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Investment Banking

Valuation, Leveraged Buyouts, and Mergers & Acquisitions


LBO Analysis - Template

JOSHUA ROSENBAUM JOSHUA PEARL

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ValueCo Corporation
Financing Structure: Operating Scenario: Structure 1 Base

Leveraged Buyout Analysis


($ in millions, fiscal year ending December 31)

Transaction Summary
Sources of Funds Amount Revolving Credit Facility Term Loan A Term Loan B Term Loan C 2nd Lien Senior Notes Senior Subordinated Notes Equity Contribution Rollover Equity Cash on Hand Total Sources % of Total Sources -% -% -% -% -% -% -% -% -% -% -% Multiple of EBITDA 9/30/2008 Cumulative -x -x -x -x -x -x -x -x -x -x -x -x -x -x -x -x -x -x -x -x -x -x Pricing NA NA NA NA NA NA NA Uses of Funds Amount Purchase ValueCo Equity Repay Existing Debt Tender / Call Premiums Financing Fees Other Fees and Expenses % of Total Uses Purchase Price Offer Price per Share Fully Diluted Shares % Equity Purchase Price % Plus: Existing Net Debt % Enterprise Value % Transaction Multiples % Exit Year Entry Multiple Exit Multiple IRR Cash Return Options Financing Structure - x Operating Scenario - x Cash Flow Sweep Cash Balance - x Average Interest - x Financing Fees 1 1 1 1 1 1 Return Analysis 2013 -x -x NA NM

Total Uses

Enterprise Value / Sales LTM 9/30/2008 2008E Enterprise Value / EBITDA LTM 9/30/2008 2008E -%

Summary Financial Data


Historical Period 2005 Sales % growth Gross Profit % margin EBITDA % margin Capital Expenditures % sales Cash Interest Expense Total Interest Expense Free Cash Flow EBITDA Less: Cash Interest Expense Plus: Interest Income Less: Income Taxes Less: Capital Expenditures Less: Increase in Net Working Capital Free Cash Flow Cumulative Free Cash Flow NA 2006 2007 LTM 9/30/2008 NA Pro forma 2008 Year 1 2009 Year 2 2010 Year 3 2011 Year 4 2012 Projection Period Year 5 Year 6 2013 2014 Year 7 2015 Year 8 2016 Year 9 2017 Year 10 2018 -

Capitalization
Cash Revolving Credit Facility Term Loan A Term Loan B Term Loan C Existing Term Loan 2nd Lien Other Debt Total Senior Secured Debt Senior Notes Total Senior Debt Senior Subordinated Notes Total Debt Shareholders' Equity Total Capitalization % of Bank Debt Repaid -

Credit Statistics
% Debt / Total Capitalization EBITDA / Cash Interest Expense (EBITDA - Capex) / Cash Interest Expense EBITDA / Total Interest Expense (EBITDA - Capex) / Total Interest Expense Senior Secured Debt / EBITDA Senior Debt / EBITDA Total Debt / EBITDA Net Debt / EBITDA -x -x -x -x -x -x -x NM -x -x -x -x -x -x -x NM -x -x -x -x -x -x -x NM -x -x -x -x -x -x -x NM -x -x -x -x -x -x -x NM -x -x -x -x -x -x -x NM -x -x -x -x -x -x -x NM -x -x -x -x -x -x -x NM -x -x -x -x -x -x -x NM -x -x -x -x -x -x -x NM -x -x -x -x -x -x -x NM

($ in millions, fiscal year ending December 31)

