LBO Modeling Notes- Modeling
Knowledge and Problem Solving Test
Acquisition where a significant part of the purchase price is funded with debt (the remaining
portion is funded with equity by the financial sponsors/PE investors) - answers✔✔Leveraged
Buyout (LBO)
Company undergoes a recapitalization to a now highly leveraged financial structure (company
becomes a new company - from oldco to newco --> companies acquired by PE can be either
private or public)
(generally, more LBOs with private companies, but go-private --companies who are public but
become private--gain more attention) - answers✔✔What happens to company after LBO? (high-
level)
Debt and put up a relatively small amount of equity
(as debt is paid down and the value of the business grows, sponsors earn large returns) -
answers✔✔Financial sponsors finance deals with a lot of...
1) Getting in cheap
2) Levering with a lot of cheap debt
3) Improving the business (growing EBITDA)
4) Exiting within 3-5 years at high multiple - answers✔✔Key drivers of success in LBOs are:
Knowledge and Problem Solving Test
Acquisition where a significant part of the purchase price is funded with debt (the remaining
portion is funded with equity by the financial sponsors/PE investors) - answers✔✔Leveraged
Buyout (LBO)
Company undergoes a recapitalization to a now highly leveraged financial structure (company
becomes a new company - from oldco to newco --> companies acquired by PE can be either
private or public)
(generally, more LBOs with private companies, but go-private --companies who are public but
become private--gain more attention) - answers✔✔What happens to company after LBO? (high-
level)
Debt and put up a relatively small amount of equity
(as debt is paid down and the value of the business grows, sponsors earn large returns) -
answers✔✔Financial sponsors finance deals with a lot of...
1) Getting in cheap
2) Levering with a lot of cheap debt
3) Improving the business (growing EBITDA)
4) Exiting within 3-5 years at high multiple - answers✔✔Key drivers of success in LBOs are:
