LBO Analysis - Template

Investment Banking
Valuation, Leveraged Buyouts,

and Mergers & Acquisitions
LBO Analysis - Template
JOSHUA ROSENBAUM
JOSHUA PEARL
ValueCo Corporation
Leveraged Buyout Analysis
Financing Structure:
Operating Scenario:
($ in millions, fiscal year ending December 31)
Structure 1
Base
Transaction Summary
Sources of Funds
% of Total
Amount
Sources
Revolving Credit Facility
Term Loan A
Term Loan B
Term Loan C
2nd Lien
Senior Notes
Senior Subordinated Notes
Equity Contribution
Rollover Equity
Cash on Hand
Total Sources
Uses of Funds
Multiple of EBITDA
9/30/2008
Purchase Price
Offer Price per Share
% of Total
Cumulative
-%
-%
-%
-x
-x
-x
-x
-x
-x
-%
-%
-x
-x
-x
-x
-%
-%
-%
-%
-%
-%
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
Pricing
NA
Amount
Uses
2013
- Entry Multiple
- Exit Multiple
Purchase ValueCo Equity
NA
Repay Existing Debt
NA
NA
Tender / Call Premiums

Financing Fees
-%
NA
NA
NA
Other Fees and Expenses
Transaction Multiples
Enterprise Value / Sales
LTM 9/30/2008
2008E
Enterprise Value / EBITDA
LTM 9/30/2008
2008E
-%
Total Uses
Return Analysis
- Exit Year
Fully Diluted Shares

- % Equity Purchase Price
- % Plus: Existing Net Debt
Enterprise Value
-x
IRR
Cash Return
-x
NA
NM
-%
-%
Options
Financing Structure
- x Operating Scenario
- x Cash Flow Sweep
Cash Balance
- x Average Interest
- x Financing Fees
1
1
1
1
1
1
Summary Financial Data

Historical Period
2005
Sales
% growth
2006
LTM
9/30/2008
2007
Pro forma
2008
Year 1
2009
Year 2
2010
Year 3
2011
Year 4
2012
NA
NA
Gross Profit
% margin
EBITDA
% margin
Capital Expenditures
% sales
Cash Interest Expense

Total Interest Expense
Free Cash Flow
EBITDA
Less: Cash Interest Expense
Plus: Interest Income
Less: Income Taxes
Less: Capital Expenditures
Less: Increase in Net Working Capital
Free Cash Flow
Cumulative Free Cash Flow
Projection Period
Year 5
Year 6
2013
2014
-
Year 7
2015
Year 8
2016
Year 9
2017
Year 10
2018
Capitalization
Cash

Term Loan A
Term Loan B
Term Loan C
Existing Term Loan
2nd Lien
Other Debt
Total Senior Secured Debt
Senior Notes
Total Senior Debt

Total Debt
Shareholders' Equity
Total Capitalization
% of Bank Debt Repaid
Credit Statistics
% Debt / Total Capitalization
EBITDA / Cash Interest Expense

(EBITDA - Capex) / Cash Interest Expense
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
EBITDA / Total Interest Expense

(EBITDA - Capex) / Total Interest Expense
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
-x
NM
-x
-x
-x
NM
-x
-x
-x
NM
-x
-x
-x
NM
-x
-x
-x
NM
-x
-x
-x
NM
-x
-x
-x
NM
-x
-x
-x
NM
-x
-x
-x
NM
-x
-x
-x
NM
-x
-x
-x
NM
Senior Secured Debt / EBITDA

Senior Debt / EBITDA
Total Debt / EBITDA
Net Debt / EBITDA
Income Statement
Historical Period
2005
Sales
% growth
2006
LTM
9/30/2008
2007
Pro forma
2008
Year 1
2009
Year 2
2010
Year 3
2011
Year 4
2012
Projection Period
Year 5
Year 6
2013
2014
-
NA
NA
Cost of Goods Sold

Gross Profit
% margin
Selling, General & Administrative

% sales
Other Expense / (Income)

EBITDA
% margin
Depreciation & Amortization

EBIT
% margin
Interest Income
Net Interest Expense
Earnings Before Taxes
Income Tax Expense
Interest Expense
Term Loan A
Term Loan B
Term Loan C
Existing Term Loan
2nd Lien
Senior Notes
Commitment Fee on Unused Revolver
Administrative Agent Fee
Cash Interest Expense
Amortization of Deferred Financing Fees
Total Interest Expense
Net Income
% margin
Income Statement Assumptions
Sales (% YoY growth)
Cost of Goods Sold (% margin)
SG&A (% sales)
Other Expense / (Income) (% of sales)
Depreciation & Amortization (% of sales)
Interest Income
Tax Rate
NA
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
NA
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
Year 7
2015
Year 8
2016
Year 9
2017
Year 10
2018
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
Balance Sheet
Opening
2008
Adjustments
+
Cash and Cash Equivalents

