Advanced LBO Modelling

£1,300.00 +VAT


This LBO Modelling course can also be presented in-house via live webinar.

LBO Modelling Course Objectives:

Participants will:

  • Learn about the LBO Market and the effect of leveraged on the value of a business
  • Get an overview of the LBO process, including how to determine the capital structure and assess the value creation.
  • Have explained to them how to value the target by sourcing information, building a DCF valution and comparing and contrasting DCF and the LBO model structure
  • Master the key elements of an LBO model including debt waterfalls
  • Gain an understanding of the debt capacity for LBO financing
  • Learn about the capital providers and their typical characteristics
  • Analyse value creation in a transaction

LBO Modelling Course Content:

Leverage Overview

  • Background to the LBO market
  • Introductory theory – The effect of leverage on firm value

Valuing the target

  • Sourcing information – Historic and forecast data
  • Analysing equity research
    • Key attributes of broker analysis
    • Pluses and minuses of equity research
  • Building a DCF valuation using equity research
  • Modelling the stand alone valuation
    • DCF valuation
    • Use of multiples in valuation (EV/EBIT, EV/EBITDA)

Case Study I: Participants model the stand alone valuation of the target using historic data and equity research

LBO Modelling Overview

  • Key elements of an LBO model
    • Comparing and contrasting DCF and LBO models
    • Sources and uses of funds
    • Key drivers in an LBO model
  • From stand alone valuation to LBO analysis

Case Study II: Participants use the stand alone valuation of the target to complete an LBO model

Assessing debt capacity for LBO financing

  • Financial interdependencies
  • Financing growth
  • Sustainable debt
  • Target debt capacity assumed in a WACC calculation, debt capacity and interest cover Debt capacity in LBOs
  • Debt capacity multiples in practice and credit analysis

Case Study III: Modelling the debt capacity of the target using multiple and credit analysis

Capital providers and their typical characteristics

  • Institutional and management equity
  • Traditional/new lenders
  • Senior tranche profiles
    • A, B, C, RCF
  • Subordinated tranche profiles
    • Second lien
    • Mezzanine (with/without warrants)
    • PIK
    • High yield bonds
  • More complex issues – warrants and options
  • Typical LBO transaction sensitivity analysis, management, base and payout cases

Case Study IV: Modelling a more complex capital structure with various scenarios calculating exit value and IRR for each of the capital providers

Assessing value creation in LBO transactions – APV analysis and dividend recaps

  • Key components of an APV valuation
    • Unlevered value
    • Value of the tax shield
    • Direct and indirect cost of leverage
  • APV valuation and DCF valuation
  • APV valuation in a steady state
  • Calculating AP in a steady growth environment
  • Incorporating APV analysis in an LBO transaction analysis
  • Sustaining returns via a dividend recap

Case Study V: Where has value been created, modelling APV analysis and dividend recap for an LBO transaction

Background of the Trainer:

The trainer is a qualified chartered accountant, who spent several years in corporate finance post qualification. He then spent 18 years in the investment management industry as an analyst/fund manager with Threadneedle Asset Management, a director and head of UK Equities at Scottish Widows Investment Partnership as European, then Global Head of Equity Research at HSBC Asset Management. He ran various types of retail and wholesale funds and produced research on companies in Europe and on a global basis. He developed valuation and research processes and managed teams of European and global analysts and fund managers.

Since leaving the investment management industry the trainer has managed the investment management and investment banking operations of a UK based training company developing programmes for clients as diverse as HSBC, Morgan Stanley, Deutsche Bank, Citigroup, Allen & Overy, JP Morgan, Barclays Bank, Barclays Wealth, Morgan Stanley Investment Management and Schroders. He has managed major graduate programmes for investment banking and investment management clients, training graduate to managing director level participants and advising clients on their training requirements for accountancy, corporate finance and valuation, investment management and private wealth training.

LBO Modelling Course Summary:

This course covers the key elements of modelling in an LBO analysis. Participants will value the target business using historic data and available equity research. The valuation process will incorporate absolute and relative valuation techniques. Once the target business has been valued, participants will be introduced to LBO analysis and construct an LBO model. The LBO modelling analysis will be developed by assessing the debt capacity of the business to determine the range of capital structures available for the transaction and how credit analysis is used in the LBO modelling process.

The participants will then cover more complex LBO instruments such as warrants and PIKs, how they can be incorporated into an LBO structure and how to calculate returns to each of the equity and debt providers. Participants will model a more complex capital structure and calculate exit values and the IRRs generated by each investor. Using the integrated model participants will then analyse various scenarios (management case, base case, payout case) to derive the optimum financing structure taking into account the financial constraints of each investor.

The participants will then undertake an adjusted present value (“APV”) analysis to determine where value has been created in the LBO transaction using an APV model and finally look at a recovery analysis for a failed LBO transaction.

Case Study: The participants will use a variety of case studies and exercises during the two days, based on publically quoted and generic companies.

Participants will be required to bring a laptop and a calculator to the course.


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5-6 participants – 20% discount,7-8 participants – 25% discount,Over 9 participants – 30% discount


15-16 November 2018, 14-15 February 2019, 27-28 June 2019, 7-8 November 2019