Cours 2 Essec 2018 Lbo PDF

PRIVATE EQUITY
LBO
ESSEC BUSINESS SCHOOL
APRIL-MAY 2018
TABLE OF CONTENTS
GENERAL OVERVIEW
ACQUISITION TYPES
LEVERAGE EFFECT
EQUITY INVESTOR INVESTMENT RATIONAL
SUCCESS & VALUE CREATION
THE LBO PROCESS

DEAL SOURCING, DD PROCESS
FINANCING STRUCTURING, CLOSING
POST CLOSING & EXIT
FINANCIAL APPROACH TO LBO

KEY NOTIONS
FINANCIAL PERFORMANCE & REPORTING ANALYSIS
BUILDING THE BUSINESS PLAN
PRICING METHODS
TRANSACTION EXECUTION
EVOLUTION OF THE LBO FINANCING
PURCHASE PRICE & FINANCING TOOLS
LEGAL APPROACH TO LBO

SPA, REPS & WARRANTIES, SHAREHOLDERS AGREEMENT
APPENDIX
p. 2
GENERAL OVERVIEW
INTRODUCTION
Leveraged buyout (“LBO”):

• Controlling equity stake acquired by sponsor (s)
• Acquisition leveraged with debt
• Traditional industries
• Mature companies
• Up-front investment with potential future add-ons
• 5 years average holding period
• Management may maintain a stake in the business
Management Sponsor (s) Co-Investors

Other shareholders
Equity
Equity
Equity Debt
Target Debt provider
p. 3
GENERAL OVERVIEW
ACQUISITION TYPES
LMBO (Leveraged Management Buy-Out) is an acquisition of a company using debt

and with/by the management team of the company
Other possibilities:
• LMBI: Leveraged Management Buy-In, acquisition of a company where an
existing management team is replaced with a new team
• BIMBO: Buy-In Management Buy-Out, acquisition of a company with both
managers from the company and not from the company
• OBO: Owner Buy-Out
• LBU: Leveraged Build-Up or “Buy and Build”
LBO allows shareholders to benefit from two means of leverages:

• Financial leverage
• Tax leverage
In average, LBO aims at doubling equity value in 3 to 5 years with IRR > 20%
p. 4
GENERAL OVERVIEW
LBO FINANCING STRUCTURE
Target company is acquired through a NewCo (Holding Company). The financing

structure of an LBO can be decomposed as below:
Equity
NewCo Debt
Dividends 100%
Target
p. 5
GENERAL OVERVIEW
LEVERAGE EFFECT (1/5)
The financial leverage:

Following the acquisition of the company, cash flows will mainly be used to repay
the debt through distribution of dividends to the NewCo. When exiting the company,
shareholders get back the Enterprise Value less the remaining debt. Any returns
in excess of debt repayment goes to the equity.
Example: a company has a constant Enterprise Value of 100 during the holding
period, and its acquisition was financed with 40 of equity and 60 of debt. At the end
of the period, all debt has been reimbursed using company’s free cash flows. When
the company will be sold, shareholders will get 100, while they put 40, or a multiple of
2.5x on their investment.
The Tax leverage:

In regards to taxation, LBO may save an amount of money equal to “Company
taxes rate x Debt Interest” (i.e. tax shield) when the Holding Company owns more
than 95% of the target company (Tax Integration).
p. 6
GENERAL OVERVIEW
Leverage Effect Non Levered Levered
Fiscal Year end: December 2017 2017
Sales 100.0 100.0
EBIT 10.0 10.0

Margin as sales % 10.0% 10.0%
Interest expenses 0.0 2.4
Assumed debt interest rate % 4% 4%
Tax 3.3 2.5
Rate % 33.0% 33.0%
Net Income 6.7 5.1
Equity 100.0 40.0

Debt 0.0 60.0
Return on Equity 6.7% 12.7%
Double leverage effect: interest subtracted from the tax base leading to lower tax
payment
p. 7
GENERAL OVERVIEW
Non Levered
31-Dec-17 31-Dec-18 31-Dec-19 31-Dec-20 31-Dec-21
Fiscal Year end: December 2017 2018 2019 2020 2021
Sales 100.0 105.0 110.3 115.8 121.6

growth % 5% 5% 5% 5%
EBIT 10.0 11.0 12.0 12.8 13.5
Margin as sales % 10.0% 10.5% 10.9% 11.1% 11.1%
Interest expenses 0.0 0.0 0.0 0.0 0.0
Assumed debt interest rate % 4% 4% 4% 4% 4%
Tax 3.3 3.6 4.0 4.2 4.5
Rate % 33.0% 33.0% 33.0% 33.0% 33.0%
Net Income 6.7 7.4 8.1 8.6 9.0
Equity 100.0 100.0 100.0 100.0 100.0

Debt 0.0 0.0 0.0 0.0 0.0
EBIT @ exit: 13.5

EBIT Multiple: 11.0x
EV @ exit: 148.4
Debt @ exit: 0.0
Fund's Value @ exit: 148.4
Cash Flow Non Levered -100.0 7.4 8.1 8.6 148.4
MoC gross 1.7x

Performance Non Levered
IRR gross 15.9%
p. 8
GENERAL OVERVIEW
Leverage Effect
31-Dec-17 31-Dec-18 31-Dec-19 31-Dec-20 31-Dec-21
Fiscal Year end: December 2017 2018 2019 2020 2021
Sales 100.0 105.0 110.3 115.8 121.6

growth % 5% 5% 5% 5%
EBIT 10.0 11.0 12.0 12.8 13.5
Margin as sales % 10.0% 10.5% 10.9% 11.1% 11.1%
Interest expenses 2.4 2.4 2.2 1.9 1.6
Assumed debt interest rate % 4% 4% 4% 4% 4%
Tax 2.5 2.8 3.2 3.6 3.9
Rate % 33.0% 33.0% 33.0% 33.0% 33.0%
Net Income 5.1 5.8 6.6 7.3 8.0
Equity 40.0 40.0 40.0 40.0 40.0

Debt 60.0 54.2 47.6 40.3 32.3
EBIT @ exit: 13.5

EBIT Multiple: 11.0x
EV @ exit: 148.4
Debt @ exit: 32.3
Fund's Value @ exit: 116.1
Cash Flow Levered -40.0 116.1
MoC gross 2.9x

Performance Levered
IRR gross 30.5%
p. 9
GENERAL OVERVIEW
How does the equity investor benefits from the financial leverage?
Improved the return on equity:

• Maximised capital gain and therefore the multiple on invested capital (MoC)
• Maximised IRR
Minimize the equity investment and therefore the risk / exposure for the transaction:
• Splits the risks between the debt provider (s) and the equity shareholder (s)
Maximizes the investment capacity:

• Equity available and funds being limited
p. 10
GENERAL OVERVIEW
What does an equity investor considers when investing through an LBO transaction?
• The downside risks of the company (equity investor is the “last in line”)
• Potential upsides i.e. equity gains and IRR
Key attributes of an equity investor?

