I have a Bachelor's in Political Science from a target European University. I then started a master's in Marketing which I didn't finish and did the same with a master's in Finance. By that point, I had secured a full-time offer in a BB in London, in their TMT team. After a bit more than 18 months, I moved to a large bank's Merchant Banking Division, where I have worked across the capital structure (LBOs, Mezzanine, Debt) and I am now focused solely on LBOs and a few special situations investing. I am happy to answer any questions from how to get into IB, lifestyle, TMT exit opps, to how to
22 Sep 2020
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.
12 Oct 2020
Sorry if this sounds stupid, but where do PE firms get debt financing for their LBOs? I'm very familiar with the LBO process but surely banks are not willing to lend at the amount of leverage demanded by financial sponsors? Is this where private credit comes in? I understand the equity portion comes from the LP but who is willing to commit the debt in the shell company?
13 Oct 2020
Hi, I will be a freshman in college in September (in Europe). Since I want to break into the industry I have spent my time reading books, learning about business models, and reading 10Ks. After reading Valuation by McKinsey and doing a modeling course I am capable of creating what I think are decent LBO models. I would like to know if you think I will come off as an asshole if I approach PE associates on LinkedIn with a 15-page report with my analysis on a recent deal. I am wondering if I should do this and if it would help me land an internship, thanks in advance. Full disclosure: I still
22 Apr 2020
Hi all, If you received a CIM with no assumptions (leverage, interest, price, etc.), how would one go about coming up with your own reasonable assumptions for an LBO? Never had to create my own assumptions before (especially on various tranches of debt), so any help here would be much appreciated from the experts.
29 Mar 2020
Would it be possible for a private equity sponsor to issue themselves a dividend with the a portfolio company's excess cash flow, rather than by taking on new debt (assuming they have paid their mandatory amortization on the existing debt)? TLDR; Can a a sponsor do the "dividend" without the "recap"?
17 Apr 2020
Hi all, I have been thinking about the treatment of seller's BS cash in LBO models and how Sources and Uses link with the Equity Offer Value. I'll create an example (for simplicity, buyer funds the entire purchase price with cash & no transaction fees). Scenario 1 * Min. cash required: $5mm; BS Cash: 10 * Debt: 0 * EV: 150 Sources: * Excess cash: 5 (10-5) * Sponsor equity: 155 (plug) Uses * Offer value: 160 (150-0+10) Question: In our Net Debt calculation, we add back the full amount of cash ($10); however, should we only add back the excess cash to get to the Offer Price? Phrased
06 May 2020
Monkeys, I feel like there's a lot of talk on this forum about recruiting for PE, hypothetical scenarios and technical questions. But one thing that isn't talked about enough is failed investments. For those who have been in private equity for a bit, not every deal isn't a home run for various controllable and uncontrollable reasons. Figured it might be good to have a discussion on investments you / your fund has made historically and what hindered the success. Looking to have some insight into the following (at a high level, for obvious reasons): - industry - investment thesis - biggest
01 Jul 2020
Hi everyone, Thanks in advance to your response to my question. I have come across a Shareholder Loan in a few practice cases and wanted to get some clarity about how to treat this. I'll provide a pretty simple example for these purposes. Let's say we have an LBO where the sponsor is contributing $200 in equity (the equity check) along with a $100 Shareholder Loan. We are told the Shareholder Loan has a "fixed interest of 10%" (no further detail about if this is PIK, cash or other). At exit, let's say the TEV of the business is 500. Just to make things simple, aside from the Shareholder Loan
29 Apr 2020
I've noticed it seems that sometimes it's used, and sometimes it's not. On a model test, should it be used? Taking an example...assume: -Initial Sponsor Equity **= $100 (no mgmt rollover) -Exit Equity Value = $200 -Mgmt Option Pool = 10%, strike at initial sponsor equity -Shares Outstanding (arbitrary) **= 100 Implying: -# of Mgmt Options = 100 x 10% = 10 -Initial Equity per share = $100 / 100 = $1.00 -Exit Equity per share = $200 / 100 = $2.00 So to calculate % sponsor ownership after exercise: Exit Equity Value = $200 (+) Proceeds from Mgmt Option Exercise = # of Mgmt Options x
24 Feb 2020
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 @ Transaction: $500 mm Investment Structure - Fund A Cash in: $120 mm - Fund A Cash Out: amount needed to acquire 10% of current outstanding shares from controlling shareholders - Cash Out to be financed via sellers' finance (or seller notes) - Sellers' finance to be paid via dividends, further capitalizations
