An LBO pitch is very similar to a stock pitch, in which it entails talking about your thought process and what you believe makes a good company. You can speak about how it meets the fund’s investment parameters, as well as its stable and recurring cash flows, being a market leader in a defensible ...

The portfolio company may not have enough cash to execute market expansions, do add-on acquisitions, or meet working capital needs. It’s also possible the portfolio company is still growing, and may take some time before generating higher cash flows. As a result, the portfolio company may prefer P...

First, we can account for the equity purchase. We should subtract any existing shareholder’s equity from the target’s balance sheet, since we’re buying it. Then we should add the equity invested from the sponsor and management rollover which can be found in the sources and uses table. Then we ...

The purpose of the sources and uses table is to calculate how much equity the sponsor needs to put in for the purpose of calculating returns later on. We start by calculating total uses, which represents how much money will be spent in acquiring the company as well as paying for transaction and fina...

An LBO model is circular because of the interest expense. The interest expense on the debt pay reduces cash flow. This reduction in cash flow decreases the amount of debt you can repay back. By repaying back less debt, you will have a higher debt balance, which then increases your interest expense. ...

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