Accounts Receivable
Inventories
Prepaids and Other Current Assets

Total Current Assets
Property, Plant and Equipment, net

Goodwill and Intangible Assets
Other Assets
Deferred Financing Fees
Pro Forma
Year 1
Year 2
Year 3
Year 4
2008
2009
2010
2011
2012
Projection Period
Year 5
Year 6
2013
2014
Year 7
Year 8
Year 9
2015
2016
2017
Year 10
2018
Total Assets
Accounts Payable
Accrued Liabilities
Other Current Liabilities

Total Current Liabilities

Term Loan A
Term Loan B
Term Loan C
Existing Term Loan
2nd Lien
Senior Notes
Other Debt
Other Long-Term Liabilities
Total Liabilities
Noncontrolling Interest
Shareholders' Equity
Total Shareholders' Equity
Total Liabilities and Equity
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
0.000
Balance Check
Net Working Capital
(Increase) / Decrease in Net Working Capital
Balance Sheet Assumptions

Current Assets
Days Sales Outstanding (DSO)
Days Inventory Held (DIH)
Prepaid and Other Current Assets (% of sales)
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
Current Liabilities
Days Payable Outstanding (DPO)
Accrued Liabilities (% of sales)
Other Current Liabilities (% of sales)
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
Cash Flow Statement

Year 1
2009
Operating Activities
Net Income
Plus: Depreciation & Amortization
Plus: Amortization of Financing Fees
Year 2
2010
Year 3
2011
Projection Period
Year 5
Year 6
2013
2014
Year 4
2012
Year 7
2015
Year 8
2016
Year 9
2017
Year 10
2018
Inc. / (Dec.) in Accounts Payable

Inc. / (Dec.) in Accrued Liabilities
Inc. / (Dec.) in Other Current Liabilities

(Inc.) / Dec. in Net Working Capital
Cash Flow from Operating Activities
Investing Activities
Capital Expenditures
Other Investing Activities
Cash Flow from Investing Activities
Financing Activities
Term Loan A
Term Loan B
Term Loan C
Existing Term Loan
2nd Lien
Senior Notes
Other Debt
Dividends
Equity Issuance / (Repurchase)
Cash Flow from Financing Activities
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
Changes in Working Capital Items

(Inc.) / Dec. in Accounts Receivable
(Inc.) / Dec. in Inventories
(Inc.) / Dec. in Prepaid and Other Current Assets
Excess Cash for the Period

Beginning Cash Balance
Ending Cash Balance
Cash Flow Statement Assumptions
Capital Expenditures (% of sales)
Debt Schedule
Pro forma
2008
Forward LIBOR Curve
Year 1
2009
Year 2
2010
Year 3
2011
Projection Period
Year 5
Year 6
2013
2014
Year 4
2012
Year 7
2015
Year 8
2016
Year 9
2017
Year 10
2018
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
Cash Flow from Operating Activities

Cash Flow from Investing Activities
Cash Available for Debt Repayment
Total Mandatory Repayments
MinCash
Cash From Balance Sheet
Cash Available for Optional Debt Repayment
Beginning Balance
Drawdown/(Repayment)
Ending Balance
Interest Rate
Average Interest Expense
Commitment Fee
-%
-%
-%
-%
-%

Revolving Credit Facility Size
Spread
Term
Commitment Fee on Unused Portion
Term Loan A Facility

Size
Spread
Term
Repayment Schedule
-%
0 years
-%
-%
0 years
Beginning Balance
Mandatory Repayments
Optional Repayments
Ending Balance
Interest Rate
Interest Expense
Term Loan B Facility
Size
Spread
Term
Repayment Schedule
100.0%
-%
0 years
- % Per Annum, Bullet at Maturity
Beginning Balance
Optional Repayments
Ending Balance
Interest Rate
Interest Expense
Term Loan C Facility

