WALL STREET PREP: LBO
FUNDAMENTALS QUESTIONS WITH
CORRECT ANSWERS
How Kdo Kprivate Kequity Kfirms Kexit Ktheir Kposition? K- Kcorrect Kanswer-1) KSale Kto Ka KStrategic KBuyer
2) KSecondary KBuyout K(sponsor-to-sponsor Kdeal) K-
less Kthan Kideal Kbecause Kanother KPE Kfirm Kwon't Kpay Ka Ksynergy Kpremium
2) KIPOs K-Joption Kexclusive Kto Kfirms Kof Klarger Ksize K(megafunds) Kor Kclub Kdeals
Primary KLevers Kin Kan KLBO Kthat Kdrive Kreturns? K- KcorrectJanswer-1)
KDeleveraging K- Kvalue Kof Kequity Kowned Kbe KPE Kfirms Kwill Kgrow
2) EBITDA KGrowth K-
making Koperational Kimprovements Kto Kteh Kbusiness's Kmargin Kprofile, Kimplementing Knew Kgrowth
Kstrategies Kto Kincrease Krevenue, Kdoing Kadd-on Kacquisitions Kthat Kare Kaccretive
3) Multiple KExpansion K- Kbuy Kat Klow Kmultiple Kand Kthen Kexit Kat Ka Khigher Kmultiple
How Kcan Ka Kcompany Kwork Kon Kmargin Kexpansion? K- Kcorrect Kanswer-1) KBuild Kbetter Kinvestor Ksentiment
2) Better Keconomic Kconditions
3) Favorable Ktransaction Kdynamic K(strategic Krather Kthan Kanother Ksponsor)
Do KPE Kfirms Ktypically Kassume Kentry Kmultiple Kfor Kexit? K- Kcorrect
Kanswer- KItJis Kpopular Kto Kassume Kexit Kis Kthe Ksame Kas Kentry K-
since Kdeal Kenvironment KisJunknown Kit Kis Ktoo Krisky Kto Kassume Kit KisJhigher
,What Kattributes Kmake Ka Kbusiness Kan Kideal KLBO Kcandidate? K- Kcorrect Kanswer-1) KSteady, KPredictable Kcash
Kflows
2) Strong Kmature Kindustry Kin Kdefensible Kmarket Kpositioning
3) Business Kmodel Kwith Krecurring Krevenue Kcomponent
3) Strong, KCommitted KManagment Kteam K- Kpossible Khistory Kor Kworking Kwith KPE Kfirms
4) Diverse Krevenue Ksteams Kwith Kminimal Kcyclicality
5) Low Kcapex Krequirements Kand Kworking Kcapital Kneeds
6) Currently Kundervalued Kby Kmarket K(low-purchaseJmultiple)
, What Kindustries Kattract Kthe Kmost KLBO Kdeal Kflow? K- Kcorrect Kanswer-1) KMature
2) Growing Kat Ka Kmoderate Krate
3) Non-cyclical
Predictable Krevenue Kwith Kfewer Kdisruption Krisks Kfrom Ktechnology Kor Knew Kentrants Kto Khaving Ka
Khigher Kbarrier Kentry
What Kwill Ka Kfirm Klook Kat Kwhen Kthe Kinvestment Kstrategy Kis Kbased Karound Kroll-up Kacquisitions? K-Jcorrect
Kanswer- KFragmented Kindustries Kwhere Kconsolidation Kstrategy Kis Kmore Kviable Ksince Kthere Kare Kmore
Kadd-
on Ktargets Kin Kthe Kmarket
Ideal Ktype Kof Kproducts/services Kbeing Ksold? K- Kcorrect Kanswer-1) KMission KCritical K-
product/service KisJessential Kto Kthe Kend Kmarket Kbeing Kserved. KDiscontinuity Kwould Kbe Kdetrimental
KtoJbusines Ks Kcontinuity
2) High KSwitchingJCosts K- Kcosts Kto Kswitch Kwould KoutweightJthe Kbenefits Kof Kmoving Kto Ka Klower-cost
Kprovider
3) RecurringJRevenue KComponent K- Kproducts/servicesJrequire KMAINTENANCE
What Kis Kthe Ktypical Kcapital Kstructure Kprevalent Kin KLBO Ktransactions? K-Jcorrect Kanswer-
KCurrently Karound K60/40 Kdebt Kto Kequity
Debt: KThey Kwill Kbe Kin Kdifferent Ktranches Kwith Kmost KbeingJsenior
Equity: KContribution Kwill Kmostly Kcome Kfrom Kthe Kfinancial Ksponsor Kwith Kin KsomeJcases Kan Kexisting
Kmanageme Knt Kteam. KAlso, Ksince KLBOs Ktypically Kretain Kexisting Kmanagement Kteam K- Ksponsors Kwill
Kreserve K3% K-
20% Kof Kthe Ktotal Kequity Kas Kan Kincentive Kfor Kthe Kmanagement Kteam KtoJmeetJfinancial Ktargets
