Learn / LBO modeling in depth Go to Overview 1. The debt schedule, tranche by tranche 2. Interest, average balances, and the circularity, Pro 3. Returns math, fast, and which levers matter, Pro 4. The cash sweep under a credit agreement, Pro 5. PIK, OID, and financing fees in the model, Pro 6. Partial exits, follow ons, and IRR with many cash flows, Pro 7. The equity waterfall: rollover, options, and preferred, Pro Flashcards, 0 of 15 reviewed Basic quiz Advanced quiz Terms LBO modeling in depth
0 of 7 lessons
0 of 15 cards The parts of an LBO model that separate a candidate who has built one from one who has read about it: each tranche's rules, interest that depends on itself, returns with more than two cash flows, and who actually gets the exit equity.
B Basic3 lessons 1 The debt schedule, tranche by tranche A buyout is financed with several kinds of debt, and each one has its own rules for drawing, repaying, and prepaying. The debt schedule is where those rules live. 10 min 2 Interest, average balances, and the circularity Most buyout debt floats, so interest is a base rate plus a spread, and in a real model it is charged on the average balance. That makes interest depend on itself, which you can solve by algebra once to see what Excel is doing. 10 min 3 Returns math, fast, and which levers matter Beyond the anchor table: estimating any IRR from a MOIC and a hold, working out the MOIC a target needs, and reading a sensitivity table to see which assumption actually drives the deal. 11 min Q Basic quiz 10 questions, 80% passes A Advanced4 lessons 4 The cash sweep under a credit agreement The textbook sweep sends all spare cash to debt. Real credit agreements require only a share of excess cash flow, stepping down as leverage falls, and the sponsor decides what to do with the rest. 12 min 5 PIK, OID, and financing fees in the model Three items that change cash, interest, and returns in different ways. PIK grows the debt, OID means the company gets less than it owes, and financing fees are paid in cash but expensed over years. 12 min 6 Partial exits, follow ons, and IRR with many cash flows Real deals rarely have one check in and one check out. Sponsors put in more for add ons, sell down in pieces after an IPO, and take dividends. Each changes IRR in a predictable direction you can estimate without Excel. 12 min 7 The equity waterfall: rollover, options, and preferred Exit equity is not all the sponsor's. Management rolls equity and gets an option pool, co-investors may hold preferred, and each takes its share before the sponsor's MOIC is real. 13 min Q Advanced quiz 10 questions, 80% passes