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What happens to cash when you buy a company?
Hey guys, Would really appreciate some help with a probably really basic accounting question. When you purchase a company, let's say through an LBO .... what happens to the cash of the target? Does the seller take it all with them? So, once you own the company, there's 0 cash left? The reason I...
Tips on how to build a quick LBO?
Hey guys - It's been a while since I've posted here, but I've just started working at a top MM boutique and I've begun practicing for buyside opportunities. While I am primarily interest in working at a L/S HF , I wanted to get to get tips on how to build a quick lbo model . I've built some in the...
The formation of Private Equity
Greetings, guys! Lately, i ve been reading a book regarding LBO . As far as im concerned, private equity firms (also known as financial sponsors) are mainly in charge of LBOs . However, I am quite confused about the term "Leveraged" and "investors". Do those investors of private equity firm receive...
LBO Structure
70% debt, 30% equity 50% mezz, 50% senior
Using Cash in LBO
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...
Demystifying GSO Capital (Blackstone)
Mod Note (Andy) - as the year comes to an end we're reposting the top discussions from 2015, this one ranks #33 and was originally posted 6/9/2015. I’ve been searching info about these guys for a while now. There are few threads on WSO with some insight, but still pretty limited; best source...
Why should sponsor care about previous leverage of target company?
Hi guys, I've been thinking about the following issue today: Say you have a company with $100m EBITDA , and you want to LBO it at EV = 10x EBITDA = $1bn. Let's also assume that your (you = the sponsor) maximum Debt/ EBITDA ratio is 6x, so you finance the LBO with $600m in debt and $400m in own cash....
LBO structure data
Hi, I am searching for information on LBO transactions done in the US and europe. Most importantly is info about the financial structure of the deal. Hope someone knows something. Thanks in advance. have a nice day
Leveraged buyout - Ownership 100%?
Hi everyone was reading up about LBOs . In such instances, is it always necessary for the company to purchase 100% shares of the company? Meaning to say that post-acquisition it is the sole shareholder of the company. My interpretation of the text online is that they only need to get a controlling...
Current MM LBO Debt Mix/Rates/Terms
At the moment I work in a non banking finance function. After a lot of hustle I finally secured myself an interview at a middle market firm. One part of the interview is a modeling test in which they want me to build an LBO from scratch. I have been practicing like crazy so while I understand the...
LBO Model - No Historical Financials
Doing a Private company lbo model with no historical financials but just financial projections and a target IRR . Any thoughts on how to derive working capital / balance sheet since I don't have no historical financials?
LBO Case Study Help!
Hi Guys, I have several interviews coming up and I have started practicing case studies. I have done a search online and saw the below case study posted on WSO several years ago. Can someone help me with this? I am not sure how to treat the shareholder loan... How does one approach this? Appreciate...
Understanding the Investment Banking industry
Hi All! I've been on the forum for a while, haven't contirbuted much and have more-often-than-knot been latently absorbing the knowledge from others. All of this great info has nevertheless left me a bit confused about the industry and the associate level recruiting into it. I am going to be...
Sampling European LBO deals on Capital IQ
Hi all ! I've been struggling with CIQ for a week now and what I can tell is that despite several user guides found on the Internet i am still not able to find what I'm looking for on this database... In fact for the quantitative step of my thesis, I need to build up a sample of European LBO deals...
Is it possible to have Corporate Finance career in Madrid?
hey guys I would like to know if it's possible to have a career in corporate finance in Madrid when you're a foreigner? The reason I'm asking is cause my wife's employer has offered her something there and so I'd like to assess whether it could make sense I speak fluent Spanish but I hear a lot that...
LBO modeling questions
Hey everybody, as someone who's currently preparing for his PE interviews I have a couple of simple questions regarding building lbo models I hope you guys can answer me: 1. How do I make the assumption what kind of loans I need and especially, when do I need to include mezzanine in my model? I have...
LBO model questions
Hey everybody, as someone who's currently preparing for his PE interviews I have a couple of simple questions regarding building lbo models I hope you guys can help me answer: 1. How do I make the assumption what kind of loans I need and especially, when do I need to include mezzanine in my model? I...
