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Advanced LBO Modelling

Learn how to master the Key Elements of Modelling in an LBO Analysis

Advanced LBO Modelling Training Course

A two-day course

This course is a ‘must know’ for;
  • Corporate Finance professionals at all levels, but especially those focused on Private Equity transactions;
  • Private equity LBO professionals managing or overseeing the execution of their firm’s deals; and
  • Finance professionals within portfolio companies, wanting a closer understanding of the Private Equity LBO process, and how their results are likely to be used.

  • The course will be presented by a qualified Chartered Accountant, with practical investment banking experience.
  • The course will be hands-on, excel modelling based, showing how LBO models may be built and developed in practice to varying degrees of complexity
  • Participants will be provided with a summary workbook, covering all areas of the course for easy reference after the course.
  • At the close of the workshop, a series of LBO models and excel exercises will have been completed and provided.

By the end of this course, participants will be able to:
  • Build an LBO model incorporating complex debt structures
  • Model the impact of the new LBO financing structure and key issues around structuring
  • Understand the key structuring issues and debt capacity
  • Identify potential adjustments in determining an appropriate equity purchase price based on an business’ enterprise value
  • Complete a fully integrated LBO model with: 
    • Analysis of the acquisition
    • Source and use of LBO funds
    • Integrated financial statements
    • Detailed debt waterfall, allocating cash flows across a debt structure with potential for dividend distributions
    • Equity Value Bridge charts illustrating components of value creation
    • Sensitivity analysis

Day One

Session 1 – Short Form LBO Model

  • Purchase price
  • Debt analysis and fees
  • Debt Schedule – cash sweep repayments
  • Source and use of funds
  • Income Statement and Cash Flow Statement
  • FCF (Free cash flow) – debt repayment
  • Exit
  • Return and sensitivity
  • Exercise – complete a Short Form LBO model

Session 2 - Leveraged Buyout Model – Equity Value Creation

  • Analysing the components for equity value creation
  • Decomposing value creation into revenue growth, EBITDA margin improvements, debt repayment, multiple expansion, deal fees
  • Bridge charts to show absolute amounts of value creation and Multiples of Invested Capital
  • Exercise: Building a Value Creation Bridge both absolute and Money Multiple based

Session 3 - Completion Mechanisms and Deal Adjustments

  • Contrasting Locked-Box vs. Completion Account mechanisms
  • Reconciling Enterprise Value to Actual Equity Purchase Price
  • ‘Normal’ OWC
  • Book Value vs. Fair Value adjustments
  • Under/(over) spend on Capex
  • Debt-like liabilities
  • Exercise: Estimate Equity Purchase Price after deal adjustments for Completion Accounts and Locked-Box deals.

Session 4 – LBO Debt Financing and Debt Capacity

  • Debt capacity analysis
  • Determining a maximum debt capacity using un-levered free cash flows
  • Amortising Senior Loan
  • Bullet subordinated tranches
  • Mezzanine
  • Exercise: Determine the level of debt the company could obtain.

Session 5 – Modelling a Debt Waterfall

  • Unlevered Debt Service
  • Interest income/ (expense)
  • Cash Flow available for Debt repayments
  • Mandatory Repayments: straight line amortisation, balloon and bullet repayments
  • Issuance/ (repayment) of revolver
  • Cash available after mandatory repayments and revolver
  • Covenant-based constraints on cash distributions to equity investors
  • Accelerated/ discretionary repayments

Day Two

Session 6 – Building a Long Form Model – LBO Case Study

  • Equity Offer Value
  • Source and use of LBO funds schedule, with senior, subordinated, mezzanine, shareholder loan and sweet equity
  • Calculating Deal Goodwill and building Consolidated Balance Sheet
  • Integrating Operating Model with NewCo Finance Structure
  • Create a debt waterfall with mandatory repayments, revolving credit facility, and covenant-based cash sweep
  • Current and deferred taxation, given limitations on tax deductibility of debt
  • Determine the key ratios
  • Exit enterprise value and bridge to equity value
  • Value creation schedule with a value creation bridge
  • Internal rates of return for all investors
  • Sensitivity analysis

Session 7 – LBO Management Incentive Structure

  • Ratchet Share Mechanisms vs. Sweet Equity
  • Calculation of risk and rewards: IRR and Money Multiples
  • Exercise: Contrasting RSM vs Sweet Equity with varying IRRs.

Session 8 – Leveraged Recapitalisations – LBO Case Study

  • Benefits of a leveraged recapitalisation
  • Recapitalised Source and use of LBO funds schedule
  • Assumptions – interest and new debt capacity
  • Integrating the new debt funding within a waterfall
  • Integrating the new interest rates post-recapitalisation
  • Exit values, with/ without the recap
  • Value creation schedule with a value creation bridge
  • Internal rates of return for all investors
  • Sensitivity analysis

Session 9 – Structure of PE Funds: GP vs. LP Returns

  • Life cycle of a PE fund: Investment, Development & Harvesting Phases
  • Measuring Fund Performance: % PI, DPI, RVPI, IRR vs. TVPI
  • Fund vs. GP vs. LP returns: carried interest & catch-ups
  • American vs. European Funds
  • Exercises: Calculating Performance Ratios, IRRs and Multiples for Fund and GPs.

Session 10 – Summary and Close

After graduating from Cambridge University in 1993, the trainer worked as an auditor with Arthur Andersen, gaining a comprehensive knowledge of corporate accounting and financial statements. He qualified as a chartered accountant (ACA) and then worked in investment banking in the City of London, initially with HSBC and subsequently at Merrill Lynch. Throughout his time in the City, he was in a front office role, advising companies on valuation, financing, acquisitions, foreign exchange and derivatives. This breadth of practical experience and his passion for sharing and communicating knowledge naturally led him towards a career in LBO financial model training.

He has worked in financial training for the last ten years and delivered training courses on accounting, financial modelling, corporate finance, valuation and capital markets at investment banks, private equity and corporate finance firms worldwide.

The course will begin with a fast method of reviewing an LBO opportunity, which is used to gain the key concepts before embarking on the advanced modelling issues for LBO’s.

The LBO financing structures and debt capacity will be explored, looking at equity finance, pure debt finance, and mezzanine finance.

The course will focus on building a debt waterfall and developing an advanced LBO model from scratch with NewCo/ OpCo consolidation and integrated consolidated LBO financial model forecasts. Finally, we will also look at modelling a leveraged recapitalisation and the benefits obtained from undertaking this.

  • The trainer was extremely well versed on the subject matter and was able to answer all our queries practically via Excel examples, which is fantastic for those looking to master the modelling aspect of LBOs
  • Good interaction with the teacher, very user friendly and organized models.
  • The trainer was brilliant in the delivery of the course. The content was completely relevant and the "hand-outs" were spot on.
  • Fantastic tutor, who provided a great walkthrough of complex modelling and learn new excel skills.


Number of places:

Places Filling – book quickly

£1650.00

Per participant

Discounts available:

  • 2 places at 25% less = £1237.50
    per person
  • 3 places at 30% less = £1155.00
    per person
  • 4 places at 35% less = £1072.50
    per person
  • 5 places at 40% less = £990.00
    per person
  • 6+ places at 45% less = £907.50
    per person
  • 9+ places at 50% less = £825.00
    per person
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