29 Mar 2021
Hi all - I work in a small boutique that mainly advises on buyside M&A in the middle market. Currently in the midst of PE recruiting, and obviously reviewing my models as a result. I've come to realize that our models are....well kinda shit and all very high-level. For example, when we evaluate CIMs for our clients to give a prelim view of valuation and what to bid, we generally take CIM numbers, make some judgement calls on haircutting revenue and margins, and project everything under the income statement as % of revenue. Literally, the entire football field analysis can be done in ~1-2 hours
23 Apr 2020
Hey everyone, I'm in the application process for Pacific Lake, a PE group in Silicon Valley that operates on a "search fund model". I'm excited about the group because I've thought this could be a good fit post-MBA for me, so I get the chance to test the waters at low risk. I'm coming from an MBB consulting group with only one M&A project under my belt. I've got two questions: 1. Any suggestions on what to study for the interview process? Do they care about DCF/LBO models as much as standard PE shops? How do I study for this? 2. Anybody know what to expect in the role? Type of work, salary
09 Mar 2020
I'm a bit unclear on how an actual LBO is structured. From what I understand, the PE firm doesn't directly buy the target, but rather uses a shell company of sorts to do it, with the debt going on the books of the target? Does this mean that a ShellCo is formed, raises debt from investors, and the Sponsor invests in the ShellCo's equity? And then, ShellCo merges with TargetCo, meaning ShellCo's debt is now on TargetCo's books? Sorry if it sounds like a juvenile question, I've got an extracurricular event coming up on M&A and I'm only a freshman, and just want to understand how an LBO actually
01 Mar 2021
Hello Monkeys, Two questions regarding a model test that i received. 1.) If there are comps given with median/ avg. gross margin and EBITDA margin, how would you model this into your income statement? My way: put those figures in last year and then gradually model towards this figure. Also, use EV/EBITDA from comps for entry and exit 2.) PPE: Currently, the value of PPE is given as "value of PP&E from 3rd party estimate"; if i try to backsolve those figures with last year ppe + capex - depreciation, does not solve. How should I model this going forward, given the transaction is an asset deal
01 Feb 2020
Came across this proposed deal today. https://www.wsj.com/articles/trump-eyes-a-new-rea… At first glance it might appear that LBOing Greenland, likely with 100% debt as the strategic USA is highly levered, is a bold high risk high return move. At present, the target seems to be out of favor for the following reasons: 1) Really fucking cold 2) No one lives there (pop of ~56,000) 3) High suicide rate (10% of males attempt) 4) Zero natural resources 5) Weak corporate governance (currently subsidiary of Denmark) Bull case: the fears over the long-term
15 Aug 2019
Does anyone have good 3 hr LBO prompts they can send me? I have done a few of the ones online and all the WSO ones, but want to practice more if possible. Prompts with solutions are a plus, but beggars can't be choosers. Much appreciated.
16 Jan 2020
Hi folks, I've been working through a few sample LBO models, including creating my own. In going from EBITDA to FCFE, there is a Mandatory Debt Paydown line item. However, I have seen some excel models include a Cash Interest Expense line item like screenshot below. My question is - why is Cash Interest Expense included as an extra line item? I would have expected that your interest expense is included in the Mandatory Debt Paydown. Is it assumed that Mandatory Debt Paydown is just applied to the principal of the loan and you are deducting the interest expense separately with this new line
23 Apr 2020
Hi guys, Say there is a company that is Cash-Rich. This company has over one billion in cash and cash equivalents and long term US Treasury bonds. Making this company highly liquid. Even with the early redemption of the long term bonds, the company is still in excess of $1B. Moreover, this company is producing solid earnings results, but the bottom-line could be drastically improved. (This company is not in the financial services industry). The market cap of this company is trading somewhere around 150-200mm. The price has flat-lined and has absolutely no pulse. This company also does not
15 Oct 2019
Hey monkeys, I am training in excel and I was wondering by this question: When do we use for instance "index-match" or "sum-product function" in financial statements, DCF, LBO or even a Merger Model. Could you please give some real-life example ? Thanks,
07 Feb 2021
Hi guys: For companies with large pension obligations, is it possible to get rid of them during LBO through some kind of structure, or would that only happen during bankruptcy? Thanks!
