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Table of Contents Description Author
1 Table of Contents
2 Instructions
3 Case Exercise
4 Completed

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C:\Courses\Course Materials\3 Templates and Exercises M&A Models\Simple LBO Exercise.xls

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Simple LBO Exercise.xls .

working In the exercise it is assumed that all of the cash flow is swept to repay debt Begin the model through making a sources and uses map The sources and uses map drives the closing balance of various accounts .Instructions In this exercise you create a simple LBO model that does not include goodwill and other balance accounts.

working capital or complex debt structures .alance accounts.

27 .00 Equity Issued 8.00 Interest Rate 7.00 Total Uses 20.800.30% 7.595.30% 7.00 DEBT SCHEDULE Debt Balance Debt Term 6.30% Operating Inputs EBITDA Growth from Current Level 3.EV/EBITDA 7.5% 27.800.800.Case Exercise 0 1 2 3 ASSUMPTIONS MODULE Outputs Entry and Exist Transaction Inputs Equity IRR Entry EV/EBITDA Multiple 6.200.5% Depreciation Rate 10.77 Captial Expenditure 600.090.200.(Enter transaction parameters in year zero) Current EBITDA 3.800.00 Enterprise Value 20.50 EV/EBITDA Exit Multiple .30% 7.00 Sources of Funds Debt Issue 12.30% 7.30% Opening Balance 12.44 9.20 3.00 Total Sources 20.00 Debt Inputs Senior Debt to EBITDA 4.00 630.800.069.0% TRANSACTION MODULE Transaction Summary .918.0% 10.30% 7.00 Debt Issued 12.800.00 11.0% 10.00 3.00 661.00 Debt/EBITDA Scheduled Debt Term 6.30% 7.50 Tax and Depreciation Income Tax Rate 27.00 Interest Rate 7.800.00 3.360.00 Soruces and Uses Map Uses of Funds Purchase of Company 20.5% 27.000.

44 9.00 2.77 Less: Interest Expense on Senior 934.00 2.785.00 22.220.400.56 1.203.0% Depreciation Expenses (Use Opening Balance) 2.00 21.140.77 Capital Expenditures 600.00 630.56 469.07 663.00 6.203.00 1.00 21.50 Depreciation Rate 10.20 3. .77 Less: Cash Taxes 95.800.918.730.00 Add: Capital Expenditures 600.360.00 2.24 3. .50 Less: Proceeds from Sale .17 762.423.00 661.00 22.918.360.595.59 EBT 345.090.42 Less: Capital Expenditures 600.35 Earnings 250.60 647.50 Add: Sale Proceeds .00 FINANAICAL STATEMENTS Profit and Loss EBITDA 3.0% 10.20 3.96 289.00 11.069.304.080.83 Cash Flow EBITDA 3.455.140.17 2.030.052.00 2.04 177.20 3.00 3.400.629.264.360.691.00 3.918. - Closing Balance 20.40 808.280. Less: Repayments 1.00 EBIT 1.00 630.00 3.96 3.00 22.417.0% 10.715.00 661. - .13 1. Depreciation and Other Assets Module Plant Balance Opening Balance 20.00 Accumulated Depreciation 2.00 661.96 289.40 808.94 Interest on Opening Balance 934.04 177.35 Operaing Cash Flow 3.50 Terminal Proceeds Terminal Multiple Multiple x EBITDA Plant Balance.59 WORKING MODULE Working Section for EBITDA and Capital Expenditures (Only in Projected Periods) EBITDA Projection 3.030.800.080.20 1.979.800.27 6.595.18 Less: Book Taxes 95.595.77 Less: Depreciation 2.33 Closing Balance 12.00 630.00 4.07 663.080.

482.73 Add: Net Income 250.967.56 8.00 0.220.0 19.730.250.0 22.730.0 8.979.5 Less: Accumulated Depreciation .800.787.320.4 9.000.080.0 16.979.719.304.00 0.719.07 663.800.00 Equity IRR 34% Equity Balance Opening Balance 8.0 4. . 2.0 22.73 9.17 2.0 16.00 8.6 Total 20.250.719.785.3 6.810.Gross 20.0 19.664. .9 Equity 8.33 Less: Senior Repayment 1.482.24 2.423.00 0.0 11.6 8.090.17 762.00 8.40 808.268.320.0 6. - Closing Balance 8.5 Difference . Cash after Cap Exp 2.83 Less: Dividends .810.250.691. .7 9.0 17.000.304.800.000.56 469.96 2.5 Senior Debt 12.56 1.030.069.56 Balance Sheet Assets Cash Fixed Assets .0 17.0 Total 20.000.56 1.800.17 2. - Test 1 1 1 1 .268.56 8.92 Less: Senior Interest 934. - Cash Flow to Equity -8.400.33 Equity Distributions .0 21. .59 Cash Flow for Payment of Debt 1.

26 0.30% 6.914.5% 27.00 .46 5.58 729.5% 10.00 7.30 765.30% 7.77 27.89 694.30% 7.50 Debt/EBITDA 4.785.0% 7. 4 5 6 34% 6.664.23 5.0% 10.30% 7.94 3.30% 7.633.0% 10.5% 27.30% 4.898.

42 4.54 8.523.35 495.30 765.31 3.58 729.61 2.194.664.83 832.46 5.35 586.67 2.61 2.23 23.00 41.269.121.338.0% 2.46 5.10 2.77 .47 694.386.50 23.633.800.37 267.411.46 963.503.914.442.38 694.49 - 4.386.26 - 3.633.26 0.54 2.77 .23 22.914.0% 10.89 2.503.83 832.404.68 3. .15 11.58 729.49 - 2.00 0.115.46 5.691.93 4.133.030.46 963.115.15 2.58 729.08 24.15 2.898. 41.38 (16.898.30 4.77 7.63 4.23 . 3.269.13 3.30 765.404.00 495.76 13.23 5.311.08 24.898.629.951.89 586.027.23 5.30 765.547.294.664.338.42 1.37 267.0% 10.404. .94 3.633.23 5.411.692.09) 10.77 4. 41.539.62 3.89 694.914.

386.4) 14.965.62 (29.2 11.37 267.93 3.693. 3.589.62 1.66 13.194.084.965.6 (29.482.1 24.539.523.46 45.4) . 139.6 (29.71 45.664.803.442.68 3.084. - 1 1 1 . .6 (29.93 495.93 0.05 4.38) 23.66 13.029.965.084.589.7 13.10 2.4) 3.115.3 .121.68 3.67 2.071.965.693.547.1) 8. - 11.3 14.664.93 11.589.084. 139.71 45.589.26 - .9 13.97 45.71 45.9 13.029.029.4 (16.589.692.93 .56 11.8 13.121.93 9.617.084.00 139.030.49 - 3.