Leveraged Buyouts
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What’s Included
What is a Leveraged Buyout (LBO)?
What is a Leveraged Buyout (LBO)?
In this course, we are modelling the acquisition of a company through a Leverage Buyout. Before we get started, this lesson introduces the case and explains how Leveraged Buyouts work.
How to Build a LBO Model
How to Build a LBO Model
To build the financial model for our LBO transaction, we're going to follow a simple 5-stage process that I'll explain in this lesson.
Transaction Assumptions Part 1
Transaction Assumptions Part 1
In this lesson, we enter some of the key transaction assumptions in our model and calculate the total funds required to acquire MarkerCo.
Transaction Assumptions Part 2
Transaction Assumptions Part 2
In this lesson, we estimate the fees from investment banks, debt issuance and legal due diligence that can have a significant impact on the total funds required
Secured Debt
Secured Debt
Secured debt is normally the biggest component in a LBO's debt package. In this lesson, I describe the typical characteristics of secured debt
Unsecured Debt
Unsecured Debt
Unsecured debt offers investors higher interest rates but without any need to put up collateral. Other characteristics of unsecured debt are also explained in this lesson.
Entering Our Loan Structure in Excel
Entering Our Loan Structure in Excel
MarkerCo will be acquired with two loans, one secured and one unsecured. In this lesson, I'll show you how this loan information can be used in Excel to create a Sources and Uses table.
Creating the Debt Schedule
Creating the Debt Schedule
A debt schedule calculates the interest and principal payments each year. With multiple loans and the potential for optional repayment, this calculation can be somewhat challenging. In this lesson, we'll create a debt schedule from scratch for MarkerCo.
Calculating the Cash Balance
Calculating the Cash Balance
With our loan schedule now complete, we can calculate the cash flow and cash balance for MarkerCo for the next 5 years. This requires updating the income statement with the interest payments from the debt schedule.
Amending Our Transaction Assumptions
Amending Our Transaction Assumptions
If the new loans put too much strain on MarkerCo's cash balance, the investors may need to change their initial inputs to make the deal work. Find out how in this lesson.
Key Metrics for Covenants
Key Metrics for Covenants
Loan covenants often contain specific ratios that a company must abide by. Find out how to calculate these ratios in this lesson.
Estimating Our Returns from the LBO
Estimating Our Returns from the LBO
The last step in building our model is to calculate the returns to investors. In this lesson, we'll use a number of different return calculations, including the Money-on-Money multiple.
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