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Leveraged Buyouts: A Practical Introductory Guide to LBOs by David Pilger

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Chapter 11: Cash Flow

As you will see in this section, cash flow will dictate the target company’s ability to pay down the debt of the contemplated leveraged buyout capital structure and ultimately drive returns for the potential buyers of the company. We will start our cash flow analysis with net income and add back non-cash charges from the income statement. In our example we will also make some simple assumptions about the operating requirements of the company as they relate to net working capital as well as capital expenditure requirements. These assumptions are made so that rather than get entangled in the details of basic corporate finance we can move quickly to focus on the unique aspects of leveraged buyout analysis.

“Cash flow dictates ...

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