Mini Model Walkthrough Flashcards
• What is the purpose of a mini model and at what stage is it normally applied?
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)
• Where does entry EBITDA multiple comes from?
o Depends on industry and growth profile. Can get an indication from bankers/comps
• What does cash free debt free means?
o As buyers we are only concerned with the enterprise value. The resulting equity value is for the sellers to focus on
• What do we mean by amort%?
o The amount of remaining principal that will be paid in that year
• What do we mean by sweep %
o Amount of excess cash that must be paid on top of mandatory amort amount
• Till what line in Income statement do we usually take managements projections in the income statement in a mini model and why?
o EBITDA/EBIT because we are about to lever up the capital structure which impacts resulting interest expense compared to managements case
• What do we mean by a revolver?
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.
• What is sweet equity?
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
• What is the rollover concept?
o Management roll equity into transaction so PE sponsor pays less
• What is the amortisation of debt based on in an LBO?
o The initial PRINCIPAL amount. The yearly amort expenses however cannot exceed the remaining principal due