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Simple LBO Model

Simple LBO Model

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Published by: ProfessorAsim Kumar Mishra on Mar 14, 2011
Copyright:Attribution Non-commercial


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LBO Model Disclaimer and Instructions:
Please note this is a sample LBO model created for illustrative purposes only. This model simplifies many of thein a traditional LBO model. This model should not be used for investment analysis or decision making purposes.should only be used for educational purposes. Do not rely solely on this model to understand how LBO models f are other key variables in LBO models that are not included in this model. Muppies is not liable for any inaccuracin this model. Please contact info@muppies.org if you have any questions or concerns. This model is solely for non members shall not use this model without explicit authorization from Muppies officers.
This model has been designed by a Muppies member to help you with your interview process. Following are sosteps you may need to take when evaluating an interview case LBO:1. Build Functioning Historical and Forecasted Income Statement, Balance Sheet and Cash Flow Statements (N2. Determine Impact on Balance Sheet on date of acquisition (e.g Impact on Goodwill etc.) - (Not shown in model3. Value company using traditional valuation metrics (DCF, Comparable company comps) - (Not shown in model)4. Calculate IRR on investment given a leveraged buy-out using various assumptions (shown in model)5. Incorporate both quantitative and qualitative measures to determine investment decision
key inputsThis modelunction. Thereies or mistakesMuppies memberset shown in model)l) 
Transaction Overview
Company Overview Halliburton Company Exit Sources of funds Amount EBITDA Mult. Libor Spread Interest RateTicker halExit Year 2010Excess Cash on Balance Sheet500 Stock Price (02/03/08) $32.40 Exit Multiple9.5xExisting DebtOffer Premium20%Senior Bank Term "A" 9,1232.0x 2.0%7.2% Purchase Share Price $38.88 Other Senior Bank Term "B" 4,5611.0x 3.0%8.2%Fully Diluted Shares O/S 978.25 Libor Rate5.2%Senior Subordinated Debt 4,5611.0x 3.5%8.7% Equity Value 38,034 Op. Cash (% rev3.0%Junior Subordinated Debt 4,5611.0x 4.0%9.2% Add: Short-term Debt - Interest on cash5.0%Preferred StockAdd: Long-term Debt 2,796 Common Equity 18,664Add: Pension Obligations Returns Total Sources of funds 41,971Less: Operating Cash (675) IRR 37%Less: Excess Cash (3,704) MOI 2.6x Uses of fundsTotal Enterprise Value 36,451 Equity Purchase Price 38,034Debt Retired 2,796Implied Multiples Pre-Acquistion Acquisition Cash InfusionEV/Rev 06 1.3x 1.6x Advisory fees1.5%571EV/Rev 07 2.0x 2.4x Financing fees1.5%571EV/EBITDA 06 7.8x 9.4x Other usesEV/EBITDA 07 6.6x 8.0x Other usesP/E 06 15.0x 18.0x Total Uses Of funds 41,971P/E 07 13.1x 15.8xOverall Check okLeverage Multiples Pre-Acquistion Acquisition MaxDebt/EBITDA 0.7x 4.1x 4.1xEBITDA/Interest 22.1x 2.5x 2.5x
IRR CalculationsExit Year 
Exit Year 2010
3 Years 5 Years 8 Years Exit Multiple in Year: 2010
Exit Multiple 9.5x37%
2010 2012 2015
8.4x 8.9x9.4x9.9x 10.4x
Exit EBITDA 6,097
47% 32% 22%
Err:504 Err:504 Err:504 Err:504 Err:504
45% 31% 21%
Err:504 Err:504 Err:504 Err:504 Err:504Exit Enterprise Value 57,922
42% 30% 21%
Err:504 Err:504 Err:504 Err:504 Err:504Debt on books 13,102
39% 28% 20%
Err:504 Err:504 Err:504 Err:504 Err:504Cash on Books 3,204
36% 27% 19%
Err:504 Err:504 Err:504 Err:504 Err:504Exit Equity Value 48,024
30% 24% 18%
Err:504 Err:504 Err:504 Err:504 Err:504Entry Equity Value 18,664
24% 21% 16%
Err:504 Err:504 Err:504 Err:504 Err:504
16% 17% 14%
Err:504 Err:504 Err:504 Err:504 Err:504IRR 37%
7% 13% 12%
Err:504 Err:504 Err:504 Err:504 Err:504MOI 2.6x
-3% 8% 9%
EBITDA MarginsExit Multiples

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