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Retained Earnings Pro Forma Buyout
Hi there, I'm an analyst at a Hedge Fund working on a new issue and was hoping you guys could help elucidate something for me. Essentially, PE is doing an LBO to acquire a company from another PE (say 400 in notes, 200 in cash injection). In the Capitalization table pre-acquisition equity is a few...
Can you call bank debt?
Have a technical interview in 6 hours, and just one technical thing I need help on. Anyone with knowledge of bank debt, particularly in context of LBOs please chip in. Anyhow, my question is, I know that call provisions are usually not common place when it comes to bank debt, but I'm assuming a bank...
LBO - What to do with extra cash?
In an LBO scenario, if the company has extra cash after paying mandatory debt amortization, what’s the most Accretive thing to do with that extra cash (use it in a discretionary sweep to voluntarily prepay debt; pay yourself a dividend; etc.)?
Implications of LBOing a high growth company
Can anyone provide any insights as to the likelihood of this? Why and why not either a financial sponsor or strategic buyer would do this. Thanks.
Secondary Buyouts?
Was just reading this article (http://finance.fortune.cnn.com/2014/04/28/private-equity-exits/) about the stock of private equity backed companies that should be nearing maturity from a holding perspective for financial sponsors.
Energy Future Holdings Files for Bankruptcy
Energy Future Holdings Corp. filed for chapter 11 bankruptcy Tuesday , after months of negotiations with creditors aimed at speeding the restructuring of the private-equity-backed utility's debt load of more than $49 billion, as reported in WSJ .
LBO Financing and Investment Banks
Just trying to figure out the relationship between collateralized loan obligations (CLOs) and LBO financing. When an investment bank syndicates a loan, who is providing the capital? Is it the bank itself, or does it simply accumulate capital from other sources (institutional investors) and collect a...
Margin of Safety in LBO Model
Is it possible to calculate a Margin of Safety for LBO purposes, to assess whether there is a sufficient amount of margin of safety to invest in the company? If so, how would I calculate it? I know it would be expected growth/sales minus break even, but would this mean breakeven with regards to IRR...
LBO assumptions question
Apologies in advance if this is in the wrong subforum. I'm learning about LBOs and this one exercise I'm attempting mentions that another PE fund owns a quarter of one of the potential candidates and invested in the company three years ago. What kind of assumptions would you make based on this piece...
merger vs LBO model
Which of the following statements are TRUE regarding the DIFFERENCES in the pro-forma Balance Sheet adjustments in an lbo model vs. the adjustments in a merger model? a. Under Long-Term Liabilities, there are likely to be more debt tranches in an LBO model than there are in a merger model. b. The...
LBO debt related quiz questions needing answers
Which of the following statements are TRUE regarding the similarities and differences between Senior Notes and Subordinated Notes? a. Both Senior Notes and Subordinated Notes are preferred by conservative investors such as commercial banks. b. Both Senior Notes and Subordinated Notes are preferred...
Measuring reasonability of leverage and coverage ratios
A company you’re analyzing in a potential LBO transaction has a Total Debt / EBITDA ratio ranging from 2.0x to 3.0x over 5 years; its EBITDA / Total Interest Expense ratio ranges from 1.5x to 2.0x, and its EBITDA / Cash Interest Expense ratio ranges from 2.5x to 3.5x. It has minimal CapEx and...
LBO model: impact of raising entry an exit multiples on IRR
why does IRR decrease if both entry and exit multiples increase equally? eg from 6x to 8x each. Is it because more equity is needed as the leverage ratios stay constant requiring a higher equity % to purchase..
Dividend Recap Model
Hi guys, I am currently building my own lbo model for one of my course and I'd like to include a dividend recap in year 3 as I assume I wasn't able to get a lot of debt at the entry. I looked in the archives but couldn't find anything pertinent. So could someone provide a template? I understand the...
MOIC vs. IRR - Interview Question
Let's say you have two investment opportunities. One has a higher MOIC, one has a higher IRR . Which do you prefer? Investment Banking Interview: MOIC and IRR The question above tests your understating of two similar principles in finance. These principles are "Multiple on Invested Capital" and...
LBO Models in Your Head
Has anyone ever been asked to do an LBO and M&A models off the top of their head? Pen & Paper given with financials on a sheet but not much time (around 3 minutes) to calculate and walk through answer. Basically you have to calculate as you go through.
