TRANSACTION COMPS AND LBO MODELING
EXAM SCRIPT 2026 TESTED QUESTIONS AND
CORRECT ANSWERS ALREADY PASSED
◉ What other scenarios can LBO analysis be used for? Answer: It
can also assess refinancing opportunities and restructuring
alternatives for corporate issuers.
◉ What is at the center of LBO analysis? Answer: A financial model,
known as the 'LBO model', which analyzes a target's performance
under multiple financing structures and operating scenarios.
◉ What is the role of LBO analysis in financing structure? Answer: It
helps craft a viable financing structure that includes the amount and
type of debt and equity contributions from a financial sponsor.
◉ Who typically leads the LBO financing structure analysis? Answer:
An investment bank's leveraged finance and capital market teams,
along with a sector coverage team, collectively known as the 'deal
team'.
◉ What is the goal of the financing structure analysis in LBO?
Answer: To present tailored financing options that maximize returns
while remaining marketable to investors.
,◉ What does LBO analysis help determine in M&A? Answer: It helps
determine an implied valuation range for a target in a potential LBO
sale based on acceptable terms.
◉ What key variables are considered in LBO valuation output?
Answer: Financial projections, purchase price, financing structure,
exit multiple, and year.
◉ What IRR range do sponsors typically target in LBO analysis?
Answer: Sponsors typically target 15-20% IRRs to assess acquisition
opportunities.
◉ What are the steps in LBO analysis? Answer: 1. Locate and
Analyze Information; 2. Build the Pre-LBO Model; 3. Input
Transaction Structure; 4. Complete the Post-LBO Model; 5. Perform
the LBO Analysis.
◉ What is involved in Step 1 of LBO analysis? Answer: Collecting,
organizing, and analyzing all available information on the target, its
sector, and transaction specifics.
◉ What is a CIM/CIP in the context of LBO analysis? Answer:
Confidential Information Memorandum/Confidential Information
Presentation, which provides details to prospective buyers.
,◉ What is the purpose of the transaction summary page in LBO
analysis? Answer: It serves as the cover page of the LBO model,
allowing the deal team to quickly review and spot-check the
analysis.
◉ What does the LBO model allow bankers to do? Answer: It allows
bankers to switch between various financing structures and
operating scenarios.
◉ What is included in the post-LBO model? Answer: A debt
schedule, pro forma income statement, pro forma balance sheet, and
pro forma cash flow statement.
◉ What is the significance of sensitivity analysis in LBO valuation?
Answer: It is performed on key value drivers to produce a range of
IRRs used to frame valuation for the target.
◉ What is the first step in building the pre-LBO model? Answer:
Build the historical and projected income statement through EBIT.
◉ What is the role of public filings in LBO analysis? Answer: They
supplement information for public targets and are important for
preliminary due diligence.
, ◉ What is the importance of cash flow generation in LBO analysis?
Answer: It is crucial for analyzing the viability of the financing
structure based on debt repayment and investment returns.
◉ What does the deal team do after the sponsor chooses a financing
structure? Answer: They present it to the bank's internal
committee(s) for approval.
◉ What is the final output of the LBO analysis process? Answer: All
essential outputs are linked to a transaction summary page that
serves as a review tool for the deal team.
◉ What is the purpose of hiring outside consultants by PE firms?
Answer: To help with the assessment of the company and sector.
◉ What is the primary financial assumption source for building the
pre-LBO model? Answer: The CIM/CIP.
◉ What does the pre-LBO model exclude? Answer: The effects of the
LBO transaction.
◉ What are the three financial statements included in the pre-LBO
model? Answer: Income statement, balance sheet, and cash flow
statement.
EXAM SCRIPT 2026 TESTED QUESTIONS AND
CORRECT ANSWERS ALREADY PASSED
◉ What other scenarios can LBO analysis be used for? Answer: It
can also assess refinancing opportunities and restructuring
alternatives for corporate issuers.
◉ What is at the center of LBO analysis? Answer: A financial model,
known as the 'LBO model', which analyzes a target's performance
under multiple financing structures and operating scenarios.
◉ What is the role of LBO analysis in financing structure? Answer: It
helps craft a viable financing structure that includes the amount and
type of debt and equity contributions from a financial sponsor.
◉ Who typically leads the LBO financing structure analysis? Answer:
An investment bank's leveraged finance and capital market teams,
along with a sector coverage team, collectively known as the 'deal
team'.
◉ What is the goal of the financing structure analysis in LBO?
Answer: To present tailored financing options that maximize returns
while remaining marketable to investors.
,◉ What does LBO analysis help determine in M&A? Answer: It helps
determine an implied valuation range for a target in a potential LBO
sale based on acceptable terms.
◉ What key variables are considered in LBO valuation output?
Answer: Financial projections, purchase price, financing structure,
exit multiple, and year.
◉ What IRR range do sponsors typically target in LBO analysis?
Answer: Sponsors typically target 15-20% IRRs to assess acquisition
opportunities.
◉ What are the steps in LBO analysis? Answer: 1. Locate and
Analyze Information; 2. Build the Pre-LBO Model; 3. Input
Transaction Structure; 4. Complete the Post-LBO Model; 5. Perform
the LBO Analysis.
◉ What is involved in Step 1 of LBO analysis? Answer: Collecting,
organizing, and analyzing all available information on the target, its
sector, and transaction specifics.
◉ What is a CIM/CIP in the context of LBO analysis? Answer:
Confidential Information Memorandum/Confidential Information
Presentation, which provides details to prospective buyers.
,◉ What is the purpose of the transaction summary page in LBO
analysis? Answer: It serves as the cover page of the LBO model,
allowing the deal team to quickly review and spot-check the
analysis.
◉ What does the LBO model allow bankers to do? Answer: It allows
bankers to switch between various financing structures and
operating scenarios.
◉ What is included in the post-LBO model? Answer: A debt
schedule, pro forma income statement, pro forma balance sheet, and
pro forma cash flow statement.
◉ What is the significance of sensitivity analysis in LBO valuation?
Answer: It is performed on key value drivers to produce a range of
IRRs used to frame valuation for the target.
◉ What is the first step in building the pre-LBO model? Answer:
Build the historical and projected income statement through EBIT.
◉ What is the role of public filings in LBO analysis? Answer: They
supplement information for public targets and are important for
preliminary due diligence.
, ◉ What is the importance of cash flow generation in LBO analysis?
Answer: It is crucial for analyzing the viability of the financing
structure based on debt repayment and investment returns.
◉ What does the deal team do after the sponsor chooses a financing
structure? Answer: They present it to the bank's internal
committee(s) for approval.
◉ What is the final output of the LBO analysis process? Answer: All
essential outputs are linked to a transaction summary page that
serves as a review tool for the deal team.
◉ What is the purpose of hiring outside consultants by PE firms?
Answer: To help with the assessment of the company and sector.
◉ What is the primary financial assumption source for building the
pre-LBO model? Answer: The CIM/CIP.
◉ What does the pre-LBO model exclude? Answer: The effects of the
LBO transaction.
◉ What are the three financial statements included in the pre-LBO
model? Answer: Income statement, balance sheet, and cash flow
statement.
