Leveraged Buy Out (LBO) Financial Model with Guide

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Leveraged Buy Out (LBO) Financial Model with Guide Powered By Docstoc
					                                 BUY OUT LEVERAGE TEMPLATE

The world of business valuation is a challenging world and requires prudent application of professional
judgment when performing the process. The value is determined as benefits stream divided by risk; this
might not be as simple as it looks. It entails detailed work of producing business projection and
calculating risk rate to discount the benefits. There are other factors which can influence the value of the
business such as changes in technology and which ought to be factored in business valuation.

The benefits stream used when valuing business are
         Net income earnings,
         Income from Operations
         Income before taxes,
         Earnings before interest and taxes,
         Earnings before interest, Taxes, Depreciation and Amortization (EBITDA),
         Cash Flow to Equity,
         Cash Flow to Invested Capital,
Benefit stream selected determines the collect value of the business, it is essential to evaluate benefit
streams and match them with the correct discounted rate. Business valuation is a complicated world
requires experience and skills; the valuation is simplified by the leverage buyout template. Research and
dedication is vital in shaping the true picture of the business and projecting the growth rate, objective is
always to gain a fair value of the business.

The leverage buy out template is applied in step by step procedures, the first step requires estimating the
cost of the deal, which is market price multiplied by the outstanding shares plus the outstanding debt
and underwriting cost. The second step identifies how the deal will be financed, this include equity
shares, preferred shares and debt to be acquired. The template is designed to assist the user to value the
company in prospective term growth of up to 10 years. The determined revenues growth rate is
automatically applied as the depreciation growth and capital spending growth. The working capital
growth rate is determined by the user of the template.
The forth step is filled with general information; the discounting rate information to be applied in
valuation. The information required is the Treasury bill rate, tax rate, risk premium and the firm beta
rate. This is the information for valuing the firm using capital asset pricing method (CAPM). Since after
acquisition not all assets might be required, the step after d
Description: This Leveraged Buy-Out Financial Model sets forth a spreadsheet that can be used to analyze a potential acquisition using debt. The model first calculates the cost of the transaction by taking the market price, multiplying it by the number of outstanding shares, and adding outstanding debt and underwriting costs. The model then identifies how the transaction will be financed. The model provides a valuation of the company based on growth rates over ten years; the spreadsheet uses the capital asset pricing model (CAPM) to value the target company. This spreadsheet is useful to companies or investors seeking to assess the value of a target company.
This document is also part of a package Financial Models Bundle 7 Documents Included