LBO MODEL EXAM QUESTIONS AND VERIFIED
COMPLETE ANSWERS GRADED A++ LATEST UPDATE
how to PE firms make money?
buying businesses with a combination of cash and more importantly, debt raised from
investors
spending on average 3-5 years to make improvements to the business (increase growth
and/or improve margins), while using the cash flow to make interest payments
selling the business for a higher price through M&A or IPO, and then repaying the
balance of the debt with the proceeds
why do PE firms use debt in all of their deals?
because cash today is worth more than cash tomorrow, so they would rather borrow
money than have less cash today
How do you make money in a LBO?
the business generates cash flow, which is used to pay down the debt, so the PE firm's
ownership in the company increases.
As the business improves its growth rate and/or margins, it can be sold for a higher
multiple than it was purchased for
what makes a good LBO candidate?
COMPLETE ANSWERS GRADED A++ LATEST UPDATE
how to PE firms make money?
buying businesses with a combination of cash and more importantly, debt raised from
investors
spending on average 3-5 years to make improvements to the business (increase growth
and/or improve margins), while using the cash flow to make interest payments
selling the business for a higher price through M&A or IPO, and then repaying the
balance of the debt with the proceeds
why do PE firms use debt in all of their deals?
because cash today is worth more than cash tomorrow, so they would rather borrow
money than have less cash today
How do you make money in a LBO?
the business generates cash flow, which is used to pay down the debt, so the PE firm's
ownership in the company increases.
As the business improves its growth rate and/or margins, it can be sold for a higher
multiple than it was purchased for
what makes a good LBO candidate?
