What you'll learn
Determination of the price of purchase as well as the amount of equity and debt
The income statement projections are built on the basis of the assumptions for revenue as well as for expenses
Calculation of the "Free Cash Flow" is done along with the cash that is available for the repayment of debt
The debt schedule is completed and the mandatory as well as the optional repayments are determined
Requirements
Basic introductory knowledge of working in excel
Basic introductory knowledge related to accounting
Description
LBO Modeling is a process that can be divided into 8 steps. These steps consist of –Determination of the price of purchase as well as the amount of equity and debt which will be requiredThe debt tranches are assigned with the repayment percentages, interest rates and percentage totalsA table of "Sources and Uses" is created for tracking the ways the funds will be used in the dealThe income statement projections are built on the basis of the assumptions for revenue as well as for expensesCalculation of the "Free Cash Flow" is done along with the cash that is available for the repayment of debtThe debt schedule is completed and the mandatory as well as the optional repayments are determinedThe debt schedule is then linked to the cash flow statement and also to the income statementThe investor returns are then calculated and the sensitivity tables are createdIdeal Candidates for the Leveraged BuyOutThe "ideal" candidate for the LBO Model should –Have cash flows that are stable as well as predictable for repayment of debtBe undervalued with respect to the industry peers (lower price of purchase)Be a business that is associated with low risks (repayment of debts)The need for ongoing investments like CapEx should not be muchHave the capability of cutting costs and increasing marginsHave a management team that is strongHave a solid asset base for using as collateral for debtOf all the points the first one is of utmost significance as nobody will lend to a company as well as finance an LBO model if the cash flow of the company is unpredictable.An LBO model of leveraged buyout shows what all takes place when a company is acquired by a private equity firm by using a combination of equity or cash along with debt which is then sold off within a period of 3-5 years. By taking such a step, the aim of the private equity firm is to earn a return of 20 -25 percent which is far in excess of the "historical average annual return" in case of the stock markets. The leveraged buyouts are more or less same to the normal deals of merger and acquisitions; the only difference is that in a leveraged buyout, the assumption is that the buyer will be selling the target in future.
Overview
Section 1: Introduction
Lecture 1 Introduction to LBO
Lecture 2 What is Buyout
Lecture 3 Features of an LBO
Section 2: Benefits of Leverage
Lecture 4 Benefits of Leverage
Lecture 5 Benefits of Leverage Continues
Lecture 6 Disadvantages of Leverage
Lecture 7 Simple LBO Exercise
Lecture 8 Returns Generation
Lecture 9 Ideal Candidates
Section 3: Non Ideal Candidates
Lecture 10 Non Ideal Candidates
Lecture 11 Moderate to high EBITDA Multiple
Lecture 12 Exit Options
Lecture 13 Inputting the Inputs
Section 4: Types of Debt
Lecture 14 Types of Debt
Lecture 15 Types of Debt Continues
Section 5: Inputing the Inputs
Lecture 16 Inputing the Inputs
Lecture 17 More on Inputing the Inputs
Lecture 18 High Level Input
Section 6: Initial valuation
Lecture 19 Initial valuation
Lecture 20 Initial valuation Continues
Lecture 21 Inputing Selected Financial Data
Lecture 22 Leverage Buyout Analysis for Siemens
Section 7: Uses and Sources of Fund
Lecture 23 Uses and Sources of Fund
Lecture 24 Uses and Sources of Fund Continues
Section 8: Understanding Fees
Lecture 25 Understanding Fees
Lecture 26 Understanding Preferred Equity and Management Rollover
Lecture 27 Inputing the Historical
Lecture 28 Predicting Future line Items -Income Statement
Lecture 29 Working with schedules
Lecture 30 Working with schedules Continues
Lecture 31 Explain Cash Flow Statement
Lecture 32 Debt Schedules
Section 9: Debt Breakdowns
Lecture 33 Debt Breakdowns
Lecture 34 Debt Breakdowns Continues
Lecture 35 Scenario Analysis
Lecture 36 Final Analysis of LBO
Lecture 37 Understanding Circuit Breakers
Lecture 38 Sensitivity Table
Lecture 39 Common Interview Questions
Novice students who have interest in pursuing a career in the financial sector. Working Professionals. Any other person who may have interest in undertaking the LBO Modeling course

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