• Commercial mind-set
• Strategy understanding, synthesis and analytical thinking
• Negotiation skills
• Knowledge on the economy and businesses
• Large network
• Financial capacity
• Legal, social, environmental knowledge…
Profile for an Equity Investor?
• Business school or engineering / MBA
• previous experience:
• CEO, CFOs…
• Investment Bankers
• Auditors / Consultants
p. 11
TABLE OF CONTENTS
GENERAL OVERVIEW
ACQUISITION TYPES
LEVERAGE EFFECT
THE LBO PROCESS

POST CLOSING & EXIT

KEY NOTIONS
PRICING METHODS

APPENDIX
p. 12
SUCCESS AND VALUE CREATION
DRIVERS OF LBO SUCCESS
Management:
• Motivated and cohesive team, good track-record, have a well-defined investment
strategy, and involved in the financial structure
Market/Sector:
• Mature and stable sector, with good visibility on the future cycles
Positioning:
• Competitive advantages and barriers to entry
• Brand positioning
• R&D quality – patents
• Established customer base…
Quality of the Target:

• Visibility of future cash flows
• Defined needs of capital expenditures, both investment & working capital
• Acquisition opportunities, foreseen organic & non-organic growth
• And of course, reasonable purchase price !
p. 13
3 MAIN SOURCES OF LBO VALUE CREATION (1/2)
Decrease in debt (deleveraging)
Increase in EBITDA, which may come from:

• Organic revenue growth, margin expansion, costs savings, external
growth (M&A, etc.)…
An increase in valuation multiple at exit
p. 14
Example
@ Entry @ Exit
EBITDA €12.5m €16.0m

EBITDA x 8.0x 8.5x
EV €100.0m €136.0m
Debt €60.0m €46.0m
Equity €40.0m €90.0m
Multiple on Cost / Equity 2.3x
p. 15
Example
• Increase of EBITDA (€16m - €12.5m) x 8.0 = €28m

• Increase of valuation multiple (8.5 - 8.0) x €16.0m = €8m
• Debt repayment (€60m - €46m) = €14m
€50m
+28%
+16% €14m
+56% €50m
€8m
of Value
Created
€28m
€90m
€40m
Equity Investment EBITDA increase Valuation multiple Deleveraging Exit Value

expansion
p. 16
TABLE OF CONTENTS
GENERAL OVERVIEW
ACQUISITION TYPES
LEVERAGE EFFECT
THE LBO PROCESS

POST CLOSING & EXIT

KEY NOTIONS
PRICING METHODS

APPENDIX
p. 17
THE LBO PROCESS
LBO PROCESS OVERVIEW
Investment Investment Investment

Committee Committee Committee
Consideration and Final Approval Quarterly financial

Approval to Proceed and operational
performance review
Global Industry Global Industry

Team Team
Heads-up memo
IAC memo
Portfolio
Deal Sourcing Due Diligence Structuring Approval Process Closing
Management
Deal origination: Conducting financial, Financing with equity, Completing due Finalising purchase Daily interaction and
Proprietary (direct business, legal due bonds, convertible diligence agreement collaboration with
approach / networks) diligence bonds Finalising investment Finalising financing employees and
Limited auction Analysis of market, Creating stock option recommendation Creation of NewCo management
(professional sources) company, purchase plans memo Board participation
Auction (professional price, exit options Arranging financing
sources) Management meeting
and reference calls
Preparation of an initial
recommendation
memo
Weekly team meetings
Commercial & Lawyers, Business consultants,

Investment Banks accountants, etc.
business consultants,
p. 18
THE LBO PROCESS
DIFFERENT STEPS OF LBO
Pre-transaction: sourcing and analysis

• Sourcing
• Initial analysis of the deal
• Non binding offer by sending a Letter of Intent (LOI)
Deep inside the transaction: structuring of the deal

• In depth due-diligences: data-room, websites, meetings, etc…
• Binding offer letter subject to due diligence findings
• Audits : accounts, legal, tax, strategy, market…
• Financing structuring and closing
Exclusivity period
• Audits: environmental, insurances…
• Finalisation of the structuring, financing
• Closing: exchange of shares vs capital, last negotiations could stop a deal
Post-transaction: monitoring and exiting the deal

• During the life of the transaction: what is the role of the investor?
• The exit: IPO, trade sale, secondary buyout
p. 19
THE LBO PROCESS
DEAL SOURCING
Direct approach:
• Mailing, phoning,
• Events, expositions, meetings, etc.
Networks:
• Chiefs Executive Officers, managers, etc.
• Banks, auditors, etc.
Special/complex situations:
• Shareholders conflicts, holding facing difficulties, …
• Opportunities of build-up
Professional sources:
• Investment Banks (Lazard, Goldman Sachs, Rothschild, Credit Suisse, BNP-
Paribas, etc.)
• Fat Four (Enrst & Young, KPMG, Deloitte, PwC, etc.)
• M&A boutiques (Evercore, Centerview Partners, Houlihan Lokey, Greenhill)
p. 20
THE LBO PROCESS
DEAL SOURCING AND PROS
The 3 transaction types:

• Exclusive transaction
• An “open-bid”, with a public offer; where all players can participate
• A “limited auction”, where few players are invited
Advantages of an exclusive transaction:

• No pressure on timing
• Minimal costs until an investor is sure to close the transaction
• Reasonable price
• Deep access to the company’s information and to the management
• Confidentiality
Advantages of an open-bid:
• Precise information, pre-selected and quickly available
• Professionals interlocutors (lawyers, bankers…)
• Clear timing, however, usually tight deadline…
• Intermediaries might play an active role in negotiating in “complex” situations
p. 21
THE LBO PROCESS
THE 4 MAIN SOURCES OF AN LBO
A sell from a family:

• Bretiling, Kinder Morgan, Grand Frais, Claudie Pierlot (SMCP), IKKS, Buccellati,
Sun Country Airlines, etc.
Divestment from a Group of a “non-core business”:

• Total: Atotech (Carlyle)
• Schneider Electric: Innovista (PAI)
• DuPont: DuPont Automotive (Carlyle)
• Johnson & Johnson’s: Ortho-Clinical Diagnostics (Carlyle)
• Carrefour: Picard (Lion Capital)
An LBO from an LBO (secondary buyout):

• Homair Vacances, Marle, B&B Hotels, PQ Corporation, Indecomm
• Sebia, Cerba, Douglas
Public to Private transaction :

• Dell, Hilton, Burger King, H.J. Heinz...
p. 22
THE LBO PROCESS
DUE DILIGENCE PROCESS: PHASE I (1/2)
First step due diligences:
The market:
• Size, past and future growth,
• Barriers at entry, key success factors and key purchase criteria (KPC)
• Technical evolutions, regulation, substitution risks
The company in its market:

• Positioning, strategy, market shares,
• Competitive advantages,
• Management team,
• Structuring and organisation of the company (industry, commercial, logistic,
sales, etc.),
• Past financials, business plan, etc.
SWOT Analysis:
Strengths and weaknesses of the company
Opportunities and threats from the market
p. 23
THE LBO PROCESS
DUE DILIGENCE PROCESS: PHASE I (2/2)
The purchase price:

• Use of comparables from listed assets or M&A transactions
• Multiples of EBIT, of EBITDA,
• DCF model
The exit:
• Strategic value of the company over the next 4-5 years?
• Identification of potential buyers?
Simultaneously with the analysis, potential buyers are discussing with bankers and
mezzanine players to evaluate the potential of using the leverage.
At the end of the Phase I, the potential buyer may decide to give a letter of interest to
the seller or to the intermediary.
On this basis, the seller may select a restrictive number of candidates (4-6) who will
have access to further and deeper information (Phase II).
p. 24
THE LBO PROCESS
DUE DILIGENCE PROCESS: PHASE II (1/4)
Deep analysis:
Data-room:
• During the DD process, the seller will give the buyers access to a data room
which contains a lot of key information about the transaction:
• Commercial contracts, taxes declaration, financial statements
• Works contracts, social accounting
• Market studies, litigations
• Patents list, supplier contracts
• Detailed business plan, etc.
• The financial investor is advised by auditors and/or experts
Management meeting:
• The main 5-10 managers of the company may present, for one day, how they are
driving their company and the characteristics of the market
• The potential investors will judge the quality of the management and question
them about their strategy, expansion, etc.
p. 25
THE LBO PROCESS
Sites visits:
• The potential investor may visit one or several production/commercial sites of the
company, trying to:
• Understand better how the company is working
• Evaluate the production lines’ vintage, buildings, stocks …
• Feel the ambiance of work and the social climate
• Analyse the rate of productivity and technology
• Measure the level of activity
Other means of access to information:

• Websites, newspapers, library,
• Syndicates, ministries, professional events,
• Market studies (XERFI, DAFSA, eurostaff…)
• Brokers notes, annual competitors reports, etc.
Interviews :
• Customers, suppliers, sectors experts, etc.
p. 26
THE LBO PROCESS
This second phase is concluded with the redaction of an Binding Offer Letter (in
agreement with bankers and mezanners) but depending on the forthcoming audits.
This letter will allow the seller to pick 1 (or 2) candidates for the final phase. The
letter should be detailed and should develop the following points:
• Identity of buyer(s)
• Acquisition perimeter
• Purchase price
• Assumptions took for calculating the purchase price
• Way of payment
• Financing structuring
• Pending conditions
• Strategy considered by the buyer
• Current management team and its investment or not in the new structuring
• Reps and warranties
• Deadline for offer’s validity
• Main contacts
p. 27
THE LBO PROCESS
Once an agreement is signed between both seller and potential buyer, seller should
give an « exclusivity » to the buyer during a defined period (2-3 months). The audit
analysis can start.
The buyer asks experts to help him for the last step of analysis:
• Market audit / strategic audit / organisational audit

• Industrial audit
• Account and financial audit
• Legal, fiscal and social audit
• Insurance audit
• Environmental audit
• If needed, real estate appraisal, …
In the same time, buyer will continue its own researches and hold meetings (with the
management, discussion of the business plan, customers and suppliers interviews,
…) and finalize the financing structuring and the legal documents of the transaction.
p. 28
THE LBO PROCESS
THE FINANCING STRUCTURING
The financing structuring will be analysed in details in a dedicated phase.
Decisions regarding the management team (the previous and the new one) are also
very important and are subjects to several negotiations. Various financing
possibilities are available to influence the motivation of the team:
• Investment in equity and sweet-equity with advantageous conditions

• Bonds
• Stock option plan
• Subscription for convertible bonds
• Etc.
p. 29
THE LBO PROCESS
THE CLOSING
After the 2-3 months period of audits, and if they are all positive, the closing period
will open (2-3 weeks to close):
• Creation of the NewCo

• Meetings, annual general meeting and advisory boards
• Resignations and nominations, if any
• New issue of equity
• Debt transfer
• Shareholders agreements to be signed
• Champagne !
p. 30
THE LBO PROCESS
INVESTORS’ ROLE POST-CLOSING
Supervision: advisory board member
Advisor:
• Acquisition studies, merger, investment plans, etc.
• Deeply involve in the strategy of the company
Will help to increase the efficiency of reporting
Intermediary: relationships with banks, networks
Human resources: help for hiring high qualified people for strategic position
Negotiator: when relationships are tensed
Major role to play when the LBO faced difficulties and in the sale process
(discussions with the new buyers …)
p. 31
THE LBO PROCESS
EXITING FROM LBO
A key step : the realisation of gain
Investors have a major role:

• Chose of the exit timing
• Discussion and negotiation with the management to motivate them to sell
• Prepare the company to be sold (legal and financial cleaning, …)
• Choose the sale process
• Intermediary between the banks and the management
• Candidates selection
• Negotiations
…however, the success of a transaction really depends on the collaboration between

the management and the investors
p. 32
THE LBO PROCESS
DIFFERENT WAYS OF EXIT (1/3)
Trade sale to an industrial Group

• Pros:
+ All shares sold
+ Good valuation because of synergies and strategic purposes
+ Transaction closed in a relatively short timing, as both parties know well the
market
• Cons:
- Confidentiality
- Industrial “spying”
- Motivation and future of the management
The LBO of an LBO:

• Pros:
+ All shares sold
+ Management increases its equity ownership
+ Company is already aware about LBO constraints (debts, reporting, etc.)
• Cons:
- Motivation of the management if they have already been successful during
the 1st LBO
- The heavy weight of debts may handicap the company
- Is there a real strategic value for the company?
p. 33
THE LBO PROCESS
The IPO:
• Pros:
+ Generally a good valuation (sometimes very high)
+ Quite short timing
+ More limited due-diligence
+ Management motivation
• Cons:
- Partial exit (40-50% of shares maximum)
- Low liquidity and volatility of the shares prices
- Selective criteria (growth, size, sector, etc.)
Bankruptcy
p. 34
THE LBO PROCESS
Global: Deal Volume (2006 - 2017)
100%
7% 11% 8% 7% 10% 11% 8% 7% 9%
15% 13% 13%
90%
80%
35% 32% 38% 39%
70% 34% 39% 39% 42% 44%
39% 39% 45%
60%
50%
40%
30% 58% 57% 54% 54%
48% 52% 50% 50% 51% 49%
46% 45%
20%
10%
0%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Strategic Buyer Financial Buyer IPO
Global: Deal Value (2006 - 2017)

100%
7% 9% 10% 8% 9%
16% 14% 14% 17%
90% 18% 22% 18%
80% 27%
36% 35% 25% 31% 32%
70% 18% 29% 28%
33% 29%
60% 44%
50%
40%
30% 60% 61% 64% 59%
57% 57% 56% 55% 58%
48% 52%
20% 40%
10%
0%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Strategic Buyer Financial Buyer IPO
Source: Pitchbook as of January 2018 p. 35

THE LBO PROCESS
PROS & CONS OF LBOS
An advantage for the company:

• Change in a way of managing the company (cash-flows, return on investments
focus…)
• Equity stake for the management => motivated managers
• Stimulates the growth and development: acquisitions, open new sites, new
subsidiaries…
• Company structure modified (reporting tools, committees, boards…)
• Possibility to benefit from (external) advices at all times
• Easier process for “hard” decisions (activity ceased, reorganization…)
• Increase the company’s network
… but should just be a step:

• The weight of debts and its constraints increase the possibility of bankruptcy…
• … Or may slow down the growth of the company in the long-run
• The necessity for the shareholder to sell may create a tensed atmosphere …
• … or postpone decisions which are not compatible with returns (IRR)
p. 36
TABLE OF CONTENTS
GENERAL OVERVIEW
ACQUISITION TYPES
LEVERAGE EFFECT
THE LBO PROCESS

POST CLOSING & EXIT

KEY NOTIONS
PRICING METHODS

APPENDIX
p. 37
FINANCIAL APPROACH TO THE LBO
5 KEY NOTIONS
The 5 key financial notions of an LBO are:

• EBITDA: Earnings Before Interest, Tax, Depreciation & Amortization
• EBIT: Earnings Before Interest & Tax
• Free-Cash Flow: cash-flow available after financing capex and working capital
• Enterprise Value: the total of the equity value and net debt
• IRR: Internal Rate of Return
The 5 basic questions:

• What is the EBITDA forecasted over the next 5 years?
• What are the recurrent capex?
• What is the value of the company in terms of the EBIT and EBITDA multiples?
• What are the real cash-flows? What are the yearly cash flows available for debt
repayment?
• What is the IRR for the next 3, 4 and 5 years, when buying the company at x
times EBITDA?
p. 38
FINANCIAL PERFORMANCES & REPORTING ANALYSIS (1/3)
The « top-line »:
• What is the revenues’ volatility over the past 5-10 years?

• Comparison with competitors and with the market?
• What is the growth in terms of volume and value? Average price variation?
• Where does growth come from: by product, by customer, by country?
• Is this growth constant or exceptional (laws, substitution, etc.)?
• Forex effects?
The « gross margin »:
• What is the variable cost structure? Its evolution over time?

• What are the raw materials? Price evolution over the years?
• Analysis in term of volume/value? Forex effects?
• Impact of the “products-mix”, “geographical-mix” and “customers-mix”?
p. 39
The « SG&A » (Selling, General & Administrative Expenses):

• Commercial fees and distribution fees?
• Administrative salaries? Rents, insurances, taxes, etc.?
• Provisions
The Capex:
• Recurrent level? Minimum level? Comparison with competitors?
• Type analysis: replacement, capacity, security, environment, etc.
• Amortization periods
The working capital:

• Inventory: composed of? Rotation delay? Accounting and depreciation methods?
• Customers: old credits ? rotation delay? Accounting and depreciation methods?
• Suppliers: rotation delay? Evolution?
• Other assets: taxes, socials contributions, etc., Impacts on cash?
• Geography and business sectors diversification? Cyclical variations?
p. 40
Analysis of the balance sheet:
• Intangible fixed assets: nature? Non-value? Assets available for sell?
• Tangible fixed assets: nature? Level of amortization ? assets available for sell?
• Financial fixed assets: assets available for sell? Non-value?
• Prepaid expenses or expenses to set out: possibility to reduce contributions?
• Own capital: equity increase? Cash available? Dividends?
• Minority interests: on which subsidiaries? Which minority shareholders?
• Provisions for risks and contributions: detail? Future risk on cash? Fiscal impact?
• Subventions: to be repaid?
• Financial debts: current accounts? Employees profits sharing?
• Bank debts: terms? Leasing?
• Contingent liabilities: leasing, guarantees
p. 41
BUILDING THE BUSINESS PLAN (1/2)
By product, customer, company, country:
• Revenues growth (volume, price, market share)
• Gross margin evolution
• SG&A contributions and depreciation evolution => EBITDA and EBIT profile
• Operational financial expenses (leasing, working capital financing…)
• Non-consolidated subsidiaries dividends
• Exceptional loads, taxes, minority interests
• Capex and working capital
• Assets sales and acquisitions
p. 42
BUILDING THE BUSINESS PLAN (2/2)
Avoid traps:
• Consolidated cash flows are not always available for an LBO
• Company taxes, basis of fiscal integration… are depending on the legal structure
of the company
• Shift in time (tax savings, dividends…)
Summary tables:
• The income statement
• The balance sheet
• Cash flow figures
Economical cash flows are very important
p. 43
PRICING METHODS
Purchase price of a company may result from scientific calculation but the real value
is first dependent on the market. It is the final result of a negotiation process
between the seller and the buyer in a competitive market => there is no “true”
nor “universal” method.
However, only 1 valuation method is relevant: the discounted cash flow model,
because a buyer will buy the amount of cash generated by the company in the future
…validated by 3 other methods:

