LBO · 5 questions

LBO 1

What makes a buyout work, where the return comes from, and what recaps and PIK notes do to the statements.

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  1. 1 Where an LBO return comes fromA private equity firm wants a higher return (IRR) on a buyout. All else equal, which of these help? AnalystAssociate Pick the drivers
  2. 2 A good LBO candidateWhat makes a company a good candidate for a leveraged buyout? InternAnalyst Pick the drivers Plus
  3. 3 A dividend recapA company owned by a private equity firm borrows £100 and pays all of it to its owner as a dividend. Associate Build the statements Plus
  4. 4 PIK interestA company’s PIK note charges £10 of interest this year. PIK interest isn’t paid in cash: it is added to the debt. It is tax-deductible; the tax rate is 25% and tax is paid in cash. Associate Build the statements Plus
  5. 5 Auction or bilateral sale?A sponsor client wants to sell one of its portfolio companies. When would you advise a targeted, bilateral process rather than a broad auction? VP & above Pick the drivers Plus