FUNDAMENTALS QUESTIONS WITH
CORRECT ANSWERS
How Kdo Kprivate Kequity Kfirms Kexit Ktheir Kposition? K- Kcorrect Kanswer-1) KSale Kto Ka KStrategic KBuyer
2) KSecondary KBuyout K(sponsor-to-sponsor Kdeal) K-
less Kthan Kideal Kbecause Kanother KPE Kfirm Kwon't Kpay Ka Ksynergy Kpremium
2) KIPOs K-Joption Kexclusive Kto Kfirms Kof Klarger Ksize K(megafunds) Kor Kclub Kdeals
Primary KLevers Kin Kan KLBO Kthat Kdrive Kreturns? K- KcorrectJanswer-1)
KDeleveraging K- Kvalue Kof Kequity Kowned Kbe KPE Kfirms Kwill Kgrow
2) EBITDA KGrowth K-
making Koperational Kimprovements Kto Kteh Kbusiness's Kmargin Kprofile, Kimplementing Knew Kgrowth
Kstrategies Kto Kincrease Krevenue, Kdoing Kadd-on Kacquisitions Kthat Kare Kaccretive
3) Multiple KExpansion K- Kbuy Kat Klow Kmultiple Kand Kthen Kexit Kat Ka Khigher Kmultiple
How Kcan Ka Kcompany Kwork Kon Kmargin Kexpansion? K- Kcorrect Kanswer-1) KBuild Kbetter Kinvestor Ksentiment
2) Better Keconomic Kconditions
3) Favorable Ktransaction Kdynamic K(strategic Krather Kthan Kanother Ksponsor)
Do KPE Kfirms Ktypically Kassume Kentry Kmultiple Kfor Kexit? K- Kcorrect
Kanswer- KItJis Kpopular Kto Kassume Kexit Kis Kthe Ksame Kas Kentry K-
since Kdeal Kenvironment KisJunknown Kit Kis Ktoo Krisky Kto Kassume Kit KisJhigher
,What Kattributes Kmake Ka Kbusiness Kan Kideal KLBO Kcandidate? K- Kcorrect Kanswer-1) KSteady, KPredictable Kcash
Kflows
2) Strong Kmature Kindustry Kin Kdefensible Kmarket Kpositioning
3) Business Kmodel Kwith Krecurring Krevenue Kcomponent
3) Strong, KCommitted KManagment Kteam K- Kpossible Khistory Kor Kworking Kwith KPE Kfirms
4) Diverse Krevenue Ksteams Kwith Kminimal Kcyclicality
5) Low Kcapex Krequirements Kand Kworking Kcapital Kneeds
6) Currently Kundervalued Kby Kmarket K(low-purchaseJmultiple)
, What Kindustries Kattract Kthe Kmost KLBO Kdeal Kflow? K- Kcorrect Kanswer-1) KMature
2) Growing Kat Ka Kmoderate Krate
3) Non-cyclical
Predictable Krevenue Kwith Kfewer Kdisruption Krisks Kfrom Ktechnology Kor Knew Kentrants Kto Khaving Ka
Khigher Kbarrier Kentry
What Kwill Ka Kfirm Klook Kat Kwhen Kthe Kinvestment Kstrategy Kis Kbased Karound Kroll-up Kacquisitions? K-Jcorrect
Kanswer- KFragmented Kindustries Kwhere Kconsolidation Kstrategy Kis Kmore Kviable Ksince Kthere Kare Kmore
Kadd-
on Ktargets Kin Kthe Kmarket
Ideal Ktype Kof Kproducts/services Kbeing Ksold? K- Kcorrect Kanswer-1) KMission KCritical K-
product/service KisJessential Kto Kthe Kend Kmarket Kbeing Kserved. KDiscontinuity Kwould Kbe Kdetrimental
KtoJbusines Ks Kcontinuity
2) High KSwitchingJCosts K- Kcosts Kto Kswitch Kwould KoutweightJthe Kbenefits Kof Kmoving Kto Ka Klower-cost
Kprovider
3) RecurringJRevenue KComponent K- Kproducts/servicesJrequire KMAINTENANCE
What Kis Kthe Ktypical Kcapital Kstructure Kprevalent Kin KLBO Ktransactions? K-Jcorrect Kanswer-
KCurrently Karound K60/40 Kdebt Kto Kequity
Debt: KThey Kwill Kbe Kin Kdifferent Ktranches Kwith Kmost KbeingJsenior
Equity: KContribution Kwill Kmostly Kcome Kfrom Kthe Kfinancial Ksponsor Kwith Kin KsomeJcases Kan Kexisting
Kmanageme Knt Kteam. KAlso, Ksince KLBOs Ktypically Kretain Kexisting Kmanagement Kteam K- Ksponsors Kwill
Kreserve K3% K-
20% Kof Kthe Ktotal Kequity Kas Kan Kincentive Kfor Kthe Kmanagement Kteam KtoJmeetJfinancial Ktargets
