Leveraged Buyout Full-Scale Model
If you have read the previous chapters several times, you have a good understanding of the leveraged buyout (LBO) theory. At the end of the last chapter we spoke about weaknesses of a simple leveraged buyout analysis, which warrant the need for a full-scale model. However, a simple analysis can be great for giving a rough indication of whether the investment is even worth looking at further.
A full-scale model does have major benefits:
Recall Step 3 in the LBO simple analysis, the calculation of exit debt. A full-scale model that is properly linked completely through will contain a debt schedule that will handle the paying down and adjustments of debt and interest. So you will see that, when we have a full-scale model, we don’t need to make all the ...