Current Date 2012 Current Share Price $30.00 Fully Diluted Shares Outstanding 500.0 Market cap Current Debt 600.0 Current Cash 100.0 Current Net Debt Enterprise Value LTM Revenue 6,000.0 LTM EBITDA 2,400.0 Free cash flows after debt paydown 480.0 EV / EBITDA multiple LBO Assumptions Exit Date 2016 LBO Debt Capacity (Net debt/EBITDA) 6.0x Minimum cash balance 50.0 EBITDA multiple in exit year Financial Sponsor Required Equity Return 25.0% Select Operating and Financial Data Projected Annual Forecast 2012A 2013E 2014E 2015E 2016E Revenue 6,000.0 Revenue Growth Rate (%) EBITDA 2,400.0 EBITDA Margin (%) 40.0% Free cash flow after required debt paydown 480.0 FCF Margin (%) 8.0% Cash 100.0 Debt 600.0 Net Debt 500.0 Debt Schedule Projected Annual Forecast 2013E 2014E 2015E 2016E LBO Debt, Beginning of Period - Required paydown (1,000.0) (1,000.0) (1,000.0) (1,000.0) - Optional paydown (after min cash balance) LBO Debt, End of Period Questions: 1.What is the implied Enterprise Value in the exit year? 2.What is the implied Equity Value at the exit year? 3.What is the maximum amount financial sponsors can invest in this company? Questions: 1.How much do sponsors have to acquire this company and pay off it's debt? 2.What is the highest purchase price the sponsors would be willing to pay for XYZ shares today? 3.Given XYZs market trading level, is an LBO likely? Comments Current date and exit date assumed to be Dec 31 for simplicity Net Debt = Debt - Cash Enterprise Value = Mkt cap + net debt Current date and exit date assumed to be Dec 31 for simplicity Based on current debt market conditions Company must maintain a minimum cash balance for a "rainy day" Generally assumed to be the same as the entry multiple Higher required return due to increased debt and riskiness Projected Annual Forecast 2017E 2018E 2019E Assumed to remain constant with revenues for simplicity Assumed to remain constant with revenues for simplicity Beginning cash balance plus change in cash over the period From Debt Schedule below Net Debt = Debt - Cash Projected Annual Forecast 2017E 2018E 2019E LTM Debt * LBO Debt Capacity (1,000.0) (1,000.0) (1,000.0) Assumed to be $1,000 per year Excess cash on hand or generated throughout the year can be used to pay down debt Excess cash on hand or generated throughout the year can be used to pay down debt Leveraged Buyout Analysis for Company XYZ Select Operating and Financial Data Current Date 2012 Current Share Price $30.00 Fully Diluted Shares Outstanding 500.0 Market cap 15,000.0 Current Debt 600.0 Current Cash 100.0 Current Net Debt 500.0 Enterprise Value 15,500.0 LTM Revenue 6,000.0 LTM EBITDA 2,400.0 Free cash flows after debt paydown 480.0 EV / EBITDA multiple 6.5x LBO Assumptions Exit Date 2016 LBO Debt Capacity (Net debt/EBITDA) 6.0x Minimum cash balance 50.0 EBITDA multiple in exit year 6.5x Financial Sponsor Required Equity Return 25.0% Select Operating and Financial Data Projected Annual Forecast 2012A 2013E 2014E 2015E 2016E Revenue 6,000.0 6,600.0 7,260.0 7,986.0 8,784.6 Revenue Growth Rate (%) 10.0% 10.0% 10.0% 10.0% EBITDA 2,400.0 2,640.0 2,904.0 3,194.4 3,513.8 EBITDA Margin (%) 40.0% 40.0% 40.0% 40.0% 40.0% Free cash flow after required debt paydown 480.0 528.0 580.8 638.9 702.8 FCF Margin (%) 8.0% 8.0% 8.0% 8.0% 8.0% Cash 100.0 50.0 50.0 50.0 50.0 Debt 600.0 12,822.0 11,241.2 9,602.3 7,899.6 Net Debt 500.0 12,772.0 11,191.2 9,552.3 7,849.6 Debt Schedule Projected Annual Forecast 2013E 2014E 2015E 2016E LBO Debt, Beginning of Period 14,400.0 12,822.0 11,241.2 9,602.3 - Required paydown (1,000.0) (1,000.0) (1,000.0) (1,000.0) - Optional paydown (after min cash balance) (578.0) (580.8) (638.9) (702.8) LBO Debt, End of Period 12,822.0 11,241.2 9,602.3 7,899.6 Questions: 1.What is the implied Enterprise Value in the exit year? 2.What is the implied Equity Value at the exit year? 3.What is the maximum amount financial sponsors can invest in this company? Questions: 1.How much do sponsors have to acquire this company and pay off it's debt? 2.What is the highest purchase price the sponsors would be willing to pay for XYZ shares today? 3.Given XYZs market trading level, is an LBO likely? Comments Current date and exit date assumed to be Dec 31 for simplicity Net Debt = Debt - Cash Enterprise Value = Mkt cap + net debt Current date and exit date assumed to be Dec 31 for simplicity Based on current debt market conditions Company must maintain a minimum cash balance for a "rainy day" Generally assumed to be the same as the entry multiple Higher required return due to increased debt and riskiness Projected Annual Forecast 2017E 2018E 2019E 9,663.1 10,629.4 11,692.3 10.0% 10.0% 10.0% 3,865.2 4,251.7 4,676.9 Assumed to remain constant with revenues for simplicity 40.0% 40.0% 40.0% 773.0 850.3 935.4 Assumed to remain constant with revenues for simplicity 8.0% 8.0% 8.0% 50.0 50.0 50.0 Beginning cash balance plus change in cash over the period 6,126.5 4,276.2 2,340.8 From Debt Schedule below 6,076.5 4,226.2 2,290.8 Net Debt = Debt - Cash Projected Annual Forecast 2017E 2018E 2019E 7,899.6 6,126.5 4,276.2 LTM Debt * LBO Debt Capacity (1,000.0) (1,000.0) (1,000.0) Assumed to be $1,000 per year (773.0) (850.3) (935.4) Excess cash on hand or generated throughout the year can be used to pay down debt 6,126.5 4,276.2 2,340.8 22,693.6 14,844.0 6,080.1 20,480.1 $39.96 Yes; 33% premium Excess cash on hand or generated throughout the year can be used to pay down debt