How would you suggest practicing LBO analysis? Would you generally start from scratch and build out a 3-statement model with projections and then build out the analysis, or would you just take a 3-statement model from work and do the analysis from there?
I ask because I'm trying to start practicing the LBO, and initially thought it would be best to start by building a 3-statement model, but it's taking FOREVER. I don't have a whole lot of experience with modeling but I do understand it pretty well, but building out a model with 2 years of historicals and 5 years of projections with the schedules takes forever - I'm trying to practice LBO analysis here, not building a financials model.
What are the LBO tests like in PE interviews? Do you generally have to build everything from scratch?
*If I'm missing something, please let me know. Based on what I know about LBOs, you pretty much need all 3 statements with projections to build it. I have ZERO experience with LBOs, but I know you start with sources and uses, pro forma the target's B/S based on sources and uses, build out the WC, capex, and D&A/PPE schedules, calc. FCF, build out debt schedule based on FCF used as a paydown on revolver/loan after paying interest, then calculate IRR based on initial equity investment and excess proceeds after paying down remaining debt on exit price (generally assumed as the same multiple as purchase EBITDA multiple).
So... sorry for the mess of questions here. Basically...
(1) Is building out the 3 statements the best way to practice an LBO?
(2) Is that how you go about doing an LBO analysis?
Thanks.
just curious: is this for ft analyst pe interviews or are you trying for an associate role post IB/consulting?
What?
If you can't quickly build out the 3-statements, you wont have a shot in hell at building an LBO.
Start with and master modeling the 3-statements.
Then expound onto that LBO skills.
The LBO will entail alot more like purchase price considerations, full debt and interest schedule including a revolver, PF Balance Sheet, goodwill build-up etc...
Learn the basics first. Learn to model the 3 statements.
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