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  • Leveraged Buyout Valuation and Analysis

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    futy
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    - The document presents financial projections for a company over 5 periods, including sales growth, costs, debt obligations, cash flows, and valuation metrics - Senior debt of $40M at 10% and junior debt of $50M at 15% are outlined, with the debt balances and interest payments declining each period - Projected financials show EBIT, net income, debt payments, and equity values increasing each period - Backward induction is used to calculate equity value and cost of equity each period to determine an NPV for an LBO

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    Acova case

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    5. Acova

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    - The document presents financial projections for a company over 5 periods, including sales growth, costs, debt obligations, cash flows, and valuation metrics - Senior debt of $40M at 10% and junior debt of $50M at 15% are outlined, with the debt balances and interest payments declining each period - Projected financials show EBIT, net income, debt payments, and equity values increasing each period - Backward induction is used to calculate equity value and cost of equity each period to determine an NPV for an LBO

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    23 views5 pages

    Leveraged Buyout Valuation and Analysis

    Uploaded by

    futy
    - The document presents financial projections for a company over 5 periods, including sales growth, costs, debt obligations, cash flows, and valuation metrics - Senior debt of $40M at 10% and junior debt of $50M at 15% are outlined, with the debt balances and interest payments declining each period - Projected financials show EBIT, net income, debt payments, and equity values increasing each period - Backward induction is used to calculate equity value and cost of equity each period to determine an NPV for an LBO

    Copyright:

    © All Rights Reserved
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    of 5

    Seller Proceed 100

    Transaction cost 3
    Senior Debt 40 Mn @ 10%
    Junior Debt 50 Mn @ 15%

    Period 0 1 2 3 4 5
    Sales Growth 5% 5% 5% 5% 5%
    Sales 100 105 110 116 122 128
    CGS/Sales 50% 50% 50% 50% 50% 50%
    CGS 53 55 58 61 64
    SGA/Sales 25% 25% 25% 25% 25% 25%
    SGA 26 28 29 30 32
    Dep/Sales 5% 5% 5% 5% 5% 5%
    dep 5.3 5.5 5.8 6.1 6.4
    Amortization 0.60 0.60 0.60 0.60 0.60
    EBIT 20.40 21.45 22.55 23.71 24.93

    Income tax 35% 35% 35% 35% 35% 35%

    Capex/ D sales 25% 25% 25% 25% 25%


    Capex 1.3 1.3 1.4 1.4 1.5
    NWC/ D sales 8% 8% 8% 8% 8%
    NWC 0.40 0.42 0.44 0.46 0.49

    Senior Debt Interest (4.00) (3.53) (2.96) (2.30) (1.53)


    Debt Repayment 4.74 5.64 6.64 7.73 8.93
    Residual Debt 35.27 29.62 22.98 15.25 6.32

    Junior Debt Interest (7.50) (7.50) (7.50) (7.50) (7.50)


    Debt Repayment - - - - -
    Residual Debt 50.00 50.00 50.00 50.00 50.00

    EBT 8.90 10.42 12.09 13.91 15.90


    Profit 5.79 6.78 7.86 9.04 10.34

    NI+Dep+Amor-Capex-D NWC 9.99 11.16 12.43 13.81 15.31

    NI+Amor-Capex-D NWC 4.74 5.64 6.64 7.73 8.93

    Equity Structure
    Junior Debt 50.00 50.00 50.00 50.00 50.00
    Senior Debt 35.27 29.62 22.98 15.25 6.32
    Equity 18.79 25.56 33.42 42.46 52.80
    18.1% 24.3% 31.4% 39.4% 48.4%
    Total 104.05 105.18 106.40 107.71 109.12
    EBIT multiple 6 7 8
    Valuation 149.55 174.48 199.41
    Less Debt 93.23 118.16 143.08

    OwnerShip
    LBO 80% 74.59 94.53 114.47
    Management 20% 18.65 23.63 28.62

    (12.00) 74.59 94.53 114.47


    IRR 44% 51% 57%

    PE Multiple 10.00 12.00 14.00


    NI 10.34 10.34 10.34
    Valuation 103.35 124.02 144.70

    OwnerShip
    LBO 80% 82.68 99.22 115.76
    Management 20% 20.67 24.80 28.94

    (12.00) 82.68 99.22 115.76


    IRR 47% 53% 57%

    Backward Induction Method


    Period 0 1 2 3 4 5
    Total Debt 90.00 85.27 79.62 72.98 65.25 56.32
    Equity Value 52.15 63.81 76.74 91.03 106.75 124.02 (Using 12 PE)
    EV 142.15 149.08 156.36 164.01 172.00 180.35

    % Debt 57.2% 50.9% 44.5% 37.9% 31.2%


    % Equity 42.8% 49.1% 55.5% 62.1% 68.8%

    Equity Beta 2.34 2.04 1.80 1.61 1.45

    Risk Free 6% 6% 6% 6% 6%
    Premium 7% 7% 7% 7% 7%
    Cost of Equity 22% 20% 19% 17% 16%

    NPV
    LBO 80% 29.72
    Management 20%
    (Using 12 PE)
    1989 1990E 1991E 1992E 1993E 1994E
    Sales 337.4 380.0 419.9 464.0 510.3 561.4
    EBIT 34.9 43.1 56.0 70.9 77.2 85.1
    NI 19.6 13.9 12.1 21.9 29.4 36.1
    Cash Flow Available 8.4 2.9 17.0 20.7 26.5

    Debt Schedule
    Senior Debt
    Beginning Debt 190.0 185.0 175.0 160.0 140.0
    Interest 12.4 22.2 21.0 19.2 16.8
    Principal Payment 5.0 10.0 15.0 20.0 25.0
    Ending Debt 185.0 175.0 160.0 140.0 115.0

    Sub-Debt
    Beginning Debt 65.0 65.0 65.0 65.0 65.0
    Interest 4.4 8.8 8.8 8.8 8.8
    Principal Payment - - - - -
    Ending Debt 65.0 65.0 65.0 65.0 65.0

    WC Loan
    Beginning Debt 31.8 28.4 35.5 33.5 32.8
    Interest 1.7 3.1 3.9 3.7 3.6
    Principal Payment 3.4 (7.1) 2.0 0.7 1.5
    Ending Debt 28.4 35.5 33.5 32.8 31.3

    Interest 18.5 34.1 33.7 31.7 29.2


    Principal Payment 8.4 2.9 17.0 20.7 26.5

    Acquisition Cost 330.0


    Transaction Cost 10.0
    Total 340.0

    PE Multiple 13.0
    Equity Value 382.1 469.2
    Debt 278.4 275.5 258.5 237.8 211.3
    Total 278.4 275.5 258.5 619.9 680.4

    IRR Calculation IRR


    Mezzaine (12.9%) (65.0) 4.4 8.8 8.8 8.8 134.3 23.3%
    Barring (79.2%) (80.0) - - - - 371.6 36.0%
    Management (7.9%) (5.0) 37.1 641.3%

    IRR Calculation IRR


    Mezzaine (12.9%) (65.0) 4.4 8.8 8.8 123.1 24.5%
    Barring (79.2%) (80.0) - - - 305.3 39.8%
    Management (7.9%) (5.0)

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