Size
Spread
Term
Repayment Schedule
-%
0 years
Beginning Balance
Optional Repayments
Ending Balance
Interest Rate
Interest Expense
Existing Term Loan Facility
Size
Spread
Remaining Term
Repayment Schedule
-%
0 years
Beginning Balance
Optional Repayments
Ending Balance
Interest Rate
Interest Expense
Beginning Balance
Repayment
Ending Balance
Interest Rate
Interest Expense
Beginning Balance
Repayment
Ending Balance
Interest Expense
2nd Lien
Size
Spread
Term
Senior Notes
Size
Coupon
Term
-%
0 years
-%
0 years
Beginning Balance
Repayment
Ending Balance
Interest Expense
Size
Coupon
Term
-%
0 years
Returns Analysis
Entry EBITDA Multiple
Pro forma
Year 1
Year 2
Year 3
Year 4
2008
2009
2010
2011
2012
2013
2014
Year 7
Year 8
Year 9
Year 10
2015
2016
2017
2018
-x
Initial Equity Investment

EBITDA
Exit EBITDA Multiple
Enterprise Value at Exit
-x
Less: Net Debt

Term Loan A
Term Loan B
Term Loan C
Existing Term Loan
2nd Lien
Senior Notes
Other Debt
Total Debt
Less: Cash and Cash Equivalents
Net Debt
Equity Value at Exit
Cash Return
NM
NM
NM
NM
NM
NM
NM
NM
NM
NM
Year 1
2009
Year 2
2010
Year 3
2011
Year 4
2012
Year 5
2013
Year 6
2014
Year 7
2015
Year 8
2016
Year 9
2017
Year 10
2018
Initial Equity Investment

Equity Proceeds
IRR
NA
NA
Entry
Multiple
Projection Period
Year 5
Year 6
-1.0x
-0.5x
0.0x
0.5x
1.0x
-1.0x
NA
NA
NA
NA
NA
IRR - Assuming Exit in 2013E

Exit Multiple
-0.5x
0.0x
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
0.5x
NA
NA
NA
NA
NA
NA
1.0x
NA
NA
NA
NA
NA
NA
NA
Exit
Multiple
NA
6.5x
7.0x
7.5x
8.0x
8.5x
NA
-2
NA
NA
NA
NA
NA
NA
NA
IRR - Assuming 0.0x Entry Multiple

Exit Year
-1
0
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
1
NA
NA
NA
NA
NA
NA
2
NA
NA
NA
NA
NA
Assumptions Page 1 - Income Statement and Cash Flow Statement

Year 1
2009
Year 2
2010
Year 3
2011
Projection Period
Year 5
Year 6
2013
2014
Year 4
2012
Year 7
2015
Year 8
2016
Year 9
2017
Year 10
2018
Income Statement Assumptions

Sales (% growth)
Base
Sponsor
Management
Downside 1
Downside 2
1
2
3
4
5
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
Cost of Goods Sold (% sales)

Base
Sponsor
Management
Downside 1
Downside 2
1
2
3
4
5
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
SG&A (% sales)
Base
Sponsor
Management
Downside 1
Downside 2
1
2
3
4
5
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
Depreciation & Amortization (% sales)

Base
Sponsor
Management
Downside 1
Downside 2
1
2
3
4
5
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
Interest Income
Base
Sponsor
Management
Downside 1
Downside 2
1
2
3
4
5
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
Cash Flow Statement Assumptions

Capital Expenditures (% sales)
Base
Sponsor
Management
Downside 1
Downside 2
1
2
3
4
5
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
Assumptions Page 2 - Balance Sheet

Year 1
2009
Year 2
2010
Year 3
2011
Projection Period
Year 5
Year 6
2013
2014
Year 4
2012
Year 7
2015
Year 8
2016
Year 9
2017
Year 10
2018
Current Assets
Days Sales Outstanding (DSO)
Base
Sponsor
Management
Downside 1
Downside 2
1
2
3
4
5
Days Inventory Held (DIH)

Base
Sponsor
Management
Downside 1
Downside 2
1
2
3
4
5
Prepaids and Other Current Assets (% sales)

Base
Sponsor
Management
Downside 1
Downside 2
1
2
3
4
5
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
Current Liabilities
Days Payable Outstanding (DPO)
Base
Sponsor
Management
Downside 1
Downside 2
1
2
3
4
5
Accrued Liabilities (% sales)

Base
Sponsor
Management
Downside 1
Downside 2
1
2
3
4
5
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
Other Current Liabilities (% sales)

Base
Sponsor
Management
Downside 1
Downside 2
1
2
3
4
5
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
-%
($ in millions)
Assumptions Page 3 - Financing Structures and Fees