Simple LBO question
Hi all, following financial data for company A are given: In Year 0: Rev = 100 M$ growing by 10% CAGR EBIT = 15% (constant margin throughout projection period) D&A = 5 M$ (constant throughout projection period) Inventory = 5 M$ (% of rev. constant) A/R = 5 M$ (% of rev. constant) A/P = 5 M$ (% of...
Mistakes on WSO PE Prep Pack Models?
I am working through the full- version practice lbo models on the prep pack, and there are some minor differences in the way I usually model versus what is being shown. I could be wrong, but I believe the prep pack has some mistakes and it is driving me nuts... Was wondering if you guys could help...
LBO beginner question
Hi, I know this question has been answered before but it's still not clear for me. I read that existing debt of a target doesn't matter in a lbo , but why that ? I mean: if the target has $500m of existing debt that needs to be refinanced, then I need to raise $500m more fund (either debt or...
Good or Bad Time to Join Leveraged Finance?
Hi All, Do you think there are risks joining a LevFin team as an Analyst 1 in the current climate - e.g. interest rate rises, volatility - for MM shop in London? I have seen some deals pulled and low issuance etc, but also understand that as leveraged loans are floating rate that they limit duration...
LBO logic confusion?
I don't understand how minimizing cash and maximizing leverage leads to higher returns? I mean, how does using $2B of equity and $3B of debt boost your returns more so than $3B of equity and $2B of debt? I keep reading explanations about this online but it's not clicking for me.. Maybe I need to...
Technical Question: Cash-on-Cash Return LBO model 1st year
Hi, sorry to start with a dumb question - I am a consultant trying to break into PE and currently working on my LBO modelling. So got a running model, balance sheet balances, so far so good. Now something that I find slightly counter intuitive. When calculating my cash-on-cash returns after year 1,...
Value creation deconstruction in LBOs
Hi guys, One question I have encountered in the past is to analyze the value creation of an LBO . My first thought on this was to deconstruct the IRR or MOIC to see how each individual value driver (I would say the main ones are a) multiple expansion, b) operational improvements like margin growth...
Affinity Equity Partners
Have a first round interview with Affinity Equity Partners for Australian office. Anyone interviewed with them and have any insights into what they are after specifically?
Determining the global economic scenario in LBO
How does the financial sponsor determine the global economic scenario while assuming the investment horizon? What fundamentals are followed apart from sensitivity analysis?
Used copy of Advanced LBO Modeling for sale
I have a 3-year old Wall Street Prep Advanced LBO Modeling self-study course with the excel files for sale. Was about $350 new, will sell for half off. PM me if interested - I can either mail it or meet you in NYC . About 350 pages and includes an lbo model and source docs.
Best LBO Candidates..
In times like these, where companies are not spending on Capex, but are instead buying a ton of stock back and finishing of on their de-leveraging, I have found a few candidates who could take themselves private buy buying back their own stock a few years out. 2 companies that I have found could do...
Is IRR always the ultimate deciding factor when looking at LBO Financing Structure?
Would IRR in your lbo model always be the deciding factor in determining which financing structure to use for an LBO or would other factors come into play?? For example would an IRR of 22% using senior and senior stretch debt be the same as using senior and mezz debt if the IRR is also 22%? Also is...
PE Model Question - Revolver
I'm working on a case for school where we are doing a mock LBO . How can one determine the size of a revolver needed relative to the rest of the debt or relative to EBITDA ? Thanks
Does pre LBO debt matter when screening for potential LBO candidates
Hi, I am about to write my master thesis from a PE firm perspective and I am looking for potential LBO candidates. I have come across many threads where it is stated that one of the desirable characteristics of a LBO candidate is a low pre-debt levels. I need to find some good sources that could...
What daily information is required knowledge in a financial career (analyst, broker, etc.)
Hey monkeys, I'm new to posting, but have lurked for a few months now. I was wanting to know what to keep track of every day (for interviews, or just on-the-job knowledge), so here's what I have: - Pt/% increase/decrease and totals of S&P 500/DJIA/NASDAQ - Pt/% increase/decrease and price of Gold...
