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CREDIT FUND LBO CASE STUDY INTERVIEW -PLEASE HELP
Hi everyone, I have a case study interview scheduled with a Private Credit Fund investing in leveraged loans. I have an LBO case study that runs for 3.5 hours followed by a discussion on the model. Would appreciate any help on how to go about preparing for a long form LBO model (any resources) and...
Post LBO capital structure question
Hi guys, would appreciate any help with the below question which should be very simple but I still struggle with some logic behind it. My understanding is that in an LBO the EV of the target should not change post acquisition, but the split between equity and debt is what will obviously change (with...
Target Acquisition
Hi All: I am interested in Target Acquisition as in M&A and /or identifying LBO good targets. I worked for a niche consulting firm that specialized in acquisition target profiling, however, I careened into FP&A with a heavy data emphasis for last few years. My first love has always been target...
PE Case Study Question
Say you own a business doing $7MM in EBITDA and a PE firms offers to give you the following for 80% of your business: - $60MM cash - $7MM earn out paid at the end of year 1 if EBITDA goes up 12% (if hurdle is not met then $0 is earned) - $15MM seller note that will amortize 5 years from the date of...
LBO Model Question
Some LBO models will reach levered FCF by simply taking unlevered FCF minus the cash interest expense incurred in that year. Isn't that not ideal though because it fails to account for the tax deductibility of interest expense? As in, cash taxes are overstated? Is that method just acknowledged as a...
Best books for advanced LBO modeling?
Hi all. I'm going to be starting as a PE associate shortly. I have a good grasp of modeling / LBO modeling, but want to hit the ground running and am looking to brush up on any advanced LBO modeling topics that could actually come up on the job. Are there any good books or other resources that would...
LBO Modeling Best Practice
Hi all, As I am practicing LBO modeling I wanted to discuss with you any best practices to avoid practicing wrong / not optimal stuff. If I start an LBO from scratch in a modeling test, I would go along the following way 1) Setting up the Business Plan (Historicals + forecasts) 2) Transaction...
Family Business Buyout
Hey All, Apologies in advance for the long post, but I'm in an interesting situation. I'm currently working in a Corp Dev job (about 3 years out of school), but have had serious talks with my grandpa to join his business - think Specialty Industrials company with highly engineered products, does...
LBO Modelling Test - Doubts
Had a modelling test for an interview recently which had a Term loan and Revolver for an LBO. I have not modelled with RCFs before, so I have a few questions. So the RCF is a 400 MM facility, with 4% interest and 1.5% maintenance fee. My questions are. 1. When to draw the RCF? I would suppose when...
LBO Modeling question (Revolver, circularity, etc)
Hi for 1-4hour long LBO Modeling I have following questions. 1) Do you I necessarily have to calculate interest expense by averaging beginning and ending debt balance? Or is it okay to calculate it with beginning balance only for the purpose of testing? 2) For calculating Revolver, do I always have...
How does your "perfect LBO candidate" checklist look like ?
Anyone ready to share their own " LBO candidate checklist" or point out useful resources explaining financial characteristics of a "good LBO candidate" ? I am a fintech developer on a short break and would like to build a simple LBO candidates screener because working on stocks screeners, data...
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 @...
Understanding the Actual Structure of an LBO
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...
Using complex excel function in financial modelling (Accounting, M&A, LBO, Valuation)
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,
How to build real modeling skills?..because my shop sucks.
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...
Q&A: From Master's Dropout to BB IB to PE
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,...
Majority Stakes in LBOs
I have a question regarding a LBO acquisition of a majority stake (>50%,
Who lends PE debt?
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...
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.
Failed Investments
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...
LBO practice models
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...
LBO: Net debt, excess cash, and Sources and Uses
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...
Shareholder Loan in LBO Case
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...
Normal level of detail in models?
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...
Going from EBITDA to FCF - why is there "Cash Interest Expense" in addition to "Mandatory Debt Paydown"?
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...
Would you think I'm an asshole?
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...
Question on the "Dividend Recap"
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...
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?
Creating own LBO assumptions
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...
LBO target screening criterion? Looking to use CapIQ screener to find targets
Hi, Wondering if someone can help me with what they use in a Capital IQ screener to find potential LBO targets for a PE interview discussion? I know that good targets should have a strong balance sheet (hard asset rich), strong cash flows to service debt, low capex, low working capital requirements....
Search Fund PR-MBA (Pacific Lake)
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...
Do you use the Treasury Stock Method when calculating Ownership in an LBO test with Mgmt Option Pool?
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...
Tricky LBO model test: Comps and PPE
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 /...
Anyone Have 3 hour LBOs They Can Send Me?
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.
Anyone have 3hr LBOs they can send me?
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.
Date Issues in LBO Model - Help
Hi all, Quick beginner LBO question. I've always gotten stumped on dates in LBO models. For example, how would you structure/project the IS and BS projections in a model if the current date is 4/30/2018 and you have the following: * Balance Sheet as of 12/31/2017 * Full year 2018 Budget IS * Assume...
WSO PE Interview Course - PaySmart Case Questions
Hello all, been prepping with the WSO course, and am working on the PaySmart case. I have two questions, one specific to this case, and one that's more general: (1) Minor point, but in the video solution, when projecting out the market share for US and Europe, Europe increases by the given 0.5%...
Getting to LFCF - EBITDA or Net Income
Is there a preferred method of getting to FCF - starting from net income or EBITDA? In the case that total interest isn't the same as cash interest (e.g. a PIK component) or taxes are different from cash taxes (e.g. NOLs), does that mean we should be starting from EBITDA since the interest/taxes...
Weird-form LBO models
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...
VC - but no tech experience
Have a possible interview with a stage agnostic VC . Background in Leveraged Finance - no tech experience as such. Is it necessary to have founder/start-up/tech experience? What are some ways (from easily accessible to difficult) I can demonstrate an interest in the space? Many Thanks.
EY TAS Val vs Alvarez & Marsal Val
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...
NEED YOUR HELP - LBO timing for modeling tasks - technical matters
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...
KKR Formally Approaches Walgreens on Record Buyout
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...
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...
100% Leveraged LBO?
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...
What “type” do the BB’s hire
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...
Proposed LBO of Greenland [Project Melted Iceburg]
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...
Capital lease in LBO?
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...
Can one get rid of a company's pensions during LBO?
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!
Modeling Test?
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...
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