Insights

Private Equity Fund Structure: GP and Management Company

  • Peter Lynch

Why does a private equity fund have both a general partner and a management company?

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EBITDA Exit Multiple

  • Peter Lynch

An EBITDA multiple is, very simply, a company’s enterprise value (EV) divided by its EBITDA at a given time (EV / EBITDA); conversely, EV can be calculated by multiplying EBITDA by the EBITDA multiple. This metric has long been used as short-hand approach to a company’s valuation, and you will frequently hear individual deals or entire industries referred to as “an [X] times deal” or “an [X] times industry,” with X being a multiple of EBITDA.

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Projecting the Cash Flow Statement

  • Peter Lynch

This video explains how to project the cash flow statement in an LBO model built in Excel. The sequence required to project each line item is identical to the sequence laid out in the Integrating Financial Statements video series (which is focused on a three-statement model) and the LBO video series, so we will not explore that in detail. Instead this video will provide shortcuts to move through the process faster when you are working with new financial statements, and visuals to help communicate how the income statement and balance sheet link to the cash flow statement.

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Incentive Equity Compensation

  • Peter Lynch

Incentive equity compensation helps align investors with the management team running the business. In every control private equity transaction, it is one of the most important variables to get right. This post will explain how equity compensation generally works with visuals that should help cement these concepts.

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How a Balance Sheet Balances

  • Peter Lynch

An unbalanced balance sheet in a three-statement financial model can be a nightmare if you don’t understand the mechanics that would otherwise result in a balanced balance sheet. In this post we will explore how the cash flow statement balances a three-statement model, and we will include common errors that result in a broken model together with instructions on how to fix them.

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