Private Equity and LBO Learning Path: A Comprehensive Guide

explain pre money and post money valuations, calculation formulas, ownership splits, step up in a private equity deal, and exit outcomes for promoters and pe firms.

Master deal structuring by calculating pre-money and post-money valuations, determining share price and ownership between the promoter and the PE firm, and applying step-up concepts and exit scenarios.

Explore other private equity structures, including redeemable preferred stock, convertible debt, senior debt, mezzanine debt, subordinated debt, and warrants, highlighting liquidation priority and issuer guarantees.

Master financial engineering to create an optimal, flexible capital structure that finances the business plan and buyouts, balancing senior debt, mezzanine debt, and equity to reward management and investors.

Explain how private equity funds use a fund structure with a limited partner and a general partner, managing multiple funds and allocating profits and losses.

Learn the investment process from approaching a private equity firm to due diligence, final negotiation, and exit. Understand the roles of promoters, advisors, and investment bankers and their fees.

Learn how a fund manager filters deals using criteria like positive cash flow, stable net profit margin, revenue thresholds, and debt-to-equity limits, aligning opportunities with investor mandate and sector focus.

Drive post-investment performance by meeting forecasts in the first two quarters, building a track record through sales and capex, and maintaining transparent investor relations about exits as liquidity events.

Introduce private equity by defining it, identifying investors, and outlining its structure, returns, deal structuring, valuation, and leveraged buyouts, including venture capital and private equity transactions.

Explore leading private equity firms by assets under management, focusing on leveraged buyouts and distressed debt, with notable portfolios like Apollo Global Management, Blackstone, KKR, and Bain.

Understand how profits allocate to limited partners and the general partner under hurdle rates and carry. Use Excel to calculate IRR from cash flows and carried interest.

Explore the basic structure of a private equity fund, detailing limited partners and the general partner, the limited partner agreement, capital contributions, commitments of 4-6 years, and distribution on exit.

Explore the four real estate strategies in private equity—core, core plus, value added, and opportunistic—along with funds of funds, detailing risk, return, and value-enhancement approaches.

Bank roles in private equity span fund accounting and administration, M&A advisory and deal execution, and debt financing with senior and mezzanine debt for leveraged buyouts.

Explore three private equity investment forms—primary, secondary, and co-investment—with due diligence, fund structures, and the benefits of reduced risk and accelerated returns for limited partners.

Co-investment vehicles enable the sponsor to pursue deal-by-deal investments outside the main fund, alongside private equity funds, often with different terms and fees, and may include outside or strategic investors.

Understand how private equity capital commitments are funded in stages through capital calls. See how sponsor commitments align investors' and sponsors' interests and what fund agreements require for capital contributions.

Explore private equity distribution waterfalls, where proceeds flow in tiered priority between investors and sponsors, recognizing capital return, hurdle rates (7–9%), catch-up, and carried interest.

Understand clawback provisions in private equity funds, including how sponsors repay excess carried interest at fund termination, with mechanisms, triggers, and investor repayment caps.

Understand the private equity fund structure, from sponsors and general partners to investment advisors, and learn fee mechanics like management fees, carried interest, and acquisition fees.

Understand organizational and operating expenses in private equity funds, including caps on organizational costs, investors' capital commitments covering them, and how sponsors bear excess while operating costs remain uncapped.

Placement agents market private equity funds, introduce sponsors to investors, and ensure qualifications under securities laws; engagement defines compensation, scope, exclusivity, and broker-dealer registration under Securities Exchange Act of 1934.

Learn how to complete a cost sheet in financial modeling by forecasting professional fees, outsourcing accounting, office and manpower costs, marketing, app development, and cloud server charges.

Learn to prepare cap table and depreciation schedules for computers and furniture, and build income statements and balance sheets for a startup, including receivables and weighted average cost of capital.

Compute pre-money and post-money valuations from investment and share counts to show founders' and private equity returns. Explain how liquidation preference and ownership influence proceeds at various sale values.

Compute the weighted average cost of capital using risk-free rate, market risk premium, and beta; assess working capital, terminal value, unlevered free cash flow, and NPV.

Explore term sheet mechanics, including weighted average anti-dilution, right of first refusal and tag-along rights, drag-along exits, IRR/NPV targets, and indemnity provisions for private equity deals.

Explore leveraged buyouts in private equity, blending debt and equity to acquire a target, form an acquisition vehicle, and measure success with EBITDA and internal rate of return.

Walks through building a private equity LBO model using core financial statements, and a debt schedule for a Twitter-like company, highlighting EV/EBITDA and 2025 exit with a $1 billion payback.

Build and link the cash flow statement from the income statement, incorporating depreciation and amortization, capex, stock-based compensation, and deferred tax assumptions in a hypothetical private equity model.

Learn to build a simplified cash flow model: estimate deferred tax from depreciation, include stock-based compensation as non-cash, and analyze working capital changes to derive net cash from operating activities.

Model debt and capital lease schedules by connecting ending balances to the next period, applying zero adjustments, and calculating interest expense from the average balance at 0.03%.

Explore shares outstanding in a schedule, tracing beginning and ending balances, issued and repurchased shares, average basic shares, and dilution with stock-based compensation for private equity free cash flow modeling.

Analyze operating income and adjusted EBITDA, incorporating depreciation, amortization, and stock-based compensation, then derive unlevered free cash flow via two methods for the private equity model.

this lecture computes the implied enterprise value at exit (2025) using EBITDA and a 19x multiple, then derives equity value after net debt for a four-year LBO.

Compare traded versus private firms and apply the fundamental approach to value private firms, estimating risk with return on equity, assets, debt, equity, tax rate, and growth.

The lecture explains a regression linking risk to ROE, asset ratios, debt coverage, growth, and tax rate, noting debt and growth raise risk and higher ROE lowers risk; R-squared 9.3%.

