lbo-returns-analysislisted

# Financial Scenario Modelling ## When to use Use this skill when you need to build or stress-test the returns analysis for an LBO acquisition. It is most useful in three situations: (1) ahead of an indicative bid, when you need to establish the range of supportable entry prices; (2) ahead of a final bid, when you need to refine the model with updated diligence data; or (3) ahead of the IC memo, when you need to present returns under clearly defined scenarios with transparent assumptions. This skill structures the logic and the sensitivity analysis -- it does not replace a live Excel model, but it defines what that model must contain and what assumptions to test. ## What it does Produces: (1) a structured LBO model logic description (sources and uses, capital structure, operating assumptions, exit assumptions); (2) bear/base/bull scenario assumptions clearly differentiated; (3) a returns sensitivity table described in prose (MOIC and IRR vs entry multiple and exit multiple, and vs leverage and interest rate); and (4) a covenant headroom analysis and downside protection assessment. ## Method ### Step 1 -- Sources and uses of funds Define the transaction structure: **Enterprise value (entry):** EV = entry multiple x LTM EBITDA (or NTM EBITDA if forward-looking). State both the multiple and the EBITDA base. Note whether EBITDA is management-adjusted or QoE-adjusted -- always use QoE-adjusted as the base after financial diligence. **Sources of funds:** - Senior secured d