lbo-course-notes-sample.pdf - Leveraged Buyout(LBO Modeling...

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v Leveraged Buyout (LBO) Modeling
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Leveraged buyout (LBO) Acquisition where a significant part of the purchase price is funded with debt The remaining portion is funded with equity by the financial sponsors (private equity “PE” investors). Company undergoes a recapitalization to a now highly leveraged financial structure Company becomes a new company from oldco to newco Companies acquired by PE can be either private or public
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LBO analysis on a cocktail napkin
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What is the basic intuition underlying an LBO? Sponsors hope to monetize their profits by: 1. Selling the target to a strategic or another PE firm 2. Selling to the public via IPO Alternatively, sponsors can monetize without a complete exit by giving themselves dividends financed via newly borrowed debt (dividend recap)
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Deal environment PE deal volume of $183b in 1H14 was the highest since the crisis Global PE exits climbed to an all-time high of $260b in 1H14 $192.5b to strategics $67.7b to secondary buyouts
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