Sheet Tab

Table of Contents Description Author

1 Table of Contents
2 Instructions
3 Case Exercise
4 Completed

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

Colour Codes
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 1 2 3
ASSUMPTIONS MODULE Outputs
Entry and Exist Transaction Inputs Equity IRR
Entry EV/EBITDA Multiple 6.50 EV/EBITDA
Exit Multiple - EV/EBITDA 7.00 Debt/EBITDA
Scheduled Debt Term 6.00

Debt Inputs
Senior Debt to EBITDA 4.00
Interest Rate 7.30% 7.30% 7.30% 7.30%

Operating Inputs
EBITDA Growth from Current Level 3,200.00 3,360.00 3,595.20 3,918.77
Captial Expenditure 600.00 630.00 661.50

Tax and Depreciation

Income Tax Rate 27.5% 27.5% 27.5%
Depreciation Rate 10.0% 10.0% 10.0%

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 20,800.00
Total Uses 20,800.00

Sources of Funds
Debt Issue 12,800.00
Equity Issued 8,000.00
Total Sources 20,800.00

DEBT SCHEDULE
Debt Balance
Debt Term 6.00
Interest Rate 7.30% 7.30% 7.30% 7.30%

Opening Balance 12,800.00 11,069.44 9,090.27

 Less: Repayments 1,730.56 1,979.17 2,304.33
Closing Balance 12,800.00 11,069.44 9,090.27 6,785.94

Interest on Opening Balance 934.40 808.07 663.59

WORKING MODULE
Working Section for EBITDA and Capital Expenditures (Only in Projected Periods)
EBITDA Projection 3,360.00 3,595.20 3,918.77
Capital Expenditures 600.00 630.00 661.50

Terminal Proceeds
Terminal Multiple
Multiple x EBITDA

Plant Balance, Depreciation and Other Assets Module

Plant Balance
Opening Balance 20,800.00 21,400.00 22,030.00
Add: Capital Expenditures 600.00 630.00 661.50
Less: Proceeds from Sale - - -
Closing Balance 20,800.00 21,400.00 22,030.00 22,691.50

Depreciation Rate 10.0% 10.0% 10.0%

Depreciation Expenses (Use Opening Balance) 2,080.00 2,140.00 2,203.00

Accumulated Depreciation 2,080.00 4,220.00 6,423.00

FINANAICAL STATEMENTS
Profit and Loss
EBITDA 3,360.00 3,595.20 3,918.77
Less: Depreciation 2,080.00 2,140.00 2,203.00
EBIT 1,280.00 1,455.20 1,715.77
Less: Interest Expense on Senior 934.40 808.07 663.59
EBT 345.60 647.13 1,052.18
Less: Book Taxes 95.04 177.96 289.35
Earnings 250.56 469.17 762.83

Cash Flow
EBITDA 3,360.00 3,595.20 3,918.77
Less: Cash Taxes 95.04 177.96 289.35
Operaing Cash Flow 3,264.96 3,417.24 3,629.42
Less: Capital Expenditures 600.00 630.00 661.50
Add: Sale Proceeds - - -
 Cash after Cap Exp 2,664.96 2,787.24 2,967.92
Less: Senior Interest 934.40 808.07 663.59
Cash Flow for Payment of Debt 1,730.56 1,979.17 2,304.33
Less: Senior Repayment 1,730.56 1,979.17 2,304.33
Equity Distributions - - -

Cash Flow to Equity -8,000.00 0.00 0.00 0.00

Equity IRR 34%

Equity Balance
Opening Balance 8,000.00 8,250.56 8,719.73
Add: Net Income 250.56 469.17 762.83
Less: Dividends - - -
Closing Balance 8,000.00 8,250.56 8,719.73 9,482.56

Balance Sheet
Assets
Cash
Fixed Assets - Gross 20,800.0 21,400.0 22,030.0 22,691.5
Less: Accumulated Depreciation - 2,080.0 4,220.0 6,423.0
Total 20,800.0 19,320.0 17,810.0 16,268.5

Senior Debt 12,800.0 11,069.4 9,090.3 6,785.9

Equity 8,000.0 8,250.6 8,719.7 9,482.6
Total 20,800.0 19,320.0 17,810.0 16,268.5

Difference - - - -
Test 1 1 1 1
 4 5 6

34%
6.50
Debt/EBITDA 4.00

7.30% 7.30% 7.30%

4,898.46 5,633.23 5,914.89

694.58 729.30 765.77

27.5% 27.5% 27.5%

10.0% 10.0% 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 5,633.23 5,914.89

694.58 729.30 765.77

7.00
41,404.23

22,691.50 23,386.08 24,115.38

694.58 729.30 765.77
- - 41,404.23
23,386.08 24,115.38 (16,523.09)

10.0% 10.0% 10.0%

2,269.15 2,338.61 2,411.54

8,692.15 11,030.76 13,442.30

4,898.46 5,633.23 5,914.89

2,269.15 2,338.61 2,411.54
2,629.31 3,294.62 3,503.35
495.37 267.49 -
2,133.94 3,027.13 3,503.35
586.83 832.46 963.42
1,547.10 2,194.67 2,539.93

4,898.46 5,633.23 5,914.89

586.83 832.46 963.42
4,311.63 4,800.77 4,951.47
694.58 729.30 765.77
- - 41,404.23
 3,617.05 4,071.46 45,589.93
495.37 267.49 -
3,121.68 3,803.97 45,589.93
3,121.68 3,664.26 -
- 139.71 45,589.93

0.00 139.71 45,589.93

9,482.56 11,029.66 13,084.62

1,547.10 2,194.67 2,539.93
- 139.71 45,589.93
11,029.66 13,084.62 (29,965.38)

23,386.1 24,115.4 (16,523.1)

8,692.2 11,030.8 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)

- - -
1 1 1