Stumbled upon a piece of financial history in the office today...
By pure chance, as I was looking for something inside the office supplies/storage room, I came across an abandoned old box. I almost ignored it but something caught my eye, and I ended up digging up this old deal tombstone ... arguably one of the most famous deals in modern financial history. It...
How do you model an earn-out in an LBO model?
I'm trying to model an LBO where I am the buyer and am offering to pay 8x $100M LTM EBITDA , but 5x up-front, with the rest paid over 3 years as revenue targets are hit. How do you do this on the model (I'm asking about the concept, not the mechanics of how much they get)? I'm thinking it should...
LBO paper model examples?
Hi fellow monkeys (and humans) - what's a good source (website / book) to get a hold of examples of LBO paper model type questions asked of candidates in interviews? A forum for lbo models was created earlier, with the view point of helping candidates, however, there was no response. Any help would...
A few lbo questions
A few quick questions about lbo modeling with PE recruiting upon us. 1. For calculating PIK interest, do you use the beginning balance, or the average of the beginning and ending balance (including the PIK for the period) 2. In sources and uses, does it matter whether you put minimum cash balance in...
LBO - capitalized financing fees
does capitalizing financing fees create DTLs on the pro forma balance sheet ?
LBO'ing a Local Business
There are a few threads on this site regarding the idea of wealth generation through purchasing a so called "non-sexy" business (i.e. gas stations, laundromats, etc.) for the long-term cash generation potential. There have also been a few really great, recent discussions about home ownership and the...
LBO in Foreign Currency
If I have all three statements in local currency, when calculating returns in USD, which forecast FX do you use? Do you use estimated broker research spot rates for each year or the forward curve? I've been thinking about this and can't make up my mind. Thanks!
PE associate interviews: 4-hour LBO
Guys, can anyone share his experience with the long version of the modeling case study for PE associate positions? I found some info here but was wondering more specifically about the PE lbo model . How detailed are the requirements given to the candidate? How detailed and deep should the model be?...
How much debt paydown is necessary by Year 5 in an LBO?
I am assuming 80%+ for the typical business. What if you're investing in a slightly younger company that has solid growth potential? I am modeling in only 5x entry leverage, but cash flow yield is not strong enough to support 80% debt paydown due to growth capex requirements. Only able to paydown...
Bulge Bracket Investment Banking Financial Model
Hey fellow primates I've noticed that there seems to be a lack of 'real' investment banking models on the web. You get alot of tutorials, which seem great, though i've never tried them, and a few free models here and there but nothing that's really used on a professional basis. There are numerous...
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How to calculate EV for LBO of a private company?
Would you use DCF and comps to find enterprise value and then back out net debt to get equity value ? Also, what are the major differences in the lbo model for public and private companies?
Determining Working Capital/Minimum Cash Levels
Can anyone shed any light on best practices for determining a reasonable estimate of a company's working capital requirements? - I'm mostly interested in this in a restructuring context for adjusting a company's working capital when it gets out of wack due to financial distress. Also interested if...
how does LBO analysis imply a share price?
I'm new to LBO in a LBO analysis, where do you find the minimal price that an acquirer would pay for a company? Can I use total uses of funds/shares outstanding as the implied share price?
Conceptual LBO Questions
Hey guys, I have a couple questions regarding lbo models and how they are actually built on the job. 1) I have seen some models from actual Analysts at BBs in NY , and I never see IRR being a major component of the model, although Wall Street Prep and this website makes it seem like IRR is the major...
LBO debt not converted to Cash?
Hi I am wondering when debt goes into the company, we adjust the BS by adding additional debt to liability, but wouldn't cash also increase on the asset side?
Hypothetical scenario: LBO of a FIG company, with financing provided by that company
Has this happened? Could this happen? Would it work? Would it be illegal? Trying to get my head around how it wound work and keep confusing myself...
LBO .. Need help
Hi everyone, I'm an engineering student preparing for summer internship interviews.. I had to learn all teh technical aspects of M&A by myself since I didn't have such courses .. I pretty much understand everything, but I'm having REAL trouble with LBOs .. I understand the global concept of it being...
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