• Multiples (EV / EBIT ; EV / EBITDA ; PER ; etc.)
• Benchmark of listed and comparable companies
• Benchmark of similar M&A transactions
…and other methods:

• Net asset revaluated
• Break-up value
p. 44
DISCOUNTED CASH FLOW VALUATION (1/2)
The discounted cash-flows - DCF:
CF (t) = cash-flow at time t

∑ i = actualization rate (i.e. discount rate)
TV = capital stocks ended value (i.e. Terminal Value)
n = exit date (period number)
Which cash flow? The net cash flows available (after contributions) to pay and
reimburse the debt (but before all equity earnings). Actually, cash flows before flows
for equity providers
Which actualization rate? The balance averaged rate for equity remuneration (20-
30%), mezzanine & bank debts (11-15% and 4-7% respectively)
Which capital stocks ended value? Enterprise value: by applying some entry
multiple @entry - minus remaining debts
p. 45
DISCOUNTED CASH FLOW VALUATION (2/2)
Limits of the discounted cash-flows - DCF:
Depends on the business plan on which we are working: as many values as different
business plans…!
Actualization rate is not very precise – it depends on the leverage of the transaction
which may change from one year to another (in addition, debt interests rate are also
changing)
How to take into account new issues of equity: actualization of flows through an
average rate? Or assets with a certain value generating and no flows (real-estate,
minority shares…)
The right percentage ownership is not easy to calculate, because of the dilution
coming from management or mezzanine
Formula is strongly linked to the ended value which is not” a “scientific result (which
multiple? Which EBITDA? Minority stakes?)
p. 46
OTHER VALUATION METHODS (1/2)
Multiples: in general, acquisition multiples are calculated after the transaction, but
they are mainly used to quickly determine a range of valuation: a middle market
business, non-cyclical and with a reasonable growth, has an enterprise value
between 8x and 10x EBITDA in the LBO market – 4 or 5 key multiples exist: EV /
EBIT ; EV / EBITDA ; P / E ; EV / CA ; EV / FCF – with some exceptions for specific
sectors such as insurances, banks, …
Benchmark of listed and similar companies comps: multiples are calculated,

using comps of similar companies. Difficulties are mainly (i) the selection of a
representative sample of the target, (ii) the volatility of the listed market and (iii) the
viability of financials given for the current and next year…
Benchmark of similar M&A transaction comps: multiples are calculated using

relevant transactions (private transactions, mergers…) in the target’s sector.
Unfortunately, data is often confidential and multiples may change a lot depending on
the period.
p. 47
OTHER VALUATION METHODS (2/2)
Net asset revaluated: allows to take into account the value of non-strategic assets
which are non-cash generating or for which the valuation in the balance sheet may
not corresponds to the “real” value – this is often used when the asset is going to be
sold
Sum of the parts: it can be used to value different businesses within the same
company and with different cash flow assumptions, growth or valuation multiples.
This is often used for selling a group activity by activity and when the exit strategies
for each activity are different
p. 48
Senior debt + mezzanine

Use of Capital EBITDA x Source of Capital EBITDA x % Total Value
Share price 70.0 7.0x Equity 16.0 1.6x
Shareholders loan 24.0 2.4x
Net debt 30.0 3.0x Subtotal 40.0 4.0x 38.3%
Mezzanine 13.5 1.4x 12.9%
Transaction fees 1.3 Senior Debt A 42.0 4.2x
Senior Debt B 9.0 0.9x
Structuring fees 3.2 Subtotal Senior Debt only 51.0 5.1x 48.8%
TOTAL 104.5 10.5x TOTAL 104.5 10.5x 100.0%
Unitranche
Use of Capital EBITDA x Source of Capital EBITDA x % Total Value
Share price 70.0 7.0x Equity 16.0 1.6x

Shareholders loan 24.0 2.4x
Net debt 30.0 3.0x Subtotal 40.0 4.0x 38.3%
Unitranche 64.5 6.5x 61.7%
Transaction fees 1.3
Structuring fees 3.2 0.0%
TOTAL 104.5 10.5x TOTAL 104.5 10.5x 100.0%
p. 49
Transaction Financing
IN THE 90s 2007 - PRE CRISIS IN THE MID 2010s
Equity 35% Equity 20% Equity 40-50%
Mezzanine Debt 10% PIK & Mezzanine Debt 5% PIK & Mezzanine Debt 0-10%
Senior Debt 55% High Yield Debt 15% Unitranche / Senior Debt 40-50%
Tranch A - 5 years Second Lien 5% Tranch A - 6 years

Tranch B - 8 years in fine Tranch B - 8 years in fine
Senior Debt 55%
Tranch A - 7 years
Tranch B - 8 years in fine
Tranch C - 9 years in fine
Total 100% Total 100% Total 100%
Use of unitranche increasing thanks to the private debt market

Equity % stabilized at ~40%
p. 50
VALUATION MULTIPLE EVOLUTION
Average entry
price of 10.6x
LBO entry price multiples (EV/EBITDA) EBITDA for
deals completed
in YTD 2018
12.0x
10.6x
10.0x 10.3x
10.0x 9.7x 9.7x 9.7x
9.4x
8.8x 8.8x 9.0x 8.8x
8.3x
8.0x
6.0x
4.0x
2.0x
0.0x
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1-2018
Average purchase price multiples have surpassed peak levels…
Source: S&P LCD comps as of Mar. 2018 p. 51

LEVERAGE EVOLUTION (1/2)
Average leverage at
entry of 5.4x EBITDA
LBO debt multiples at Entry (Net Debt/EBITDA) for the deals completed
YTD in 2017
7.0x Still below

6.1x peak levels
6.0x 5.5x -10%
5.4x
5.2x 5.2x 5.1x -0.6x
5.0x 4.9x
5.0x 4.6x
4.4x 4.4x
3.9x
4.0x
3.0x
2.0x
1.0x
0.0x
However, leverage multiples remain relatively reasonable,

