1. Introduction
We’re going to show you how to take our intermediate LBO template and turn it into a more advanced, flexible LBO model.
There’s a lot of material to cover, so we’re going to split this tutorial into a series of posts. This one will show you how to integrate casing, flexible financing assumptions, and sensitivity analysis. Future posts will cover topics including operating models and add-on acquisitions.
Goal
By the end of this tutorial, you’ll know how to build a sophisticated, flexible LBO model.
Starting Point
As a starting point, we’ll use the completed LBO model from our LBO equity waterfall tutorial.
Download the template, and let’s take a look.
You’ll notice the model includes the following four tabs:
- ATP – this is our ability-to-pay analysis
- Contrib – this is our basic value creation analysis
- LBO – this is our intermediate LBO model
- Equity Waterfall – this is an illustrative equity waterfall
Of these, we’re going to focus almost entirely on the LBO tab. The other three tabs are supplemental analyses, but we’re including them here for the reasons listed below:
- ATP – I include an ability-to-pay analysis with any LBO model. The ability-to-pay analysis is easy to add, and it’s a great sanity check for the LBO.
- Contrib – Likewise, I always include a value creation bridge. It’s important to understand what’s driving the modeled returns.
- Equity Waterfall – This is not relevant in banking, but will be present in any serious private equity deal.
Please download the Manual for more information…
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