A Simple Model 2014 A Simple Model, LLC. All rights reserved. A Simple Leveraged Buyout Model NOTES TO ACCOMPANY VIDEOS These notes are intended to supplement the videos on ASimpleModel.com. They are not to be used as stand ‐ alone study aids, and are not written as comprehensive overviews of the topic detailed. The purpose of these notes is to provide a tangible collection of the visuals used in the videos with comments highlighting the more important aspects covered.
A Simple Model 002 Simple LBO Leveraged Buyout Model It has been my experience that those new to financial models generally find the LBO model intimidating. In my opinion, this is because most students or analysts are first exposed to more complex LBO models. This is generally done one of two ways: 1. In a LBO tutorial that introduces a complex model for a publicly traded company. 2. Or worse, presenting someone new to LBO models with a thorough LBO template that needs to be populated. The first approach introduces too many concepts simultaneously, and the second approach reduces financial modeling to data entry. The purpose of this video is to demonstrate that a LBO model is not complicated. Don’t get me wrong, you can build highly complex LBO models. But this video will demonstrate that a LBO model is just an integrated financial statement model adjusted to reflect a transaction. To reflect the transaction you must add three components: 1. Source and Uses 2. Balance Sheet Adjustments 3. Exit Analysis Numbers one and two above will have an impact on your integrated financial statement model. These two components are used to record the transaction taking place in your model. How does this work? First, Sources and Uses are used to calculate your Balance Sheet Adjustments: Sources & Uses are used to adjust the balance sheet to record the transaction.
A Simple Model 002 Simple LBO Leveraged Buyout Model Once the transaction has been recorded under Balance Sheet Adjustments, the “Post- Closing” balance sheet is linked directly back to your integrated financial statement model. This may sound crazy, but that is the additional layer of complexity. Otherwise building a LBO model is nearly identical to building an integrated financial statement model. The only remaining difference is a few new balance sheet line items including the “Capitalized Financing Fee” and “NEWCO” debt items (see video). I realize we have not touched on the third component yet (“Exit Analysis”), but that is because this section is used to measure the performance of your investment. When you build this part of the model everything under “Exit Analysis” is pulling from the financial statements above. In other words, if you were to highlight and delete every cell under “Exit Analysis” it would not impact the model above. The same cannot be said for “Sources and Uses” or “Balance Sheet Adjustments.” Record Transaction Link “Post-Closing” Balance Sheet to Integrated Financial Statement Model
A Simple Model 002 Simple LBO
- Fall '18
- Balance Sheet, Generally Accepted Accounting Principles, Oldco Equity