Lbo case study presentation

Assume $20 of D&A in Year 0, growing by $5 every year. CapEx = D&A. Fixed working capital changes of $10 every year. 40% tax rate. Exit at the end of Year 5 with the same multiple as at entry. Just like you’d have a structured approach towards deal discussion, you should also have a structured approach for paper LBOs.

Types of LBO• LBO: When a company is bought by another companymade just for this purpose. Stocks of the acquired companyare hold by a partnership of investors (usually institutional)• MBO: It occurs when the operation is set up by themanagers of the company and the objective being to takecontrol of the company.

You should do this problem set on a piece of paper and pen. If you haven’t read our guide to crush paper LBO in private equity interviews, you should do that first.

Theory of LBO• In a successful LBO, equity holders often receivevery high returns because the debt holders arepredominantly locked into a fixed return• Financial buyers invest in highly leveragedcompanies seeking to generate large equity returns• An LBO fund will typically try to realize a return onan LBO within three to five years SUMEET AKEWAR 6.