Financing Structures
Purchase Price
1
Sources of Funds
Revolving Credit Facility Draw
Term Loan A
Term Loan B
Term Loan C
2nd Lien
Senior Notes
Equity Contribution
Rollover Equity
Cash on Hand
Structure 1
Structure 2
-
Total Sources of Funds

Uses of Funds
Equity Purchase Price
Repay Existing Bank Debt
Tender / Call Premiums
Financing Fees
Other Fees and Expenses
Total Uses of Funds
Structure
3
Structure 3
-
Public / Private Target

4
Structure 4
-
Status Quo
-
Entry EBITDA Multiple

LTM 9/30/2008 EBITDA
Enterprise Value
Size
(%)
-
($)
-
Less: Total Debt

Less: Preferred Securities
Less: Noncontrolling Interest
Plus: Cash and Cash Equivalents
Equity Purchase Price
Calculation of Fully Diluted Shares Outstanding

Offer Price per Share
Basic Shares Outstanding

Plus: Shares from In-the-Money Options
Less: Shares Repurchased
Net New Shares from Options
Plus: Shares from Convertible Securities
Fully Diluted Shares Outstanding
Number of
Shares
Tranche
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Tranche 5
Total
Fees
Structure 1
-x
-
Options/Warrants
Financing Fees

Term Loan A
Term Loan B
Term Loan C
2nd Lien
Senior Notes
Senior Bridge Facility
Senior Subordinated Bridge Facility
Other Financing Fees & Expenses
Total Financing Fees
Exercise
Price
-
In-the-Money
Shares
-
Proceeds
-
Convertible Securities
Conversion
Price
Amount
Issue 1
Issue 2
Issue 3
Issue 4
Issue 5
Total
Conversion
Ratio
-
New
Shares
-
Amortization of Financing Fees

Year 1
2009
Term
Term Loan A
Term Loan B
Term Loan C
2nd Lien
Senior Notes
Senior Bridge Facility
Senior Subordinated Bridge Facility
Other Financing Fees & Expenses
Year 2
2010
Year 3
2011
Year 4
2012
Year 5
2013
Year 6
2014
Year 7
2015
Year 8
2016
Year 9
2017
Year 10
2018
Annual Amortization
Administrative Agent Fee
Copyright 2009 by Joshua Rosenbaum and Joshua Pearl. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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Investment Banking

Valuation, Leveraged Buyouts,

($ in millions, fiscal year ending December 31)

Revolving Credit Facility

Purchase ValueCo Equity

Repay Existing Debt

Tender / Call Premiums

Other Fees and Expenses

Fully Diluted Shares

Summary Financial Data

Cash Interest Expense

Revolving Credit Facility

Senior Subordinated Notes

% of Bank Debt Repaid

EBITDA / Cash Interest Expense

EBITDA / Total Interest Expense

Senior Secured Debt / EBITDA

($ in millions, fiscal year ending December 31)

Cost of Goods Sold

Selling, General & Administrative

Other Expense / (Income)

Depreciation & Amortization

($ in millions, fiscal year ending December 31)

Cash and Cash Equivalents

Prepaids and Other Current Assets

Property, Plant and Equipment, net

Other Current Liabilities

Revolving Credit Facility

Total Liabilities and Equity

Balance Sheet Assumptions

($ in millions, fiscal year ending December 31)

Cash Flow Statement

Inc. / (Dec.) in Accounts Payable

Inc. / (Dec.) in Other Current Liabilities

Changes in Working Capital Items

Excess Cash for the Period

($ in millions, fiscal year ending December 31)

Cash Flow from Operating Activities

Revolving Credit Facility

Term Loan A Facility

Term Loan C Facility

($ in millions, fiscal year ending December 31)

Entry EBITDA Multiple

Initial Equity Investment

Less: Net Debt

Initial Equity Investment

IRR - Assuming Exit in 2013E

IRR - Assuming 0.0x Entry Multiple

Assumptions Page 1 - Income Statement and Cash Flow Statement

Income Statement Assumptions

Cost of Goods Sold (% sales)

Depreciation & Amortization (% sales)

Cash Flow Statement Assumptions

Assumptions Page 2 - Balance Sheet

Days Inventory Held (DIH)

Prepaids and Other Current Assets (% sales)

Accrued Liabilities (% sales)

Other Current Liabilities (% sales)

Assumptions Page 3 - Financing Structures and Fees

Total Sources of Funds

Public / Private Target

Entry EBITDA Multiple

Less: Total Debt