Conclusion

Creating a thorough leveraged buyout analysis requires the financial analyst to carefully examine several factors and scenarios regarding the target company and the leverage to be used in its purchase. As a practitioner in the corporate finance industry it is important to create an analysis that is accurate in reflecting, as best as possible, the current condition of the target company – and also flexible in considering the potential for different scenarios in the target company’s future operating environment or performance. It is important to establish a clear picture of the current financial condition of the company and then lay out the different outcomes that could arise based on the company’s future performance. This includes the company’s ability to profitably grow the business and ultimately generate returns for the owners and investors in the company. By understanding the fundamental techniques and principles underlying LBO analysis and by working through the model in this book, you should be able to develop a deeper understanding of the investor’s perspective and ultimately be able to use these techniques as a practitioner in the financial industry whether it be in investment banking or private equity or some other field.

“It is important to create an analysis that reflects, as best as possible, the current condition of the target company – and is also flexible in considering the potential for different scenarios.”

Finally, as you work through building the example LBO model analysis, or any other analysis, be certain to explore using different variables and assumptions to see how any changes will affect the forecasted performance of the target company. This will not only help in your understanding of the target company and the contemplated transaction, but more importantly it will help to reinforce some of the fundamental principles that are behind every leveraged buyout transaction. As always, the most important factor to understanding and development is repetition. For the MS Excel version of the example model used in this book – complete with a template, formulas, and completed version of the LBO analysis – go to www.fin-models.com.

“As always, the most important factor to understanding and development is repetition.”