Insights

Working Capital Adjustment in a Purchase Agreement

  • Peter Lynch

The working capital adjustment in a stock purchase agreement can have a direct impact on the price paid for the business. Given that price is arguably the most important variable in a transaction, and that the working capital adjustment can impact price, it follows that the working capital adjustment deserves special attention. (PDF Document)

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IRR vs MOIC: A 200 Year Comparison

  • Peter Lynch

If an investment were to grow by precisely 6.7% each year for 200 years, and then lose half of its value in year 201, how would the investment record change?
An article by Jim Grant, one of my favorite financial writers and analysts, highlighted this excellent thought exercise which provides an entertaining way to explore the difference between the two most commonly cited measures of investment performance: the internal rate of return (IRR) and the multiple on invested capital (MOIC). From the article:

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LBO Case Study & Financial Modeling Test

  • Peter Lynch

The LBO case study and financial modeling test are now live as part of the LBO Video Series. Please see the link that follows for the updated files: LBO Case Study: BabyBurgers LLC. The introductory video is also available below.

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Evaluating Multiple Capital Structures in a LBO Model

  • Peter Lynch

Evaluating the appropriate capital structure for a particular acquisition is critical. In this post we will explore how to build a schedule to facilitate this process, and then demonstrate how to link this schedule to a LBO model.

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Arrays in Excel Without Ctrl+Shift+Enter

  • Peter Lynch

I have always tried to use arrays in Excel without creating what is referred to as an “Array Formula.” An array formula is easily identified by the fact that you have to press Ctrl+Shift+Enter to create one, which is why they are sometimes referred to as CSE formulas. It has been my opinion that you can accomplish everything an array formula is capable of by nesting functions that create arrays in other functions.* The formulas this creates are more flexible, which makes building large models a little simpler.

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