Perform LBO quick screen for a potential target:
1. Business Profile:
- Revenue and EBITDA
- Growth profile
- Cyclicality
- Market position
2. Cash Flow Characteristics:
- EBITDA margin
- Capex intensity (% of revenue)
- Working capital needs
- Free cash flow conversion
3. LBO Capacity:
- Debt capacity (assume 4-6x EBITDA)
- Interest coverage at various leverage levels
- Asset base for secured lending
4. Quick Returns Math:
- Entry multiple assumption
- Exit multiple assumption
- EBITDA growth assumption (5-year)
- Debt paydown capacity
- Implied IRR range
5. Value Creation Levers:
- Multiple expansion potential
- Margin improvement opportunity
- Deleveraging contribution
- M&A add-on strategy
6. Key Risks:
- Cyclical downturn sensitivity
- Customer concentration
- Key person risk
- Regulatory/political
7. Comparable Transactions:
- Recent deals in sector
- Multiples paid
- Acquirer profiles
Output: LBO attractiveness score (1-10) with indicative IRR range.
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LBO Quick Screen
LBOBuyoutPrivate EquityReturns
ThesisBoard
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Asset Class:Private Equity
Research Type:Fundamental
Stance:Neutral