14 Apr 2019
Long-time lurker on this forum, I'm interested in learning to layer on some complexity on some of the models that I've been building and practicing with. I've worked through some of the material available on sites like Macabacus and Multiple Expansion (both of which were super helpful and were sourced from this forum) and I've done a few of the instructional courses like WSP, etc, but am curious about understanding some of the less-plain vanilla aspects of LBO that are not widely available/or explained in other training manuals. I was curious if anyone might have any resources as far as
11 Dec 2019
Am I crazy to think I have a shot of getting into a BB LevFin group? I'm in FIG at a big 3 rating agency and have started to specialize in the RIA (retail brokerage and advisory) sector because the skills seem easily transferable (analysis of LBO deal terms, capital structure, synergies etc.) to LevFin. Please somebody tell me it's not that simple.
13 Sep 2019
Hi, Say a company wants to refinance existing debt on the back of $40m EBITDA as its situation has improved over the past 3 years. - Could a lender extend a Unitranche loan based on Ebitda leverage covenant + revolver based on A/R? - If so: what metrics would the lender use to assess the quantum & duration of the loan, its leverage covenants, the quantum of the revolver and its cost? Am I right assuming that adding a revolver, even based off A/Rs, would lower the amount lent on the back of the $40m EBITDA? Thanks!
22 Mar 2019
I'm trying to teach myself how to model LBOs for interviews, and beyond buying the WSO PE guide and Street Of Walls, are there any good practice exercises which emulate the kind of LBO case study you might get in a PE interview? / is anyone willing to share resources? A lot of other posts suggest getting friends in IB to send over practice models, but sadly I'm from a consulting background, and don't know anyone in IB, so any help appreciated! Thank you
10 Jun 2020
I have a second round interview coming up for an IB analyst position. All I know from the recruiter is that it will be an hour long technical interview with the associate and that it will involve testing my modeling skills and knowledge- DCF, LBO etc. I am assuming this involves a modeling test but I would find it surprising if I was asked to do an LBO AND a DCF model. Any thoughts on how I should prepare?
05 Jul 2019
I'm a PE associate looking to further my chess game - currently about 1100 blitz on chess.com. Teach me chess and I'll share all I know about recruiting, IB, PE. This is for NYC. :)
30 Sep 2018
I graduated from undergrad and went straight to PE after doing a couple summers interning in IB. Unfortunately, the fund I am with does a shit job of teaching us how to model or giving the appropriate number of reps to figure it out. I'm trying to do what I can to teach myself but am unsure exactly where to turn. I have tried a few of the online training courses (WSO, AMT, WSP) but don't feel like they give me a REALLY GOOD foundation. I would like to have a strong skillset that allows me to make sense of and combat weird nuances between different companies. Is there anything anyone recommends
09 Dec 2020
Hello I have an upcoming superday with an M&A boutique. Part of it involves making a 3-statement Excel model in 1 hour using some given assumptions. My background is finance but ive never made a 3-statement model using Excel before. Does anyone have any advice on what i should focus on learning/studying? Also, can i expect some additional elements like debt-schedule/LBO or are they not likely to expect that much for just an intern role? Thanks guys
02 Dec 2018
Hi guys, Need your help on LBO modeling timings. Not a standard job, a pretty big one. To put it short - from your practice, how long can it take to complete a big modeling job (if we disregard any other outside factors like management etc). I would appreciate your thoughts. It's the first time I'm posting any questions, and have never spoken to anyone from PE or IB on how it works in their practice, so I would like to have better understanding of how much time it usually takes to complete certain modeling things. I'm working alone to complete everything. I'm not from PE myself, work in a
13 Nov 2019
I have a question regarding a LBO acquisition of a majority stake (>50%, <100%), i.e: 51% . Most of the models out there are built on a 100% basis... What happens with the sources and uses (Purchase price, debt, Fees, equity..)?, do you account for just 51% of the purchase price?. How does it affect the calculation of Goodwill compared to a 100% stake acquisition. Would it be correct to assume everything: purchase price, sources and uses, equity and Goodwill at 100% basis and only adjust for the acquired stake at the very end just for return calculations?. Any insight would be much appreciated
18 Nov 2020
Hi guys, I have a quick question on how to treat capital leases in LBO models please. I saw from a Mergers and Inquisition video that capital leases should be included in EV , because "what's included in EV must be added back in Ebitda", and vice versa. In cases where firms don't break out capital lease specific interest expenses and D&A expenses, I think the above analysis makes sense. In an LBO model however, do you include capital lease as a debt in Sources and Uses? I'm conflicted/confused because, 1) if you don't include it, then the multiples for the deal may be even lower than the
03 Aug 2019
I am looking at this M&A model, and it says that a certain percentage of the cash used in the leverage buyout is coming from the target companies own balance sheet. What is the logic behind this? How can you use a company's own money to buy itself?
