Question
You work for a private equity firm and you are analyzing the possibility of buying a company. Suppose the purchase price is 4.5 billion and
You work for a private equity firm and you are analyzing the possibility of buying a company. Suppose the purchase price is 4.5 billion and the debt percentage will be 50%. In the first case of your pro-forma analysis you considered that all proceeds during 5 years will be used to pay interest and amortization the debt, without any equity distributions. In the fifth year, after you sell the firm (or go thru an IPO) and pay off the rest of the remaining balance of debt, the total distribution will be 7.5 billion. Ignore taxes
- What is the MOIC (levered, including the use of debt)?
- What is the levered IRR?
- Would you recommend this LBO acquisition? Why?
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Fundamentals of Investment Management
Authors: Geoffrey Hirt, Stanley Block
10th edition
0078034620, 978-0078034626
