The document summarizes the leveraged buyout of Company A that occurred in 2005 and its subsequent sale in 2010. In 2005, the private equity firm acquired Company A for $396 million by contributing $108 million in equity and obtaining $304 million in debt financing. By 2010, the company's value had increased substantially and was sold for proceeds of $299 million to the private equity firm and $33.2 million to the unsecured lender, providing annualized returns of 22.6% and 16.6%, respectively.
1. LBO of Company A
($ in millions)
TRANSACTION ASSUMPTIONS
Closing Date 31-Dec-05
2005 EBITDA $66.0
EBITDA Multiple 6.0x
Purchase Price $396.0
TOTAL USES TOTAL SOUR
Uses Capitalization
Equity Purchase Price $396.0 Revolver
Financing Fees $10.0 Term Loan
Investment Banking Fees $4.0 Second Lien
Legal Fees $1.0 Unsecured Notes with Warrants
Other Fees and Expenses $1.0 Total Debt
Total Fees $16.0 Equity
Total Uses $412.0 Total Sources
SALE OF COMPANY A IN 2010
Closing Date 31-Dec-10 IRR to Financial Sponsor 12/31/05
Initial Equity Investment ($108.0)
2010 EBITDA $84.2 Dividends $0.0
EBITDA Multiple 6.0x Proceeds at Sale $0.0
Purchase Price $505.4 Total Cash Flows to Sponsor ($108.0)
Less: Total Debt ($214.9) IRR Calculation 22.6%
Plus: Cash Balance $48.8
Less: Transaction Fees (1) ($7.1) IRR to Unsecured Lender 12/31/05
Equity Value $332.3 Initial Loan ($66.0)
% Equity to Sponsor 90.0% Cash Interest Received $0.0
Equity to Sponsor $299.0 Principal Repayment at Sale $0.0
Equity from Warrants at Sale $0.0
% Equity to Unsecured Lender 10.0% Total Cash Flows to Lender ($66.0)
Equity to Unsecured Lender $33.2 IRR Calculation 16.6%
(1) Assumes 1% of Purchase Price for Investment Banking Fees, plus $2 million in legal and other expenses.
Summary of Relevent Financial Statistics
Income Statement Statistics 2006
Revenue $126.0
EBITDA $69.3
2. Net Income $24.2
Net Interest Expense $21.0
Cash Interest Expense $14.1
Taxes $16.1
Revenue Growth na
EBITDA Margin 55%
EBITDA Growth na
Net Income Growth na
Net Income Margin 17%
Balance Sheet / Cash Flow Statistics
Cash $0.0
Total Debt $280.2
Net Debt $280.2
Secured Debt $207.2
Capex $8.8
Increase (Decrease) in W/C ($0.6)
Leverage Ratios
Total Debt / EBITDA 4.0x
Net Debt / EBITDA 4.0x
Secured Debt / EBITDA 3.0x
EBITDA / Net Interest Expense 3.3x
EBITDA / Cash Interest Expense 4.9x
Interest Coverage Statistics
EBITDA / Net Interest Expense 3.3x
EBITDA / Cash Interest 4.9x
EBITDA - Capex / Net Interest Expense 2.9x
EBITDA - Capex / Cash Interest Expense 4.3x
EBITDA - Capex - ∆ W/C / Net Interest Expense 2.9x
EBITDA - Capex - ∆ W/C / Cash Interest Expense 4.3x
EBITDA - Capex - ∆ W/C - Taxes/ Net Interest Expense 2.1x
EBITDA - Capex - ∆ W/C - Taxes/ Cash Interest Expense 3.2x