11% below peak levels…

LEVERAGE EVOLUTION (2/2)
European LBO Leverage US LBO Leverage
100% 100%
90% 90%
33% 33% 31% 31% 36%
80% 42% 41% 42% 80% 39% 41% 38% 38% 37% 40% 41% 41% 39%
45% 47% 44% 42% 44% 46%
48% 49% 52%
70% 70%
60% 60%
50% 50%
40% 40%
67% 68% 69% 69% 64%
30% 58% 59% 58% 30% 61% 59% 62% 62% 63% 60% 59% 59% 61%
55% 53% 56% 58% 56% 54%
52% 51% 48%
20% 20%
10% 10%
0% 0%
Debt Equity Debt Equity
… versus 2007, the price increase has been bridged by more equity rather than
more debt, thereby reducing the risk

CURRENT PRIVATE EQUITY MARKET
Previously Currently Solution
€100m EV €110m EV €110m EV

Increase in Longer holding
10x EBITDA 11x EBITDA 11x EBITDA
Price +10% period +1 year
4 year holding 4 year holding 5 year holding

period period period
Gross Return: -0.4x Gross Return: +0.4x Gross Return:

2.5x Cost -6% 2.1x Cost +0% 2.5x Cost
26% IRR 20% IRR 20% IRR
12-15% Net Net IRR
Same cost multiple

but -6% IRR
Holding periods increase to secure the same return on investment, resulting
in an expected decrease in IRR.
But, still very attractive considering the period of low interest rates
Source: S&P LCD comps p. 54
EVOLUTION OF THE HOLDING PERIOD
Median holding period for buyout-backed companies

7
6.1
6 5.7
5.2 5.3 5.2
5 4.7
4.5
4.2
3.9 3.8
4 3.6 3.6
Years
3.3
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Average holding period increases as private equity firms struggle to generate

target return
Source: Bain 2017 p. 55

PURCHASE PRICE PAYMENT
Most of the time, price is totally paid at closing.
However, it becomes more frequent to structure the payment:

• Deferred payment
• Seller’s loan
• Earn-out
• Credit repayment / current account
• Pre-payment of dividends
• Equity re-investment by the seller in the NewCo (deferred capital gain)
• Retrocession of capital gain at exit
p. 56
LBO TRANSACTION STRUCTURE - EXAMPLE
Straight cash
Closing Exit
Jun-18 Dec-18 Dec-19 Dec-20 Dec-21
Fund value @Entry -40
Fund value @Exit 80
Cash flow @Fund level -40 0 0 0 80
IRR gross 22%
MoC gross 2.0x
Deferred payment (50% deferred until December 2019)
Closing Exit
Jun-18 Dec-18 Dec-19 Dec-20 Dec-21
Fund value @Entry -20 -20
Fund value @Exit 80
Cash flow @Fund level -20 0 -20 0 80
IRR gross 28%
MoC gross 2.0x
Car 20 vaut moins dans 2 ans que maintenant, du coup relativement moins cher pour le buyer ce qui
explique la hausse du IRR
p. 57
HOW TO FINANCE AN LBO TRANSACTION?
3 types of tools are possible for financing an LBO transaction:

• Equity amount brought by the shareholders
• The quasi-equity brought by financial institutional called “mezzaners”
• Debts brought by banks
In addition to this 3 “classical” financing modes, financing engineering brought other

instruments (high yield, bridge loan, CDOs…)
List of main tools:

• Equity
• Senior debt : 1st lien, 2nd lien and even 3rd lien
• Mezzanine
• Unitranch debt
• High yield bond
• Seller loan
• Bridge loan
• Bridge equity
• CDOs
• Asset stripping
p. 58
FINANCING TOOLS: RISK AND RETURN
Risk Return
Very high Equity 20% - 30%
High Mezzanine 11% - 15%
Mean Unitranche 8% - 10%
Low Senior Debt 4% - 6%
p. 59
CHARACTERISTICS OF FINANCING TOOLS (1/5)
The equity:
• Instrument: stocks or bonds (simples or complexes), current account, convertible
bonds
• No time limit for repayment
• No guarantee, so risk is maximum: shareholders are the last to get their money
back in case of bankruptcy
• Returns: stocks = capital gains / rate products: 5-6% interests non-paid
(capitalized)
• In theory, returns are not limited…
The mezzanine:
• Instrument: hybrid product – bond / loan + equity kicker
• Duration: 7 to 9 years
• Bullet repayment
• Security: 2nd ranking security over the target’s assets and the shares of the
financial sponsor
• Subordinated to other debts (particularly to senior debt)
• Hybrid earnings: for example, E/L + 5% Cash + 5% PIK + Equity Kicker to give
an IRR of ~11-15%
• Interests are generally a mixture of Cash and PIK, but sometimes can be fully
PIK in exchange for a slight premium in pricing
p. 60
The unitranche:
• An innovative solution that combines senior and mezzanine debt into a single
tranche which emerged due to the scarcity of financing from traditional debt
providers during the financial crisis
• Flexible approach to pricing (depending on the target company) with the option to
use cash interests, PIK interests, and an Equity Kickers
• Mostly provided by the private debt market players
• Duration: 6 to 8 years
• Cash interests: floating; EURIBOR / LIBOR (usually with a floor set at 0% - 1%)
+ 4% - 8%
• PIK: 0% - 4%
Senior debt
Unitranche
Mezzanine
p. 61
The high yield bond:

• Instrument: quoted obligation
• Duration: repayment in fine from 8 to 10 years
• Guarantee: 2nd rank hypothec of target’s equity
• Subordinated to the other debts (particularly to senior debts)
• Returns: EURIBOR + 5.0%-7.0%
Senior debts:
• Instrument: medium banking debts which may be divided into 2-3 categories (A,
B & C)
• Duration: in general 7 years for category A, 8 years and 9 years in fine for
categories B and C
• Category A is, in general, repaid six-months progressively
• Priority repayment compared to mezzanine and equity
• Guarantee: 1st rank hypothec of target’s equity
• Returns : EURIBOR + 2-2.5% for category A and +2.5-3.5% for categories B&C
p. 62
Seller loan:
• Often used when the seller and investors disagree on the purchase price
• Instrument: loan provided by the seller (result of a negotiation => no standard)
• Duration: may considerably change (in general 3-4 years)
• Repayment in 1 or several times
• Guarantee: in general, no specific guarantee
• Subordinated to other debts and mezzanine
• Returns: may considerably change (from 0% to 4-6%) – often capitalized
The bridge loan:

• Banking credit facility usually for a short period (6 months)
• Waiting for cash distribution which will not happen at closing (dividends, sales of
assets)
• Conditions similar to senior debts (lower margins)
p. 63
The bridge equity:

