Leveraged Buyout Model
The LBO model is often viewed as extraordinarily complex, but it shouldn’t be. This series will demonstrate that an LBO model is simply a three statement model adjusted to reflect a transaction.
This is the first of two videos explaining the cash sweep in a simple LBO model. It requires six quick steps so I chose to capture the process in its entirety. The benefit of an unedited tutorial is that it exposes the small habits and tricks that are otherwise not shared. I hope it makes the material more approachable.
Recently the FASB announced an update that requires a change to the presentation of debt issuance costs in financial statements. While I would argue that the old presentation is superior to this new requirement for most modeling exercises, it is important to be aware of all GAAP standards as you will encounter them reviewing audited financial statements.
In this video we make the transition from building the model on one worksheet to organizing information on multiple worksheets. As an introduction to this approach, the video focuses on the advantages realized. Per the commentary in the video, the notes associated with this video focus on debt ratio analysis.
In this video the process of adding preferred stock to the model is captured in its entirety. Whether it's another debt tranche or class of preferred stock, if you are building your own models this is a common exercise in the life of a financial analyst.
This case study was developed with the objective of identifying junior team members for a private equity firm. If you are a novice, consider building a simple five-year projection using the summary financials. If you have a more advanced skill-set, you can work with the operating model to build something far more detailed. Best of luck!