How do you do an LBO analysis?

Steps involved in LBO Analysis

1. Step 1 – Transaction Assumptions.
2. Step 2 – Construction of the Proforma Balance Sheet.
3. Step 3 – Create Cash Flow Model.
4. Step 4 – Calculate value of Private Equity Firm’s equity stake.
5. Industry characteristics.
6. Company-specific characteristics.

How do I make a simple LBO model?

Simple LBO Model Steps

1. Start with the Income Statement – EBITDA is $250mm per year.
2. On the simplified CFS, Net Income = $84mm, Depreciation = $35mm, Change in Working Capital = $6mm, CapEx = ($35mm), so Cash Generated per year = $90mm.
3. EBITDA Exit Multiple = 6.0x, and final year EBITDA = $250mm, so Exit EV = $1.5B.

How do you make a 3 LBO?

There are several steps required to build a three statement model, including:

1. Input historical financial information into Excel.
2. Determine the assumptions that will drive the forecast.
3. Forecast the income statement.
4. Forecast capital assets.
5. Forecast financing activity.
6. Forecast the balance sheet.

How does an LBO create value?

Financial sponsors tend to create value in LBO transactions in three different ways: operational improvements, debt expansion and multiple expansion. The last value creation option, on the other hand, focuses on the features of the sponsor rather than on those of the target.

How do you make an LBO?

The following steps are essential to building a thorough and insightful LBO model:

1. Assumptions.
2. Financial Statements.
3. Transaction Balance Sheet.
4. Debt and Interest Schedules.
5. Credit Metrics.
6. DCF and IRR.
7. Sensitivity Analysis, Charts, and Graphs.

How do you calculate IRR LBO?

So the rule of thumb is that, for “double your money” scenarios, you take 100\%, divide by the # of years, and then estimate the IRR as about 75-80\% of that value. For example, if you double your money in 3 years, 100\% / 3 = 33\%. 75\% of 33\% is about 25\%, which is the approximate IRR in this case.