• Used when bankers and investors don’t agree about the split between debts and
equity at closing
• Banks accept that investors don’t put all their money at closing...
• ... And they agree together to transform this bridge in debt or in equity at a
precise date
• Guarantee: bank guarantee with first request or banking guarantee
• Returns: lower in general
ABS:
• Sale of short-term assets (stocks or credit customers) allowing to release cash
• Complex structure where assets ownerships are sold to a listed ad hoc vehicle
• Guarantee: assets sold
• Returns: EURIBOR + circa 50-80bps for senior tranches to much more for first
loss tranches
The asset stripping:

• Sale of long-term and non core assets (real estate, minority subsidiaries, etc.)
p. 64
HOW SENIOR BANKERS ARE THINKING? (1/2)
Opposed to investors and mezzaners who are focused on “up-sides”, senior bankers
are trying to identify “down-sides”.
Senior bankers are interested in cash flows repetition and will ask themselves:
“what are the repetitive free cash flows which will repay debt in 7-8 or 9 years?” Debt
will be negotiated on a down-side case basis compared to the investors’ case.
The “repetitive” free cash flow =

EBITDA
- Taxes
- Capex
- Working capital
... should allow to pay debts and their interests back
p. 65
HOW SENIOR BANKERS ARE THINKING? (2/2)
Standard ratios in the market:
• % of equity on the total price at closing > 40%
• EBITDA / Interest payment > 1.5
• Total net debt / EBITDA < 6.0x
• Senior debt / EBITDA < 5.0x
• Fixed charge cover : free cash-flow / debt service (interest + amortization) > 1.0
• Debt maturity: 6-8 years
• Average time life < 5.0 years
• Gearing (total net debts / equity) < 2.5x
Banker also looks at audit results, meets the management team, visits sites of
production… trying to calculate a certain security margin in case of an issue:
• What is the real value of the assets?

• Are there credit customers available in case of the lack of treasury?
• Are there assets which may be sold quickly?
• What is the amount of equity for distribution?
p. 66
HOW MEZZANERS ARE THINKING?
Because of its « hybrid » status (as a lender but also a potential investor),
mezzaners are focused on both the up-side and the down-side.
They are not really concentrated on the cash flow, as they will not be repaid by them.
In general, mezzaners are only paid back at the LBO exit with anticipation.
A pure mezzaner will search for:
• The valuation of the company in case of an issue and if he has a chance to have
his money back
• Up-sides which may increase its future return
p. 67
TABLE OF CONTENTS
GENERAL OVERVIEW
ACQUISITION TYPES
LEVERAGE EFFECT
THE LBO PROCESS

POST CLOSING & EXIT

KEY NOTIONS
PRICING METHODS

APPENDIX
p. 68
LEGAL APPROACH TO THE LBO
LEGAL AGREEMENTS BETWEEN THE PARTIES
The 3 main legal documents are:

• SPA: Sell and Purchase Agreement
• Reps and Warranties Agreement
• Shareholders ’ Agreement
The other legal agreements of a LBO:

• NDA: non-disclosure agreement
• LOI: the letter of interest
• The non-binding offer
• MOU: « Memorandum Of Understanding »
• The binding offer
p. 69
SPA
Sell and Purchase Agreement: a short document (10 pages) which summarizes the
economic terms of the purchase:
• The price
• The payment transfer method
• The transaction size
• The potential earn out structuring and its calculation methods and payment
• The seller’s commitment (no-competition, no-staff snatching)
• Some specific points: right to use the brand name, services contract...
• Etc.
Alternative: unilateral promise for selling and buying
p. 70
REPS AND WARRANTIES (1/2)
It is the most important legal document in a transaction because it refers to

guaranties for the buyer in case of claims
Reps and warranties contract is composed of 3 main components:

• The representations and warranties of the seller,
• Characteristics of guaranties given to the buyer, and
• Procedures to exercise this guarantee
The seller gives to the buyer a capped financial indemnity
The process of indemnity is subjected to specific rules:
• Obligation to inform the seller in a short period of time in case of liabilities or

conflict discovery
• Time for dispute to be respected
• Means of arguing: audit rights, experts, courts...
p. 71
REPS AND WARRANTIES (2/2)
However, even if (i) the buyer is in its entire right and (ii) the procedure has been
respected, there is no certainty for the seller to pay its liabilities (in particular if it
concerns a person)!
That is the reason why it is necessary to apply for a guarantee to this guarantee :
• Pledge
• Banking guaranties at first demand
• Banking deposit
• Personal and common deposits
• Guaranty grantor insurance
p. 72
LEGAL APPROACH OF THE LBO
THE SHAREHOLDERS’ AGREEMENT (1/2)
Main objectives:
• To define a number of rules concerning the relationships between the current

shareholders and potential ones (e.g. mezzanine holders, new managers) during
the investment period and also at exit; and to define the rules between the
shareholders and the management
Main articles:
• Pre-emptive rights
• Common exit rights and « tag along » rights
• Right to exit (« drag along »)
• Right to withdraw
• Negative pledge shares article
• Articles concerning the management of the company; data articles for information
obligations
• IPO
• Non-competition rights, no-staff snatching, exclusivity
• Liquidity for the management
• Minority protection article
p. 73
THE SHAREHOLDERS’ AGREEMENT (2/2)
Relationships between the shareholders and the management during the investment
period:
• Organization and attributed power towards the Supervisory Board and Board of Directors
• No-competition
• Preferential subscription rights for new issue of equity
• Liquidity events: shareholders agree to put on sale the company after a certain investment
period (e.g. 5 years after acquisition)
• Management of conflicts (legal procedure or arbitrage)
• Minority protection article: e.g. pro-rata percentage of allocation in case of the issue of
equity
Relationships between the shareholders and the management:
• Obligation of information (reporting, etc.)

