LBO (Leveraged Buy Out) Modelling
What you'll learn
- Learn market practices and structures for leveraged buyout transactions
- Understand the drivers of leveraged buyout structures and the specific constraints of private equity funds
- Understand the relevance of different funding options -A & B loans, HY bonds, 2nd lien, mezzanine debt
- Learn how to build and use an LBO model to assess deal feasibility
- Using comparable transactions as a basis, be able to assess the feasibility of a deal
- Use the model to calculate standard return metrics (IRR, money multiples) and investigate the operating model using ROCE
- Use the model and some leverage comparables to structure an LBO financing
Requirements
- Delegates should have some fundamental Excel modelling skills and basic knowledge of financing, but the specifics for an LBO model are fully explained from scratch. If you've not done so, you should have a go at our Financial Modelling program.
Description
The aim of the course is to show delegates how to assess the feasibility of a potential LBO transaction and how to flexibly model the acquisition and leveraging of a company by private equity investors.
Delegates will build an integrated LBO model and a value bridge, disaggregating value added/destroyed into the various components, namely – growth, margin improvement, “multiple arbitrage” and fees. We will then use the model and some leverage comparables to structure a bid and also consider a potential competing Unitranche offer from a debt fund.
The course is practical and pragmatic: we look at the typical mandates of Private Equity Funds and how that drives the structures of deals – their return requirements, hold periods and exit routes and very importantly, the range of opportunities that this gives to the Bank. We also review and model the full range of funding sources available to borrowers, including products like Unitranche which are a strong competitor for the more “traditional” cash flow lending structures offered by banks through A & B loans.
Specifically, we will:
Build a transaction sources and uses;
Derive a pro forma opening balance sheet;
Overlay a detailed pro forma financing structure on the target company comprising a mix of senior and subordinated debt. Specifically, we will model debt with PIK components such as mezzanine debt;
Review current leverage market practices and structures – what financing is available and on what terms? Who are the Bank’s competitors? What is the significance of the different products: A& B loans, Second lien, HY, Mezzanine and Unitranche?
Explain structural and contractual subordination and explain how they are used in creating different classes of debt and indeed how shareholder loans are used to create preferences amongst the different “equity” providers such as “rollover” equity, sweet equity and institutional funding and what, if at all, is the typical role of vendor loan notes.
Build an integrated forecasting model
Calculate standard return metrics, IRRs and money multiples and investigate the operating model using RoCE;
Measure the contribution of different value drivers to the total return using a “value bridge” calculation
Use the model and some leverage comparables to structure a leveraged financing for an LBO.
At the end of the course delegates will:
Understand the drivers of leveraged buyout structures and the specific constraints of private equity funds
Understand the relevance of different funding options -A & B loans,
Be able to build and use an LBO model to assess deal feasibility
Using comparable transactions as a basis, be able to assess the feasibility of a deal
Assess management incentive structures
Be able to assess the likely competitive threat from alternative debt providers
Who this course is for:
- New analysts, those moving into a Leveraged finance team or undergrads keen to learn more before embarking on a career in finance.
Instructor
- 4.4 Instructor Rating
- 69 Reviews
- 1,275 Students
- 8 Courses
Capital City Training is a full-service technical training company focused on the banking, wealth management and broader financial services and accounting industries.
We provide engaging, challenging, high quality training across the spectrum of hard technical skills needed in banking, investment banking, fund management and wealth management, as well as coaching and management development. Capital City also provides eLearning and distance learning packages for core skills such as accounting and analysis, financial maths, modelling and valuation.
Our e-learning programs are designed to recreate the classroom experience as closely as possible - with expert tutors explaining concepts clearly, illustrating with examples and then providing delegates with exercises to practice what they've seen, with a full tutor debrief - we all learn by doing! We combine training expertise and highly credible practical experience together to give relevant high impact courses.
Capital’s style is guided by some basic principles of adult learning, namely:
- Adults are task focused, they learn by doing;
- Adults are social, they engage with tasks and assimilate information better when working in a group;
- Adults are competitive.
In all areas of our training, we stimulate and engage delegates through involving them actively in:
- Contemporary, real-world case studies
- Group exercises
- Excel modelling, where relevant
Your expert tutors - Greg and Mark - have worked in banking and finance for many years before co-founding Capital City Training in 2010. Our clients include banks across the world, where we deliver tailored solutions on top of our core skills programs.
Greg Mayes, ACA CFA AMCT, qualified as an accountant with Ernst & Young in London, and before setting up CCT was Global Head of Financial Markets Training at Barclays Capital (now Barclays Investment Bank).
Mark Woolhouse graduated from St John’s Oxford and entered the banking world, training with JP Morgan in New York and subsequently working with one of JP Morgan’s London based affiliates, Saudi International Bank. He then worked with the UK merchant banks Hill Samuel and Charterhouse.