Managerial Accounting Essay

Kinetic Concepts Leveraged Buyout Model – Quick Reference Guide

>>> Click here to save over $900 and Get All the Modeling Courses
You should use this document as a quick reference for the Kinetic Concepts LBO model and webinar. We move quickly in the webinar, so you can follow along here and review the key steps afterwards.

Today's Session – Outline
1. Private Equity Case Studies 101
 Common to get case studies based on recent/significant deals like this
 In the real world you need to build models quickly
 Figure out what to simplify – eliminate Balance Sheet, PPA, more complex debt schedules and
Revolver
2. Assumptions and Setup
 Purchase and Exit Multiples, Fees, Minimum Cash, and % Debt Used
 Debt Tranches, Interest Rates, and Annual Principal Repayment %
 Sources & Uses only – skip Purchase Price Allocation and Goodwill
3. Income Statement Projections
 Use provided revenue growth assumptions and averages for expenses
4. Cash Flow Statement Projections
 Eliminate everything but Net Income, non-cash adjustments, working capital, and CapEx
 Use 3-year averages as % of revenue for most of these items
5. Debt Schedules & Linking the Statements
 Determine Cash Available for Debt Repayment
 Use MIN Formulas for Mandatory and Optional Debt Repayments
 Link Debt Repayments on CFS and Net Interest Expense on IS
6. Calculating Investor Returns & Sensitivities
 Use IRR Function, Based on Exit Enterprise Value – Debt + Cash
7. Answering the Case Study Questions
 Focus on the Numbers and use those to support your answers (limited time)
 In particular, if Downside case looks really bad and Base case is not that great, it’s an easy “no invest” recommendation

Questions to Enhance Your Learning
Q: What’s the problem with the debt assumptions we entered in the beginning of the model?

Q: Why does the $6.8 billion under “Uses” in the Sources & Uses schedule not match the $6.5 billion in
“Funds Required” that KCI estimates?

JobSearchDigest.com Webinar Oct 15, 2013

Page 1

Kinetic Concepts Leveraged Buyout Model – Quick Reference Guide

>>> Click here to save over $900 and Get All the Modeling Courses

Q: What’s wrong with the formula we entered for optional repayment in this debt schedule?

Case Study Answers
1.

Based on the returns, would you invest in Kinetic Concepts along with Apax Partners? Why or why not? 2.

What is the most plausible way to make different assumptions if you want to target a higher IRR?

3.

How much does the company’s substantially different post-buyout performance affect the IRR and our investment recommendation?

4.

What are the advantages and disadvantages to simplifying the model the way we did and eliminating the balance sheet? When would you do this / not do

Show More