Walk me through an LBO analysis.

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IBPrep · Accepted Answer

(1) Determine the entry price (purchase price = EBITDA × entry multiple). (2) Structure the deal: 60–70% debt (leveraged loans + HY bonds), 30–40% equity from the PE sponsor. (3) Project the company's cash flows over the hold period (typically 5 years). (4) Pay down debt using free cash flow. (5) At exit, determine the exit price (exit EBITDA × exit multiple). (6) Equity proceeds = exit EV − remaining debt. (7) Compute IRR and MOIC on the sponsor's equity investment. Target: 20%+ IRR, 2–3x MOIC.

Walk me through an LBO analysis.

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Walk me through an LBO