• Audit and information rights duty
• Obligation to consult the Supervisory Board for ‘strategic’ decisions (spin-offs,
acquisitions, recruitment / management lay-offs, large investments, etc.)
• Treatment of the shareholder status following the manager’s departure: « good leaver »
(shares buy-back at fair market value) or « bad leaver » (e.g. resignation, lay-off; shares buy-
back at a discount)
p. 74
MAIN OTHER LEGAL DOCUMENTS
The non-disclosure Agreement or « NDA »
• By starting an acquisition process, the potential buyers and their advisors have to agree by
writing to keep confidential all deal-attached information and not to communicate with any
other third party during a fixed period (in average two-years). Moreover, they have to provide
back all transferred information at the end of the process (adding no copyright)
The letter of interest
The « non-binding offer » letter
• An indication of interest during the due diligence process to set the grounds for possible
future legal relationship between the bidder and the seller.
The Memorandum Of Understanding or « MOU »
The « binding offer » letter
• A formal contract between the bidder and the seller to acquire the target company after the
due diligence of the sale process has been completed. A binding offer letter creates a legal
obligation for the bidder to comply with the terms of the contract would the seller chose to
accept it.
p. 75
TABLE OF CONTENTS
GENERAL OVERVIEW
ACQUISITION TYPES
LEVERAGE EFFECT
THE LBO PROCESS

POST CLOSING & EXIT

KEY NOTIONS
PRICING METHODS

APPENDIX
p. 76
APPENDIX
DOCUMENTS FOR THE FINANCING (1/2)
Banking contracts are mainly composed of:

• Loan’s characteristics: time limit, amortization, rate interests…
• Borrower incomes declaration
• Covenants i.e. limits:
• Ratios limits
• Annual capex limits
• Debt ratio limits, etc.
• Obligations to:
• Being transparent and communicate on performances
• Obtaining tax integration
• Subscribing a death-disability insurance; etc.
• Obligation not to:
• Sell assets
• Modify the legal form of the company
• Distribute dividends to the newco shareholders
• Add new loans
• Not to grant safeties; etc.
p. 77
APPENDIX
DOCUMENTS FOR THE FINANCING (2/2)
• Other demands:
• Anticipated repayment in case of management change, company control, etc
• Excess cash-flow
• Delegation for life insurance & for reps & warranties
• Other debts subordinated to the senior debt
• Audit rights
• Commissions of firm catch, arrangement & agent
• Etc…
• In case of failure, earlier repayment of the debts except … if there is a “waiver” !
• Syndication: a bank arranges the total debt of the transaction, but will in fine keep
limited amount in its book and sells the remaining part to a pool of banks and/or
investors.
p. 78
APPENDIX
INTERNAL RATE OF RETURN (IRR)
This rate is one of the most common criteria used to evaluate a private equity fund
performance. For a LBO fund, investors may expect an IRR between 20% and 25%
per year
Mathematically the IRR is defined as any discount rate that results in a net present
value of a series of cash flows at zero. As an example, if 100 is invested in a fund as
of 01/01/2000 and that the GP distribute 80 as of 01/01/2003 and 160 as of
01/01/2005, the IRR of investors will be 22,9% per year because:
‐100 0
. % . %
There is a difference between the IRR realized (portfolio) and the net IRR returned to
investors because (1) cash flows are not transferred at the same date (2) an amount
of money is used by the fund to pay various fees (management fees, etc.). That’s
why the gross (from portfolio) IRR is between 5% and 10% above the net IRR
expected by investors.
p. 79
APPENDIX
THE SHAREHOLDERS’ AGREEMENT RIGHTS
Relationships between the shareholders and the management at exit:
• Common pre-emptive rights (or right of first refusal): if a shareholder decides to

sell its portion, he has first to offer its shares to the other existing shareholders
• Drag along rights: a pool of shareholders, representing x% and benefiting from an

offer for 100% of the equity, has the right to enforce the remaining shareholders to exit
at the same conditions (or to pre-empt)
• Common exit right or tag along: if the main shareholder sells its portion, the minority
shareholders have the right to exit at the same conditions
• Withdraw rights: if the main shareholder loses its controlling stake/position, the
others have a right to exit
• Priority for exiting: article in which the main shareholder engages itself not to sell its
equity before the exit of some specified minority shareholders have
• « Buy or sell » article: if a shareholder finds out a potential buyer for a block superior
to its own exposure, the other shareholders (mainly major ones) are obliged to sell or
buy (at the same conditions) the remaining shares
p. 80

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PRIVATE EQUITY

SUCCESS & VALUE CREATION

THE LBO PROCESS

FINANCIAL APPROACH TO LBO

LEGAL APPROACH TO LBO

Leveraged buyout (“LBO”):

Management Sponsor (s) Co-Investors

LMBO (Leveraged Management Buy-Out) is an acquisition of a company using debt

LBO allows shareholders to benefit from two means of leverages:

Target company is acquired through a NewCo (Holding Company). The financing

The financial leverage:

The Tax leverage:

Fiscal Year end: December 2017 2017

Sales 100.0 100.0

EBIT 10.0 10.0

Equity 100.0 40.0

Return on Equity 6.7% 12.7%

Fiscal Year end: December 2017 2018 2019 2020 2021

Sales 100.0 105.0 110.3 115.8 121.6

Equity 100.0 100.0 100.0 100.0 100.0

EBIT @ exit: 13.5

Cash Flow Non Levered -100.0 7.4 8.1 8.6 148.4

MoC gross 1.7x

Fiscal Year end: December 2017 2018 2019 2020 2021

Sales 100.0 105.0 110.3 115.8 121.6

Equity 40.0 40.0 40.0 40.0 40.0

EBIT @ exit: 13.5

Cash Flow Levered -40.0 116.1

MoC gross 2.9x

Improved the return on equity:

Maximizes the investment capacity:

Key attributes of an equity investor?

SUCCESS & VALUE CREATION

THE LBO PROCESS

FINANCIAL APPROACH TO LBO

LEGAL APPROACH TO LBO

Quality of the Target:

Decrease in debt (deleveraging)

Increase in EBITDA, which may come from:

An increase in valuation multiple at exit

EBITDA €12.5m €16.0m

Multiple on Cost / Equity 2.3x

• Increase of EBITDA (€16m - €12.5m) x 8.0 = €28m

Equity Investment EBITDA increase Valuation multiple Deleveraging Exit Value

SUCCESS & VALUE CREATION

THE LBO PROCESS

FINANCIAL APPROACH TO LBO

LEGAL APPROACH TO LBO

Investment Investment Investment

Consideration and Final Approval Quarterly financial

Global Industry Global Industry

Weekly team meetings

Commercial & Lawyers, Business consultants,

Pre-transaction: sourcing and analysis

Deep inside the transaction: structuring of the deal

Post-transaction: monitoring and exiting the deal

The 3 transaction types:

Advantages of an exclusive transaction:

A sell from a family:

Divestment from a Group of a “non-core business”:

An LBO from an LBO (secondary buyout):

Public to Private transaction :

The company in its market: