Financial ModellingLeveraged Buyout (LBO) Financial Model
LBO Financial Model
A leveraged buyout (LBO) is an acquisition of a company or a segment of a company funded mostly with debt. The remaining is funded with an equity contribution from a financial sponsor.
The sponsor's strategy is to realise a gain on exit, either through sale or IPO.
The high level of debt is supported by projected free cash flow and/or the target companies asset base. The ability to leverage the investment is important for the sponsors to achieve desired returns.
An LBO financial model is used to evaluate the potential free cash flow, levels of debt and returns.
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