- For Students
Through Columbia Caseworks, The Private Equity Program has published a “Technical Note on LBO Valuation and Modeling.”
The Technical Note is intended for use by practitioners and academics, including MBA students, who are learning to model leveraged buy-outs.
The note discusses the structuring of leveraged buy-outs, a step-by-step approach to modeling a leveraged buy-out, a detailed section on frequently asked questions related to the assumptions behind leveraged buy-outs, and a sample model. An instructional video accompanies the materials.
The Technical Note provides students step-by-step instructions in the modeling of a leveraged buy-out, including
- Determining the purchase price and the amount of debt and equity required
- Assigning the debt quantum by tranche inclusive of coupons and repayment schedules
- Creating a table of sources and uses
- Building an income statement projection
- Calculating levered free cash flow for principal repayment
- Calculating the debt repayment schedule including mandatory and optional repayment
- Linking the debt schedule, cash flow and income statement
- Calculating investor returns encompassing sensitivities
The publication further distinguishes itself as an instructional tool by featuring a section on frequently-asked-questions, detailing answers to
- Model inputs, including how to assess purchase price as well as how to build the sources and uses table and determine the debt quantum and specific credit instruments,
- Model outputs, including investor sensitivity tables and credit ratios
- Summary financial statements, incorporating pricing and repayment schedules by credit instrument
Go to the Columbia Caseworks page to purchase and/or download a review copy and for information on academic licensing.
Information on non-academic sales are available as well. If at any time you need assistance with the ordering process, please contact us at [email protected] or (212) 854-1796.
The Technical Note was prepared under the direction of Margaret Cannella `76, and with the guidance from Ellen Carr, Adjunct Professor and Melina Robbana `12, Program Director of the Program for Financial Studies. Private Equity Fellows Program participants Claudio La Rosa `15, Bharath Rajagopalan `15 and Alexander J. Somers `15 contributed to the publication.
The Private Equity Program runs a Fellows Program for select MBA and EMBA students preparing for careers in private equity. In 2013-2014, the Fellows Program was run as a pilot and is now going into its third year.
The Fellows Program is run by Margaret Cannella ’76. Margaret is the Administrative Director of the Private Equity Program and has been teaching at Columbia Business School as an Adjunct Professor since 2008. She spent thirty years at JPMorgan and Citigroup in investment banking, retiring as Managing Director and Head of Global Research. She is currently working with Oaktree Capital, a private equity firm and sits on the boards of several manufacturing and financial services companies. Read more about the Private Equity Program.