Mini Model Walkthrough Flashcards

1
Q

• What is the purpose of a mini model and at what stage is it normally applied?

A

o Pre IOI stage. It allows to calc indicative returns that will show whether we should proceed to an IOI using CIM information (management case)

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2
Q

• Where does entry EBITDA multiple comes from?

A

o Depends on industry and growth profile. Can get an indication from bankers/comps

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3
Q

• What does cash free debt free means?

A

o As buyers we are only concerned with the enterprise value. The resulting equity value is for the sellers to focus on

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4
Q

• What do we mean by amort%?

A

o The amount of remaining principal that will be paid in that year

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5
Q

• What do we mean by sweep %

A

o Amount of excess cash that must be paid on top of mandatory amort amount

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6
Q

• Till what line in Income statement do we usually take managements projections in the income statement in a mini model and why?

A

o EBITDA/EBIT because we are about to lever up the capital structure which impacts resulting interest expense compared to managements case

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7
Q

• What do we mean by a revolver?

A

o If cash generated from operations does not cover capex and mandatory debt repayments we tap into the revolver. It is an emergency back up facility.

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8
Q

• What is sweet equity?

A

o Management share of incremental (Newly created) equity value appreciation after a deal is done
o (Final Equity value – Initial Equity put in) * Management Option Pool

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9
Q

• What is the rollover concept?

A

o Management roll equity into transaction so PE sponsor pays less

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10
Q

• What is the amortisation of debt based on in an LBO?

A

o The initial PRINCIPAL amount. The yearly amort expenses however cannot exceed the remaining principal due

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