Leveraged buyouts - Study guides, Class notes & Summaries

Leveraged Buyouts and LBO Models Review Questions and Answers 2023/2024

7 - Leveraged Buyouts and LBO models graded A+

1. Can you explain how to adjust the Balance Sheet in an LBO model? The adjustments are similar to those in an M&A deal, but in an LBO, you don't "combine" the Seller's Balance Sheet with the Buyer's since the "Buyer" is an empty shell corporation. You still write down the company's Shareholders' Equity and replace it with the Investor Equity the PE firm is contributing, you still create Goodwill and Other Intangible Assets, and you might adjust the Deferred Tax-related items as well. ...

1. What's the true purchase price in a leveraged buyout? Just as in a merger model, you always start with the Equity Purchase Price - the cost of acquiring all the company's common shares. Then, depending on the treatment of Cash, Debt, Transaction Fees, and Equity Rollovers, the "true price" may be different, which is why you create a Sources & Uses schedule. For example, if existing Debt is "assumed" (kept in placed or replaced with new Debt that's the same), it won't affect the purc...

1. What are the different exit strategies available to a private equity firm in a leveraged buyout, and what are the advantages and disadvantages of each one? The main exit strategies are an M&A deal, an initial public offering (IPO), and a dividend recapitalization. In an M&A Deal, the PE firm sells the company to another company or PE firm. It's a clean and simple break where the firm earns all the deal proceeds in one fell swoop. In an IPO Exit, the PE firm takes the company public and sel...

7.7 Leveraged Buyouts and LBO Models - More Advanced LBO Features graded A+

7 - Leveraged Buyouts and LBO models Questions and answers 2023/2024

7 - Leveraged Buyouts and LBO models

Demystifying debt issued by corporations to nance acquisitions, leveraged buyouts, recapitalizations and renancings Leveraged nance refers to the nancing of highly levered, speculative-grade companies. Within the investment bank, the Leveraged Finance (“LevFin”) group works with corporations and private equity rms to raise debt capital by syndicating loans and underwriting bond oerings to be used in LBOs, M&A, debt renancing and recapitalizations. The funds raised are used primarily for...