![]() ![]() Upon calculating the exit enterprise value using the exit multiple assumption and exit year EBITDA, the remaining net debt on the balance sheet as of the presumed date of exit can be deducted to arrive at the exit equity value.Īfter calculating the exit equity value attributable to the sponsor, the key LBO return metrics – i.e. In practice, the conservative assumption is to set the exit multiple equal to the purchase multiple. Next, the assumptions regarding the exit must be made – most notably, the exit EV/EBITDA multiple. LBO Exit Valuation and Returns Schedule (IRR and MOIC) The debt schedule is used to closely track the following:įor the LBO model to calculate the returns accurately, the debt schedule must adjust each debt tranche accordingly to determine the amount of debt paid down in each period (and the ending balances). In the subsequent step, the financial performance of the company is projected for a minimum five-year time horizon, which is the standard holding period assumed for modeling purposes.Ī complete 3-statement model is required for the LBO assumptions to properly impact the income statement and cash flow statement (i.e. The remaining amount for the sources & uses side to be equal is the equity contributed by the financial sponsor (i.e. ![]() Interest Rate Pricing, Required Amortization, Cash Sweep)
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