LBO Modeling Questions And Verified Answers ( Grade A+)

LBO Modeling Questions And
Verified Answers ( Grade A+)




Sections - correct answersTransaction assumptions, income statement, working capital schedule, balance
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sheet, statement of cash flows, debt schedule, interest expense schedule, credit metrics, returns
m m m m m m m m m m m m m




calculations



Transaction assumptions: m




Sections - correct answersSources & uses, transaction assumptions, financing assumptions, purchase
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accounting, debt financing, other assumptions, checks
m m m m m




Transaction assumptions: m




Sources & uses - correct answersSources: cash on hand, revolver draw (which should be zero), term loan,
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senior notes, subordinated notes, mgmt rollover, sponsor equity
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Uses: purchase equity, refinance existing debt, refinancing expenses, fund cash balance, transaction
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expenses, financing fees m m




Transaction assumptions: m




Transactions assumptions - correct answersLTM adj. EBITDA X transaction multiple = transaction value
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Transaction value - debt + cash = equity value
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,Memo: Mgmt rollover in % and $
m m m m m m




Transaction assumptions: m




Purchase accounting - correct answersTotal equity value - total assets (excl. goodwill) + total liabilities = PF
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goodwill



Value paid for an asset must be capitalized on the B/S (in the case of an acquisition, the asset being acquired is
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the company itself). When calculating goodwill, remember to subtract out the existing goodwill (goodwill
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functions as the plug and we don't care about the prior plug).
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Transaction assumptions: m




Financing assumptions - correct answersRows: revolver, term loan, senior notes, subordinated notes (type
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of debt)
m




Columns: leverage, term, interest type, interest rate, annual amort, years PIK, financing fees
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Memo:

Revolver commitment m




Commitment fee m




Transaction assumptions: m




Debt financing - correct answersRows: revolver + term loan = senior secured debt
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Senior secured debt + senior notes = senior debt
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Senior debt + subordinated notes = total debt
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Columns: $, leverage in x, fees in $ m m m m m m m




Formula to get nice, round debt balances for each tranche
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=mround (leverage * EBITDA, minimum debt increment)
m m m m m m




PF income statement:
m m

, Rows - correct answersRevenue
m m m




% growth
m




Adj EBITDAm




% margin
m




% growth
m




(-) D&A
m




Adj EBIT m




% margin
m




% growth
m




(-) Net interest expense (build in circuit breaker)
m m m m m m m




Adj EBT m




(-) Tax expense
m m




Adj net income
m m




% margin
m




% growth
m m




Memo:

Revenue growth (%) m m




COGS (% of sales) m m m




EBITDA margin (%) m m




D&A (% of sales)
m m m




CapEx (% of sales) m m m




PF income statement:
m m




Steps - correct answersGrow Revenue by multiplying the prior year by (1 + growth rate)
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