Learn / LBOs Go to Overview 1. What an LBO is and why leverage helps 2. Sources and uses, Pro 3. Returns: MOIC and IRR, Pro 4. The debt stack, Pro 5. Cash flow and debt paydown, Pro 6. What drives returns, Pro 7. Dividend recaps and the timing of cash, Pro Flashcards, 0 of 26 reviewed Basic quiz Advanced quiz Terms LBOs
0 of 7 lessons
0 of 26 cards How a buyout is paid for, how the debt gets repaid, and where the returns come from. The model every PE recruiter expects you to sketch on a whiteboard.
A Advanced4 lessons 4 The debt stack LBO debt comes in layers. The safer the layer, the cheaper it is and the faster it has to be repaid. Knowing the layers explains the interest bill and the paydown order. 9 min 5 Cash flow and debt paydown Each year the company makes cash, pays interest and taxes, reinvests, and uses whatever is left to repay debt. Less debt means less interest next year, so paydown speeds up. 11 min 6 What drives returns Every LBO return comes from three places: the business earns more, the market pays a higher multiple, or debt gets repaid. Splitting the gain into those three tells you how good the deal really was. 9 min 7 Dividend recaps and the timing of cash IRR cares about when money comes back, not only how much. A dividend recap returns cash early, which can raise IRR even when the total multiple falls. 8 min Q Advanced quiz 10 questions, 80% passes