Leveraged Buyout Analysis for Company XYZ

Select Operating and Financial Data

Current Date

2012

Current Share Price

Fully Diluted Shares Outstanding
Market cap
Current Debt
Current Cash
Current Net Debt
Enterprise Value

$30.00
500.0

LTM Revenue
LTM EBITDA
Free cash flows after debt paydown

6,000.0
2,400.0
480.0

600.0
100.0

EV / EBITDA multiple
LBO Assumptions
Exit Date

2016

LBO Debt Capacity (Net debt/EBITDA)

Minimum cash balance

6.0x
50.0

EBITDA multiple in exit year

Financial Sponsor Required Equity Return

25.0%

Select Operating and Financial Data

Projected Annual Forecast

Revenue
Revenue Growth Rate (%)
EBITDA
EBITDA Margin (%)

2012A
6,000.0

2013

2014

2015

2016

2013

2014

2015

2016

(1,000.0)

(1,000.0)

(1,000.0)

(1,000.0)

2,400.0
40.0%

Free cash flow after required debt paydown

FCF Margin (%)

480.0
8.0%

Cash
Debt
Net Debt

100.0
600.0
500.0

Debt Schedule

Projected Annual Forecast

LBO Debt, Beginning of Period
- Required paydown
- Optional paydown (after min cash balance)
LBO Debt, End of Period

Questions:
1.What is the implied Enterprise Value in the exit year?
2.What is the implied Equity Value at the exit year?
3.What is the maximum amount financial sponsors can invest in this company?
Questions:
1.How much do sponsors have to acquire this company and pay off it's debt?
2.What is the highest purchase price the sponsors would be willing to pay for XYZ shares today?
3.Given XYZs market trading level, is an LBO likely?

Comments
Current date and exit date assumed to be Dec 31 for simplicity

Net Debt = Debt - Cash

Enterprise Value = Mkt cap + net debt

Current date and exit date assumed to be Dec 31 for simplicity

Based on current debt market conditions
Company must maintain a minimum cash balance for a "rainy day"
Generally assumed to be the same as the entry multiple
Higher required return due to increased debt and riskiness

Annual Forecast
2017

2018

2019

Assumed to remain constant with revenues for simplicity

Assumed to remain constant with revenues for simplicity

Beginning cash balance plus change in cash over the period

From Debt Schedule below
Net Debt = Debt - Cash

Annual Forecast
2017

2018

(1,000.0) (1,000.0)

2019
(1,000.0)

LTM Debt * LBO Debt Capacity

Assumed to be $1,000 per year
Excess cash on hand or generated throughout the year can be used to pay down debt

ed to pay down debt

Leveraged Buyout Analysis for Company XYZ

Select Operating and Financial Data
Current Date
Current Share Price
Fully Diluted Shares Outstanding
Market cap
Current Debt
Current Cash
Current Net Debt
Enterprise Value
LTM Revenue
LTM EBITDA
Free cash flows after debt paydown
EV / EBITDA multiple

2012
$30.00
500.0
15,000.0
600.0
100.0
500.0
15,500.0
6,000.0
2,400.0
480.0
6.5x

LBO Assumptions
Exit Date

2016

LBO Debt Capacity (Net debt/EBITDA)

Minimum cash balance

6.0x
50.0

EBITDA multiple in exit year

Financial Sponsor Required Equity Return

6.5x
25.0%

Select Operating and Financial Data

Projected Annual Forecast

2012A
6,000.0

2013
6,600.0
10.0%

2014
7,260.0
10.0%

2015
7,986.0
10.0%

2016
8,784.6
10.0%

2,400.0
40.0%

2,640.0
40.0%

2,904.0
40.0%

3,194.4
40.0%

3,513.8
40.0%

Free cash flow after required debt paydown

FCF Margin (%)

480.0
8.0%

528.0
8.0%

580.8
8.0%

638.9
8.0%

702.8
8.0%

Cash
Debt
Net Debt

100.0
600.0
500.0

50.0
12,822.0
12,772.0

50.0
11,241.2
11,191.2

50.0
9,602.3
9,552.3

50.0
7,899.6
7,849.6

Revenue
Revenue Growth Rate (%)
EBITDA
EBITDA Margin (%)

Debt Schedule

Projected Annual Forecast

LBO Debt, Beginning of Period
- Required paydown
- Optional paydown (after min cash balance)
LBO Debt, End of Period

2013
2014
14,400.0 12,822.0
(1,000.0) (1,000.0)
(578.0)
(580.8)
12,822.0 11,241.2

2015
11,241.2
(1,000.0)
(638.9)
9,602.3

2016
9,602.3
(1,000.0)
(702.8)
7,899.6

Questions:
1.What is the implied Enterprise Value in the exit year?
2.What is the implied Equity Value at the exit year?
3.What is the maximum amount financial sponsors can invest in this company?
Questions:
1.How much do sponsors have to acquire this company and pay off it's debt?
2.What is the highest purchase price the sponsors would be willing to pay for XYZ shares today?
3.Given XYZs market trading level, is an LBO likely?

Comments
Current date and exit date assumed to be Dec 31 for simplicity

Net Debt = Debt - Cash

Enterprise Value = Mkt cap + net debt

Current date and exit date assumed to be Dec 31 for simplicity

Based on current debt market conditions
Company must maintain a minimum cash balance for a "rainy day"
Generally assumed to be the same as the entry multiple
Higher required return due to increased debt and riskiness

Annual Forecast
2017
2018
9,663.1 10,629.4
10.0%
10.0%

2019
11,692.3
10.0%

3,865.2
40.0%

4,251.7
40.0%

4,676.9
40.0%

Assumed to remain constant with revenues for simplicity

773.0
8.0%

850.3
8.0%

935.4
8.0%

Assumed to remain constant with revenues for simplicity

50.0
6,126.5
6,076.5

50.0
4,276.2
4,226.2

50.0
2,340.8
2,290.8

2017
2018
7,899.6 6,126.5
(1,000.0) (1,000.0)
(773.0)
(850.3)
6,126.5 4,276.2

2019
4,276.2
(1,000.0)
(935.4)
2,340.8

Beginning cash balance plus change in cash over the period

From Debt Schedule below
Net Debt = Debt - Cash

Annual Forecast
LTM Debt * LBO Debt Capacity
Assumed to be $1,000 per year
Excess cash on hand or generated throughout the year can be used to pay down debt

22,693.6
14,844.0
6,080.1

20,480.1
$39.96
Yes; 33%
premium

ed to pay down debt