Introduction to Leveraged Valuation

Participants evaluate how much a financial buyer could pay for a business. The session starts by establishing why private equity firms can create value through leveraged buyouts and how the levered valuation fits into the valuation roadmap. Using a simple free cash flow forecast and a back of the envelope calculation participants establish how much a financial buyer could pay for the target company. Participants will then build a one page model focusing on the main drivers of an LBO.

• Concept an rationale of LBOs
• Purpose of an LBO valuation
• Characteristics of suitable LBO candidates
• Estimating cash flows available to capital holders
• Simplified debt/equity split for entry capital structure
• Sources and uses of funds
• Estimating debt capacity
• Exit value
• Calculating IRR