Do LBO investors aim to create value or simply pay off debt?
From Quora, the OP asked the following question: I'm new to LBOs , just looking into them. I just wanted to ask: do LBO investors look to actually increase the value of the businesses that they acquire, or do they simply look to pay off all of the debt used to finance the acquisitions, so that they...
How do you model an LBO with a strategic instead of private equity buyer?
Long time lurker, first time poster. Guys, I am interning and have a question (maybe I am overthinking this here). We have a buy side mandate and our client is going to use 70% debt to fund an acquisition of a competitor. Boss wants me to combine target and the buyer into pro forma financial...
What happens after an LBO?
After you do an LBO , does the PE firm have complete control over the acquired company's operations? Does the PE firm perhaps insert one of their own guys into the company's management to help run it? or does the acquired company continue to do their own thing, without intervention? I've checked out...
LBO Modeling - Transaction Fees?
Quick question if someone can please help. In an LBO scenario, transaction Fees are expensed on the B/S (coming out of Shareholder's Equity) but does that mean they reflected on the Income Statement as well (as a one-time charge in Year 1)?
Milestone Partners
Has anyone heard of Milestone Partners in Philadelphia, PA? If anyone has any experience interviewing with them, what was the experience like? Any insight on the firms reputation, culture, pay, hours, etc. would be greatly appreciated. Thank you in advance for your help.
Olympus partners? Any info?
Hey, does anyone know anything about Olympus Partners?
Romney "looting" example - please explain these profits
How the heck does one make millions off of investing in a company that goes bankrupt and/or gets shut down? How do the lenders get paid back, how do the numbers work? Ideally I'd like to see a model but that's obviously a bit much to ask. Another good example is when a company borrows money, pays...
Model unbalanced by decimal places
I have a model I developed that is of medium complexity, and I have an interesting problem that I am not sure how to resolve, thought I'd hit you guys up to see if anyone has dealt with this before.
What are some common acronyms used on WSO?
If you are confused by all the lingo getting thrown around Wall Street and the WSO forums, you've come to the right place. We know it can be confusing but don't worry, we are here to help! Below you will find a comprehensive list of finance acronyms for words and phrases in finance. This is a great...
LBO - Seller's Note?
Just took an LBO modeling exam for an interview and had a question. Part of the financing was a seller's note at 0.5x leverage (in addition to a revolver and term loan). I was fine with setting up the sources and uses, but was not sure how the seller's note gets treated in the debt calcs and IRR ....
Barbarians at the Gate
Growth Equity vs. LBO Shops
which is more interesting and respected? growth equity or LBO shops? why?
Analyzing Capital Structure
Hi, I am unsure of how to properly analyse the capital structure of a firm instead of just looking at how much debt and equity the firm has. I need a proper framework. Anyone has any ideas? Is a Leveraged Buyout Model useful as a framework? Cheers!
The Carlyle IPO: Long Time Coming
For a company with close to $100 billion AUM and a legacy which spanned Wall Street’s most profitable decades, Carlyle is flying mighty low beneath the radar these days. After several false starts, the Carlyle IPO seems back on track and set for a Q3 kick off. Oddly enough… it seems as though...
Question on LBO Financing
Hi guys, I got a question regarding LBO Financing. Consider: (1) A PE firm collects cash in one of its funds, say fund A that has now money for more than one acquisition. (2) The firm finds an attractive target T and wants to buy it. Now what I don’t get is…what comes first? How can you buy the...
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!
Beginner LBO Modeling questions
I'm trying to create an LBO for a case. 1. This might be a very stupid question, but why does a DCF model add back depreciation, but the lbo model does not in the calculation of free cash flow ? (Would it be wrong to add depreciation in an LBO?) 2. What are typical IRRs? I'm getting 19% but I added...
Burger King to Return to Public Markets
Here’s an interesting one. Just 18 months after being taken private in a leveraged buyout, Burger King Worldwide Holdings, one of the world’s largest fast-food chains, plans to list its shares on the New York Stock Exchange through a merger with Justice Holdings, an investment company based in...