Estimate unlevered and levered risk using a bottom-up approach, adjusting for non diversification with index correlation, tax rate, and debt to equity, to value private firms.

Compute taxable income by subtracting imputed interest from operating income, then derive net income by subtracting taxes, illustrating the income statement with imputed depreciation.

Illustrates estimating growth in a closure and valuation scenario, comparing liquidation at book value to continuing operations, with ten-year projections and terminal values and ROIC changes.

Explore illiquidity discounts in private equity valuation using restricted stock and risk premium approaches. The lecture illustrates calculating the risk premium and liquidity discount, yielding about 12.9 percent.

Calculate ten-year free cash flow to the firm, present value, and terminal value to derive equity value and value per share, incorporating EBIT growth, reinvestment, and cost of capital.

Explore private equity valuation modeling by detailing fund structures, sources of funds, and the roles of LPs and GPs. Demonstrate a money-flow model of distributions and exits.

Calculate ebitda and interest in a leveraged buyout by analyzing a five-year flat ebitda, 650 million debt, 10 percent interest, a 6x exit multiple, and a 3x invested capital target.

Compute target MOIC in a leverage buyout by tying equity proceeds, enterprise value, debt, and cash generation to arrive at initial investment and the purchase price, using EBITDA multiples.

Learn to project unlevered free cash flow in a private equity context by deriving EBITDA. Apply a 40% tax rate and adjust for capital expenditure, working capital, and interest expenses.

Explore how higher debt in capital structure affects the internal rate of return and investor cash flows when financing an acquisition, including tax-deductible interest and a five-year exit scenario.

Explore sensitivity analysis and goal-seeking in a private equity LBO model using Excel, focusing on cash-on-cash multiple, IRR, and exit strategies such as IPO.

Calculate capital expenditure at 7% of revenue, derive free cash flow from net income and depreciation and amortization, and assess term loan amortization and total debt to determine cash change.

Calculate debt and cash balances across a multi-year plan, adjust amortization periods, and assess effects on interest expenses and cash flow in private equity and LBO contexts.

Derive equity value from enterprise value by adjusting debt and cash, and analyze the cash on cash multiple with goal seek and sumif to set the LBO purchase price.

Learn how cash on cash multiple and IRR respond to EBITDA exit and purchase multiples through sensitivity analysis and data-table techniques to project equity value across scenarios.

Explore how EBITDA margin must increase annually to reach a 3.0x cash-on-cash multiple in an LBO, using goal seek and exit multiples, with reference to LTM EBITDA.

Build a private equity model by defining fund vintage and inputs such as term and committed capital, implementing data validation, and planning capital calls, investments, and the limited partnership agreement.

Model ebit across a private equity timeline, applying post-break-even growth and fixed management fees on cumulative called capital to derive nav before distributions and carried interest for GP and LPs.

Model cumulative carried interest by tracking nav vs committed capital, apply a carried interest to excess nav, and compute year-by-year distributions for general partners and LPs.

The lecture shows how to use Excel goal seek and scenario analysis to forecast TVPI targets, demonstrating how year-3 EBIT and revenue drive exit multiples from cases toward seven times.

Calculate value per share and determine exit value and ownership splits for founders and VC, showing a 5x exit multiple on a $3 million investment.

Understand what a leveraged buyout (LBO) is, its 90% debt to 10% equity financing, and why firms pursue LBOs for going private, spin-offs, or management buyouts.

Identify LBO candidates with strong, predictable cash flows, a clean balance sheet, and mature industries to support debt service and steady exit potential.

Explore how financial leverage lowers equity needs and creates a tax shield in LBOs, while debt raises risk if cash flow falters and management alignment affects deal outcomes.

Derive EBIT from revenue, COGS, and depreciation, compute cash flow from operations, and adjust for taxes and capital spending to determine cash flow to equity and the firm in LBO.

Explore a detailed LBO modeling example, calculating equity value, enterprise value, and financing structure, and analyze cash flows, debt schedules, and IRR to evaluate deal viability.

Understand the debt schedule within a private equity LBO, covering financing structure, debt components, and interest and repayment calculations based on cash flow.

Explore how to build and adjust an IRR sheet in Excel, using a 10% industry norm, test scenarios with 15% and 25%, and project exits across multiple years.

Multiply the EBITDA by 24 under varying transaction multiples to derive enterprise value, compute IRR across years, and identify optimal exit timing for maximizing value.

Define buyouts and leveraged buyouts (LBOs) as acquiring majority ownership with debt, by private equity or strategic buyers, including management buyouts, and emphasize steady cash flows and collateral.

Explore how a private equity acquirer uses a highly levered capital structure to recapitalize a target and pursue a 3 to 5 year exit with high returns.

Learn how leverage shapes an LBO model by analyzing simple income statements, debt types (senior and high yield), and their impact on EBITDA, net income, and return on equity.

Learn to compute offer and enterprise values from equity value, debt, and cash, apply EBITDA multiples, and compare two valuation approaches in this LBO valuation continuation.

Learn to input EBITDA, debt, and minimum cash for a Siemens LBO model, apply sign conventions, and set entry and exit multiples for uses of funds.

Calculate uses of funds by subtracting the minimum cash from available cash and express the investment as an EBITDA multiple used in LBO analysis.

Predict debt fees for revolver, term loan, and mezzanine using market rates, amortize yearly over 5–10 years, and assess leverage in a Germany-based LBO.

Learn how to model preferred equity and management rollover in an LBO analysis by using dynamic inputs, yes/no prompts, and exit equity allocations.

Explore building an LBO model by deriving cash flow statements using the indirect method, linking EBITDA to operating cash flow, and handling debt repayments, revolver paydowns, and discretionary financing decisions.