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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

Instructions

In this exercise you create a simple LBO model that does not include goodwill and other balance accounts, 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

alance accounts, working capital or complex debt structures

Case Exercise
0

ASSUMPTIONS MODULE
Entry and Exist Transaction Inputs
Entry EV/EBITDA Multiple
Exit Multiple - EV/EBITDA
Scheduled Debt Term
Debt Inputs
Senior Debt to EBITDA
Interest Rate
Operating Inputs
EBITDA Growth from Current Level
Captial Expenditure

3
Outputs
Equity IRR
EV/EBITDA
Debt/EBITDA

6.50
7.00
6.00

4.00
7.30%

7.30%

7.30%

7.30%

3,360.00
600.00

3,595.20
630.00

3,918.77
661.50

27.5%
10.0%

27.5%
10.0%

27.5%
10.0%

7.30%

7.30%

7.30%

12,800.00

11,069.44

9,090.27

3,200.00

Tax and Depreciation

Income Tax Rate
Depreciation Rate

TRANSACTION MODULE
Transaction Summary - (Enter transaction parameters in year zero)
Current EBITDA
3,200.00
Debt Issued
12,800.00
Enterprise Value
20,800.00
Soruces and Uses Map
Uses of Funds
Purchase of Company
Total Uses

20,800.00
20,800.00

Sources of Funds
Debt Issue
Equity Issued
Total Sources

12,800.00
8,000.00
20,800.00

DEBT SCHEDULE
Debt Balance
Debt Term
Interest Rate
Opening Balance

6.00
7.30%

Less: Repayments
Closing Balance

1,730.56
11,069.44

1,979.17
9,090.27

2,304.33
6,785.94

934.40

808.07

663.59

Working Section for EBITDA and Capital Expenditures (Only in Projected Periods)
EBITDA Projection
3,360.00
3,595.20
Capital Expenditures
600.00
630.00

3,918.77
661.50

12,800.00

Interest on Opening Balance

WORKING MODULE

Terminal Proceeds
Terminal Multiple
Multiple x EBITDA
Plant Balance, Depreciation and Other Assets Module
Plant Balance
Opening Balance
Add: Capital Expenditures
Less: Proceeds from Sale
Closing Balance

20,800.00
600.00
-

22,030.00
661.50
-

21,400.00

22,030.00

22,691.50

10.0%
2,080.00

10.0%
2,140.00

10.0%
2,203.00

2,080.00

4,220.00

6,423.00

Profit and Loss

EBITDA
Less: Depreciation
EBIT
Less: Interest Expense on Senior
EBT
Less: Book Taxes
Earnings

3,360.00
2,080.00
1,280.00
934.40
345.60
95.04
250.56

3,595.20
2,140.00
1,455.20
808.07
647.13
177.96
469.17

3,918.77
2,203.00
1,715.77
663.59
1,052.18
289.35
762.83

Cash Flow
EBITDA
Less: Cash Taxes
Operaing Cash Flow
Less: Capital Expenditures
Add: Sale Proceeds

3,360.00
95.04
3,264.96
600.00
-

3,595.20
177.96
3,417.24
630.00
-

3,918.77
289.35
3,629.42
661.50
-

Depreciation Rate
Depreciation Expenses (Use Opening Balance)
Accumulated Depreciation

20,800.00

21,400.00
630.00

FINANAICAL STATEMENTS

Cash after Cap Exp

Less: Senior Interest
Cash Flow for Payment of Debt
Less: Senior Repayment

2,664.96
934.40
1,730.56
1,730.56

Equity Distributions
Cash Flow to Equity
Equity IRR

-8,000.00
34%

Equity Balance
Opening Balance
Add: Net Income
Less: Dividends
Closing Balance

2,787.24
808.07
1,979.17
1,979.17

2,967.92
663.59
2,304.33
2,304.33

0.00

0.00

0.00

8,000.00
250.56

8,250.56
469.17

8,719.73
762.83

8,000.00

8,250.56

8,719.73

9,482.56

20,800.0
-

21,400.0
2,080.0

22,030.0
4,220.0

22,691.5
6,423.0

20,800.0

19,320.0

17,810.0

16,268.5

12,800.0
8,000.0

11,069.4
8,250.6

9,090.3
8,719.7

6,785.9
9,482.6

Total

20,800.0

19,320.0

17,810.0

16,268.5

Difference
Test

Balance Sheet
Assets
Cash
Fixed Assets - Gross
Less: Accumulated Depreciation
Total
Senior Debt
Equity

34%
6.50
4.00

Debt/EBITDA

7.30%

7.30%

7.30%

4,898.46
694.58

5,633.23
729.30

5,914.89
765.77

27.5%
10.0%

27.5%
10.0%

27.5%
10.0%

7.30%

7.30%

7.30%

6,785.94

3,664.26

0.00

3,121.68
3,664.26

3,664.26
0.00

0.00

495.37

267.49

4,898.46
694.58

5,633.23
729.30

5,914.89
765.77

7.00
41,404.23

22,691.50
694.58
-

23,386.08
729.30
-

24,115.38
765.77
41,404.23

23,386.08

24,115.38

(16,523.09)

10.0%
2,269.15

10.0%
2,338.61

10.0%
2,411.54

8,692.15

11,030.76

13,442.30

4,898.46
2,269.15
2,629.31
495.37
2,133.94
586.83
1,547.10

5,633.23
2,338.61
3,294.62
267.49
3,027.13
832.46
2,194.67

5,914.89
2,411.54
3,503.35
3,503.35
963.42
2,539.93

4,898.46
586.83
4,311.63
694.58
-

5,633.23
832.46
4,800.77
729.30
-

5,914.89
963.42
4,951.47
765.77
41,404.23

3,617.05
495.37
3,121.68
3,121.68

4,071.46
267.49
3,803.97
3,664.26

45,589.93
45,589.93
-

139.71

45,589.93

0.00

139.71

45,589.93

9,482.56
1,547.10

11,029.66
2,194.67

13,084.62
2,539.93

139.71

45,589.93

11,029.66

13,084.62

(29,965.38)

23,386.1
8,692.2

24,115.4
11,030.8

(16,523.1)
13,442.3

14,693.9

13,084.6

(29,965.4)

3,664.3
11,029.7

13,084.6

(29,965.4)

14,693.9

13,084.6

(29,965.4)