which both produce 20% IRR over same period of time; how do you choose which to invest in?" I list qualities of good LBO candidate; conversation begins to center on capex and its effects on returns....
Difference between LBO and DCF
Hi, Could anyone tell me the key differences between lbo and dcf analysis. Purpose and technical aspects? When Should I Use A DCF vs. an LBO ? The DCF and LBO are two different ways of valuing a company that are appropriate in different situations. Our users explain the difference between the...
Why would a Private Equity firm be more interested in IRR instead of NPV for a particular company?
I am working on a few interview questions and this one I cannot understand how to answer. Even though the question seems abstract can anybody provide some pointers?
current leverage ratios in the US and Europe?
Hey, what are current leverage ratios for LBOs in the US and Europe. Where do you see them by the end of 2012? does anyone have a report for Q1 2012? Thanks in advance!
IRR Question
If a public company has a shareholder owning, say 30% of the outstanding stock and a financial sponsor builds a model to acquire the target, assuming the minority shareholder rolls 50% of their equity into the new capital structure. Would this rollover increase the sponsor's IRR because it is...
LBO Returns Analysis question (not for the faint of heart)
Ok, so this has been driving me nuts and I can't figure out the answer, this is a fairly detailed question so if you don't have time to bang your head against the wall i wouldnt look. In order to back into an "implied purchase price" of equity given a target IRR , i have built a list that goes like...
IRR / LBO Question
Ok... so I've got my initial investment and subsequent dividends as the basis for my IRR . My question is... at exit, the proceeds figure that should be beefing up my IRR should be: a) that years dividends + (LTM EBITDA x Exit Multiple x Control Premium) b) that years dividends + (LTM EBITDA x Exit...
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