Burger King to go public........again
That's right ladies and gentlemen, only a few weeks after Wendy's surpassed BK at second-in-command behind McDonald's, BK retaliates by now going public for a second time. Burger King is going public. Again. Just 18 months after being taken private in a leveraged buyout, Burger King Worldwide...
M&A / LBO models from scratch
Hello everyone, I have been working for almost a year now in IB . Several of my peers are interviewing for PE / HF / VC etc. I am not. Frankly, my modeling skills are nowhere near where they would need to be for me to enter this process. We use a standard model for everything. It is very complicated...
Short-Form LBO Modeling?
Does anyone know what the best way would be to do a short-form lbo model ? This is without full-blown balance sheet or cash flow statements. Thanks.
Help!! LBO of a leasing company; include interest on capital leases in pre-financing fcf?
Peeps - desperately looking for some quick guidance on doing an lbo model for a leasing company (they buy ships via capital leases then lease them out to travel companies). Do I include the interest they pay on the capital leases in the FCF before (or after??). I.e. FCF will be net of the interest...
PE-backed IPOs
Hi guys, I am currently writing a dissertation on PE-backed issues on the London exchange (incl AIM) versus the HK exchange. I have obtained data from dealogic over all PE-backed issues since 2005, however I have some problems distinguishing buyout-backed from VC-backed issues. Does anyone know a...
How to model an LBO with minority stake
What would you do in the case where a financial sponsor makes a minority investment? What is the equity contribution amount? This is assuming the management team stays on. For instance, if a PE firm buys a 30% stake in a company, requires the firm to take on bank and mezz debt and also makes the...
PE FIRM in sights
hello monkeys, i am an engineering student (no finance background) and will be doing an interview soon with a PE firm. could you please recommend a book or two that covers the type of modeling that is needed in PE . I cant afford to do the Wall Street Prep course so preferably text books or free...
The Decade's Movers and Shakers
Who and what were they? With 2010 fast coming to a close, we say goodbye to another decade and enter one anew. 2001-2010 was not without its drama; we saw the horrors of terrorism with 9-11, we had the wars in the Middle East, there were epidemics, massive oil spills, nut job dictators, and possibly...
Breakdown of LBO exit strategies?
What are the different ways in which an LBO is exited? Approximately what percent of large LBOs (EV > 100mm) are exited in that manner? IPO - ?% Private sale - ?% Really appreciate this because for my thesis I'm trying to figure out whether only counting LBOs that have been exited via IPO or...
LBO Question: Liabilities Treatment
Doing a case study. The scenario is that the PE shop is looking to purchase a company out of chapter 11 . The instructions say that at close of transaction no liabilities should be assumed. Is this every liability (sans new debt) or just cliams to assets? Not too familiar with restructuring stuff so...
Houdaille LBO Prospectus
Gentlemen, Does anyone have ANY idea where I could get my hands on the old KKR prospectus for their Houdaille Industries LBO ? Any leads would be appreciated!
Forbes 400 Richest Americans
As if hearing Edmundo’s question of who is rich , Forbes magazine released their list of the 400 richest Americans. Topping the list as usual is Microsoft billionaire Bill Gates, with Bershire's Warren Buffet in 2nd and Oracle's Larry Ellison in 3rd. So where are the bankers ? Of the top 200, 50...
LBO pitch
Need some ideas for an PE interview pitch...what sector/companies would make good LBO targets right now?
Help: LBO Model Terminal Value differences
Need help, practicing with an lbo model for a pharma company. All projections are in line, the bs balances. When it came to DCF , wanted to calculate TV by using both the perpetuity growth and multiple approach. The values are coming back very different. I noticed that if I play around with the WACC...
PE recovery?
George Roberts and Henry Kravis are first cousins. I bet their childhood games in post-WW 2 Tulsa, Oklahoma weren't the typical "Cowboys vs Indians" fare. Perhaps they were, with the caveat of Custer buying out Sitting Bull's arrow supply prior to Little Bighorn. More than half a century later, the...
Allocating Purchase Price for an LBO
Hey guys, I'm having trouble getting my head around what the purchase price (for purposes of allocating it per ASC 805/FAS 141r) for a leveraged transaction. Let's assume "PEG" offers to buy out "Acme" for $100M, composed of $60M cash, $15M seller note, and the rest in common equity of "Newco"...
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