12 May 2019
Hey All - I recently got through a couple rounds at a EB and now have to complete a 2-Hour LBO modeling case study to get into the final round. This is for a lateral analyst position and inclusive of both the Excel model and a write-up. I was wondering if anyone has gone through a similar process for an IB analyst position and if it differs from traditional PE recruiting case studies. Given the 2 hour limit, what are the usual variables to simplify vs. what do you 100% have to get right? First thoughts are to simplify the actual mechanics given the 2 hours i.e., only using a NWC schedule vs
07 Jan 2019
Hi all Invited to an AC for a boutique advisory focusing on aerospace and defense (in London). Told that i will be doing a 'simple' 2 hour modelling test on Excel that is likely to be either an LBO or Merger Analysis test. Have only ever done DCFs on Excel before and even though i know the theory behind LBOs and/or Merger Analysis, I have never done one starting from a clean sheet. Any ideas on how complex a 'simple' 2-hour test can be expected to be? I have some material from my school on creating an LBO but it is quite convoluted. Any advice on what/how I should focus my preparation? Many
26 Nov 2018
Monkies, I am a first year real estate analyst at a large development firm in Miami, Florida. My modeling skills are from my perspective pretty good, I've learnt a ton from the senior guys at my office and I make models as a side gig for other real estate investors and developers. I create models with circular debt all the time. But only with one loan. Ie 20% equity 80% debt. I tried to create a model with 20% equity 60% senior debt and 20% mezz but the model will not calculate properly if I have two layers of circular debt in a development model. I've asked the guys at the office but they are
15 Nov 2017
If you had to choose between the following two offers which one would you choose and why? Alvarez & Marsal Valuation Services - Sr. Assoc. - 20-25% year end bonus based off hours billed. EY TAS - Valuation & Business Modeling - Senior - 10% year end bonus, however EY is offering 10k more on the base salary A&M work is primarily focused on Alt. Investment Portfolio Valuations (HF, PE, Credit, Distressed) for quarterly and annual reporting purposes. There is some work regarding valuations of Complex Securities too. A&M is also viewed as more of a finance shop. While valuation is not the main
29 Nov 2019
Looks like KKR is officially in the game for Walgreens Boots Alliance what could be the biggest LBO ever - any comments on this? I think this is the top-of-the-market/PE industry. What can KKR do after they take them private, what's the exit strategy for them ? I am not familiar with the US pharmacies and drug stores market but it looks like they where already cooperating in the past, right ?
11 Nov 2019
Hi guys, For those of you who've been through PE recruiting - how long does it typically take you to do a paper LBO (a full paper LBO, inclusive of all 5 year FCF calculation etc)? How long should you take? Is the interviewer just sitting in front of you the whole time waiting for you to finish? Been taking me 10-12 minutes to do the practice ones... Need to get faster. Thanks for thoughts.
10 Aug 2017
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
19 Oct 2019
Is it still considered a LBO if a public corporate acquires another corporate (private) using 100% debt? I know the term LBO is typically used in the context of a sponsor using a significant amount of leverage to acquire a company, but wasn't sure if LBO could also just be used as a highly leveraged transaction, sponsor or no sponsor present. What are your thoughts?
