LBO Valuation: Fundamentals and Excel Modeling

Name: LBO Valuation: Fundamentals and Excel Modeling
Rating: 4.4 (458 reviews)

Master LBO Modeling: LBO Valuation Course for Aspiring Finance Professionals

Created by365 Careers

Last updated 5/2023

English

What you'll learn

Understand how an LBO works in practice
Become familiar with LBO value creation strategies
Study the Dell LBO case study
Dive into LBO valuation
Build a Paper LBO model
Create a sophisticated LBO model

Course content

4 sections • 50 lectures • 3h 19m total length

What is an LBO?4:28
How an LBO works in practice5:26
See how an LBO works in practice: create a NewCo, fund with debt and equity (senior and subordinated), leverage to acquire the target via a SPV.
Who are the lenders in an LBO4:36
Explore who lenders are in an LBO, including term A, B, and C debt tranches and mezzanine loans with equity kickers. Understand how cash sweeps and covenants influence debt capacity.
What is debt capacity and how to define the maximum debt capacity in an LBO deal3:20
When is an LBO a feasible option?4:16
How to determine the maximum LBO price3:27
Learn to price an lbo by balancing irr, target debt capacity, and exit value, using an EBITDA-based example to compute enterprise and equity values and the maximum offer.
The different types of LBO strategies that can be pursued by financial sponsors4:38
Learn how LBOs create value for financial sponsors through main strategies: de leverage, arbitrage, and growth. Explore how tax shields from interest expenses and EBITDA improvements drive higher exit value.

Intro to the Paper LBO exercise3:59
Working on debt capacity of the deal3:54
Obtaining equity needed for the LBO deal2:32
Filling in P&L projections4:23
Forecast a five-year cash flow from 2022 to 2027, applying 7% revenue growth, COGS 30% and OpEx 21%, boosting EBITDA margin to 49% with steady 320 million capex.
Working on debt schedule and P&L completion2:45
Calculating cash flow3:29
Calculate cash for debt reimbursement from net income by adding back D and A. Adjust for 1% working capital; CapEx equals depreciation for $400m term A, affecting term B.
Completing financial projections4:19
Copy 2023 formulas to forecast 2024–2027, complete the debt schedule and interest expenses, and project cash flow, taxes, and net income in an LBO valuation model.
Obtaining equity at exit and IRR4:33
Sensitivity analysis4:18

Case description1:55
Introduction to LBO Modeling exercise1:29
Key drivers in the LBO model8:29
Develop the LBO model drivers sheet for the target, defining hard input versus formula reference styles, input ABC data (share price, shares, premium), and set three scenarios.
Constructing the Profit and Loss header2:48
Analyzing historical Profit and Loss figures1:50
Valuing the Target company3:12
Estimating transaction fees5:25
Sources and uses of funds4:22
Explore sources and uses of funds for an LBO, balance financing from equity sponsors and lenders, account for cash, financing fees, and plan debt and amortization schedules in Excel.
Shaping the Balance sheet at transaction5:02
Goodwill calculation1:22
Compute goodwill in an M&A deal by starting with the equity purchase price, subtracting the net book value, and adjusting for fair value changes to appear on the balance sheet.
Integrating assumptions into the Drivers sheet5:41
Integrate assumptions into the drivers sheet to forecast revenue, cogs, and opex, and model dso, dio, and dpo with base and worst-case scenarios and capex as a percentage of revenue.
Building a Fixed asset roll forward schedule4:16
Build a fixed asset roll forward schedule for PPE and goodwill, detailing CapEx, depreciation, and impairment, with a dedicated amortization table for financing fees in an LBO context.
Forecasting financials using the Drivers sheet4:09
Explore building a three-scenario forecast with capex at 5% of revenue, fixed asset roll forward, and revenue growth paths while keeping COGS at 50% and OpEx at 26% of revenue.
Completing the Profit and Loss statement (up to EBITDA)5:07
Populate the P&L sheet up to EBITDA using a three-scenario model with the choose function. Calculate revenue, COGS, OpEx for forecast years, then derive gross profit, gross margin, and EBITDA.
Modeling Working capital4:34
Filling in the Balance sheet at transaction sheet3:25
Add financials to the Balance sheet3:11
Projecting Fixed asset roll forward5:24
Developing a Debt schedule5:54
Creating a Fixed asset amortization schedule4:38
Structuring Cash Flow2:49
Designing the Financing sheet4:51
Calculating Cash Flow4:06
Building an Equity schedule3:57
Finalizing the Financing Cash Flow1:30
Modeling the Revolver facility (first part)8:16
Completing the Profit and Loss statement2:10
Complete the p&l by calculating annual interest for senior note, term loans a and b, and revolver; derive net income after taxes and link figures to equity and balance sheets.
Modeling the Revolver facility (second part)0:35
Balancing the Balance sheet3:55
Exit valuation and IRR comparison7:05
Analyze exit valuation and IRR in an LBO model using entry and exit EV/EBITDA multiples. Compare IRRs across equity and lenders like senior notes and term loans A and B.

Requirements

Basic knowledge of Excel
Basic knowledge of financial math
Basic knowledge of finance theory

Description

Elevate your financial modeling skills and gain a deep understanding of leveraged buyout strategies in this comprehensive LBO Valuation course.

Designed for finance enthusiasts and aspiring investment bankers, this dynamic program provides both theoretical knowledge and hands-on experience through two engaging case studies, catering to various skill levels.

In this LBO Valuation course, you will:

Gain a solid foundation in leveraged buyout theory, learning about the complexities of LBO transactions, including various financial instruments, covenants, and structures.
Be able to answer practical questions such as how to determine maximum debt capacity, who are the lenders in an LBO, and which are the different types of value creation LBO strategies
Go through a case study of Dell's legendary LBO deal named the "deal of the century"
Develop practical skills by participating in two in-depth LBO case studies, bridging the gap between theoretical knowledge and real-world application.
Master the art of crafting a 'paper LBO' – a simplified one-page financial model often requested in investment banking interviews, perfect for beginners to grasp the essentials.
Dive into a more intricate LBO valuation, building a comprehensive financial model step-by-step, involving transaction fees, goodwill, fixed asset roll forward, P&L, balance sheet, cash flow, equity, and debt schedules.
Enhance your financial modeling expertise while working on a sophisticated, multi-layered LBO valuation, setting you apart in the competitive world of finance.

This course is perfect for those seeking a career in investment banking or investment analysis, equipping you with sought-after skills and knowledge that will give you an edge in the recruitment process.

Join us on this journey to master the nuances of leveraged buyout deals and secure your place in the world of finance.

Who this course is for:

Aspiring investment bankers
Young finance professionals
People who want to learn financial modeling and valuation

LBO Valuation: Fundamentals and Excel Modeling

What you'll learn

Explore related topics

Course content

Introduction7 lectures • 30min

The Dell LBO case study4 lectures • 14min

Building a Paper LBO model9 lectures • 34min

Comprehensive LBO modeling case study30 lectures • 2hr 1min

Requirements

Description

Who this course is for: