How do you value an LBO?

How do you value an LBO?

Valuation Key Steps In order to perform an LBO valuation, the following is required (as a minimum): An operating model, forecasting EBIT and EBITDA. A debt repayment model forecasting how debt will develop from acquisition to exit. An assumption of when and at what multiple the LBO investor can exit.

Is LBO a valuation method?

A leveraged buyout (LBO) valuation method is a type of analysis used for valuation purposes. This analysis is carried out in order to project the enterprise value of a company by the financial buyer that acquires it.

How is DCF valuation done?

The following steps are required to arrive at a DCF valuation:

  1. Project unlevered FCFs (UFCFs)
  2. Choose a discount rate.
  3. Calculate the TV.
  4. Calculate the enterprise value (EV) by discounting the projected UFCFs and TV to net present value.
  5. Calculate the equity value by subtracting net debt from EV.
  6. Review the results.

Would an LBO or DCF give a higher valuation?

Would an LBO or DCF give a higher valuation? Technically it could go either way, but in most cases the LBO will give you a lower valuation. With a DCF, by contrast, you’re taking into account both the company’s cash flows in between and its terminal value, so values tend to be higher.

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How is COC calculated for a leveraged buyout?

CoC is calculated as the final value of the equity investment at exit divided by the initial equity investment, and is expressed as a multiple. Typical LBO investments return 2.0x – 5.0x cash-on-cash.