Lbo candidate - Study guides, Class notes & Summaries

LBO Modeling / LBO Modelling Exam from Wall Street Prep 2024 PASS A+ What do LBO FCF's tell us? - ANSWER-Tells you how much cash is available to repay *debt principal* each year after already paying for normal expenses and debt interest Can a PE firm earn a solid return if it buys a company for $1 billion and sells it for $1 billion 5 years? - ANSWER-Yes, if it uses a certain amount of debt to purchase the company- if they raise $500m, and use $500 cash, the company's FCF's are able ...

LBO Modeling / LBO Modelling Exam from Wall Street Prep 2024 PASS A+ What do LBO FCF's tell us? - ANSWER-Tells you how much cash is available to repay *debt principal* each year after already paying for normal expenses and debt interest Can a PE firm earn a solid return if it buys a company for $1 billion and sells it for $1 billion 5 years? - ANSWER-Yes, if it uses a certain amount of debt to purchase the company- if they raise $500m, and use $500 cash, the company's FCF's are able ...

Breaking Into Wall Street Lbo Exam 2024 Update What is an "ideal" candidate for an LBO? - ANSWER-ideal candidates: - stable and predictable cash flows - should be undervalued relative to peers - be low risk businesses - not have much need for ongoing investments - have an opportunity to cut costs and increase margins - strong management team - solid base of assets

What are characteristics of a good candidate for an LBO? Steady Cash flows Limited Business Risk Low CAPEX / Working Capital Strong Management Opportunity for Cost Reduction High asset base value Low R&D Steady industry What are some way to increase the IRR of an LBO? Reduce the purchase Price Increase Debt Increase the exit multiple Increase the company's growth rate Cut more costs Dividend recap Leverage Reduce Capex and Working Capital Why is leverage used by private equity firms when buyi...

LBO MODEL GUIDE EXAM QUESTIONS AND ANSWERS WITH COMPLETE SOLUTIONS VERIFIED GRADED A++ Does reducing the amount of cash you pay upfront increase or decrease your returns? Why? Increase; money today is worth more than money tomorrow Basic explanation of what a PE firm does It buys a company using some combination of debt and equity and then sell it in 3-5 years for a return. The firm uses the company's cash flows to pay off interest and debt principal The 3 key reasons that an LBO works...

LBO Model (Breaking Into Wall Street) EXAM 2024 UPDATE "Real-Life" LBO - ANSWER-Common example; mortgage on a house. a)Down payment -- investor equity b)Mortgage -- debt c)Mortgage interest payments -- Debt interest d) Mortgage repayments -- debt principal repayments e) Selling the house -- selling the company/taking it public What is an "ideal" candidate for an LBO? - ANSWER-1) Stable and predictable cash flows 2) low-risk businesses 3) low capex 4) opportunity for expense reductions to ...

LBO MODEL EXAM QUESTIONS AND ANSWERS WITH COMPLETE SOLUTIONS GRADED A++ Walk me through a basic LBO model. "In an LBO Model, Step 1 is making assumptions about the Purchase Price, Debt/Equity ratio, Interest Rate on Debt and other variables; you might also assume something about the company's operations, such as Revenue Growth or Margins, depending on how much information you have. Step 2 is to create a Sources & Uses section, which shows how you finance the transaction and what y...

Why do PE firms use leverage when buying companies? Amplify returns using leverage Less capital upfront => greater upside potential + greater risk Walk me through a basic LBO model 1. Make assumptions about purchase price, funding sources, interest rate on debt, and growth 2. S&U to back into Equity Contribution. PPA to calculate GW and Other Intangibles created 3. Adjust target's B/S for new debt and equity figures, allocate the purchase price, and add GW and other Intangibles s.t. A = L +...

LBO MODEL EXAM QUESTIONS AND ANSWERS WITH COMPLETE SOLUTIONS VERIFIED GUARANTEED PASS GRADED A++ Walk me through a basic LBO model. "In an LBO Model, Step 1 is making assumptions about the Purchase Price, Debt/Equity ratio, Interest Rate on Debt and other variables; you might also assume something about the company's operations, such as Revenue Growth or Margins, depending on how much information you have. Step 2 is to create a Sources & Uses section, which shows how you finance the...

LBO MODELING | FINANCEABLE EXAM QUESTIONS AND ANSWERS WITH COMPLETE SOLUTIONS VERIFIED GRADED A++ LBO Leveraged buy out - Is an acquisition of a business which a meaningful portion of the purchase price through debt - Executed by PE funds (holding period for 5 years) - Late stage businesses The LBO Process 1. Purchase price (usually EBITDA * Multiple = TEV) 2. Fund the deal 3. Use cash flow to pay down debt 4. Sale of the company (calculate TEV) 5. Pay the lender 6. MOIC (multiple ...