Lbo case study example

Image Source: CFI’s LBO Model Course. The private equity firm (aka, the financial sponsor) in the transaction will build the LBO model to determine how much debt they can strap on the business without blowing through the debt covenants and credit metrics they know the lenders will impose.

With the entry valuation and transaction assumptions filled out, we can now list out the debt assumptions related to each debt tranche, such as the turns of EBITDA (“x EBITDA”), pricing terms, and amortization requirements. The amount of debt that a lender has provided is expressed as a multiple of EBITDA (also called a “turn”).

You should do this problem set on a piece of paper and pen. If you haven’t read our guide to crush paper LBO in private equity interviews, you should do that first.

The Standard LBO Modeling Test is the most common type of modeling test an interviewee will be given during the private equity recruiting cycle. The LBO modeling test we’ll go through here reflects the level of difficulty that all candidates should expect to encounter during most interviews.