13 Mar 2018
Hi guys, I go to a school that is ranked 45-40. I have had two real estate internships and I want to break into banking. I went from a 2.87 gpa for my first 2 years to 3.27 gpa that I round to a 3.3 on my resume. I am not qualified enough for an analyst position realistically, even though I am very knowledgeable about financial markets, corporate finance, and financial products. I'm trying to find a job that I could have at a bank for 1-1.5 years and work on my cfa to pivot to an analyst role in NY. Also, I have a strong personal connection with a pretty high up employee at a particular bank
25 Mar 2018
Hi All- I've been working through some of the WSO LBO modeling tests from the PE guide. My question relates to the Basic LBO 2 model and the option pool. There is a dividend recap at the end of year 3 and the sponsor exits in year 7. A management option pool is exercised on exit. The formula for the cash generated from the management option pool is as follows: =IF(exit equity > (entry equity – div payment ), option pool % * (entry equity – div payment),0) My question is why is the dividend payment even coming into consideration? If the dividend is in year three, the sponsor is the only equity
23 Jan 2019
All, I work at a middle-market fund (started about 8 months ago here) and wanted to learn from someone qualified (associate level or above) who works on the buyside what the best and most efficient way to analyze a CIM is (Confidential Information Memorandum, for those who're not aware is a 40-50+ pg book that basically markets a company to potential strategic/financial buyers and is usually put together by an investment bank working on behalf of the client, the company. It contains critical confidential information on the company's history, business model, operations, financials, management
13 Oct 2016
I work in the lower middle market space (commercial and industrials) where companies typically trade for 6-7x LTM EBITDA. These deals are typically financed with 3-4 turns of senior debt, a turn of mezz, and the rest funded via equity. How are LBOs of tech or public companies that trade over 30x LTM EBITDA (e.g. Craft Brewers Alliance, $BREW) financed? Are unregulated credit funds like Golub anchoring these deals with a 15x unitranche solution? Even then the Sponsor has to cut a fat equity check.
23 Feb 2017
Hi all, I am currently looking at a target for a potential LBO. The target owns almost all of its retail stores and there have been suggestions of selling these stores to a REIT. Obviously, the stores would need to be leased back. I am no expert with real estate assets, so I was wondering, how to roughly (and quickly) estimate the leases that would be required each year to lease the sold stores. If it helps, I know the total square feet of the stores and the estimated value of the stores. Is there some sort of approximation to estimate the annual lease payments using the value of the stores
17 Mar 2017
Hello everyone, Here is a question about LBO that I have been thinking for a while. Let's say a company that has 100M cash and 400M debt on its balance sheet. Currently equity value is 700M. So... Enterprise Value = 700M + (400M - 100M) = 1B And we are going to use an LBO to buy the company with 50% equity and 50% debt. So on a cash-free-debt-free basis... we use 500M new cash, 500M new debt, 100M old cash on BS, to pay off 400M old debt and give 700M to the seller. The question, however, is that after the LBO, the company's balance sheet look like this: 0 cash, 500M debt and 500M equity. I
28 Dec 2016
Hello Fellow WSOers, I am stumped thinking how I can about setting up the following LBO after being given a CIM: For sources and uses, assume a purchase of 65% of the company and a equity rollover equal to 35% of the purchase price. Assume leverage of 3.5x EBITDA in senior debt. The task is to build a three statement short form LBO using a given CIM for a private company. The way I was thinking that the purchase price would be 65% of total Debt and Equity which would also include 35% equity rollover but is that a right way to approach it? Thanks for any and all advice Update: Thanks for all
20 Jan 2017
Hi all, I was studying technical for the fall recruitment and had a question regarding the type of financing one would use for a LBO. I realize that it wouldn't be a LBO any more if one uses cash but the guide was asking why a PE firm would use leverage instead of cash in an LBO transaction. The answer was that using leverage will boost its return by reducing the amount of capital it has contributed upfront. However, I was a little bit confused because you are using the cash flow of the purchased company to pay off the principal and interest of the debt. Wouldn't it generate more return if you
19 Jul 2016