Income Statement
Historical Period 2005 Sales % growth Cost of Goods Sold Gross Profit % margin Selling, General & Administrative % sales Other Expense / (Income) EBITDA % margin Depreciation & Amortization EBIT % margin Interest Expense Revolving Credit Facility Term Loan A Term Loan B Term Loan C Existing Term Loan 2nd Lien Senior Notes Senior Subordinated Notes Commitment Fee on Unused Revolver Administrative Agent Fee Cash Interest Expense Amortization of Deferred Financing Fees Total Interest Expense Interest Income Net Interest Expense Earnings Before Taxes Income Tax Expense Net Income % margin Income Statement Assumptions Sales (% YoY growth) Cost of Goods Sold (% margin) SG&A (% sales) Other Expense / (Income) (% of sales) Depreciation & Amortization (% of sales) Interest Income Tax Rate NA 2006 2007 LTM 9/30/2008 NA Pro forma 2008 Year 1 2009 Year 2 2010 Year 3 2011 Year 4 2012 Projection Period Year 5 Year 6 2013 2014 Year 7 2015 Year 8 2016 Year 9 2017 Year 10 2018 -

NA -% -% -% -%

-% -% -% -% -%

-% -% -% -% -%

NA -% -% -% -%

-% -% -% -% -% -%

-% -% -% -% -% -% -%

-% -% -% -% -% -% -%

-% -% -% -% -% -% -%

-% -% -% -% -% -% -%

-% -% -% -% -% -% -%

-% -% -% -% -% -% -%

-% -% -% -% -% -% -%

-% -% -% -% -% -% -%

-% -% -% -% -% -% -%

-% -% -% -% -% -% -%

($ in millions, fiscal year ending December 31)

Balance Sheet
Opening 2008 0.000 Adjustments + Pro Forma 2008 0.000 Year 1 2009 0.000 Year 2 2010 0.000 Year 3 2011 0.000 Year 4 2012 0.000 Projection Period Year 5 Year 6 2013 2014 0.000 0.000 Year 7 2015 0.000 Year 8 2016 0.000 Year 9 2017 0.000 Year 10 2018 0.000 -

Cash and Cash Equivalents Accounts Receivable Inventories Prepaids and Other Current Assets Total Current Assets Property, Plant and Equipment, net Goodwill and Intangible Assets Other Assets Deferred Financing Fees Total Assets Accounts Payable Accrued Liabilities Other Current Liabilities Total Current Liabilities Revolving Credit Facility Term Loan A Term Loan B Term Loan C Existing Term Loan 2nd Lien Senior Notes Senior Subordinated Notes Other Debt Other Long-Term Liabilities Total Liabilities Noncontrolling Interest Shareholders' Equity Total Shareholders' Equity Total Liabilities and Equity Balance Check Net Working Capital (Increase) / Decrease in Net Working Capital Balance Sheet Assumptions Current Assets Days Sales Outstanding (DSO) Days Inventory Held (DIH) Prepaid and Other Current Assets (% of sales) Current Liabilities Days Payable Outstanding (DPO) Accrued Liabilities (% of sales) Other Current Liabilities (% of sales)

-%

-%

-%

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-% -%

($ in millions, fiscal year ending December 31)

Cash Flow Statement


Year 1 2009 Operating Activities Net Income Plus: Depreciation & Amortization Plus: Amortization of Financing Fees Changes in Working Capital Items (Inc.) / Dec. in Accounts Receivable (Inc.) / Dec. in Inventories (Inc.) / Dec. in Prepaid and Other Current Assets Inc. / (Dec.) in Accounts Payable Inc. / (Dec.) in Accrued Liabilities Inc. / (Dec.) in Other Current Liabilities (Inc.) / Dec. in Net Working Capital Cash Flow from Operating Activities Investing Activities Capital Expenditures Other Investing Activities Cash Flow from Investing Activities Financing Activities Revolving Credit Facility Term Loan A Term Loan B Term Loan C Existing Term Loan 2nd Lien Senior Notes Senior Subordinated Notes Other Debt Dividends Equity Issuance / (Repurchase) Cash Flow from Financing Activities Excess Cash for the Period Beginning Cash Balance Ending Cash Balance Cash Flow Statement Assumptions Capital Expenditures (% of sales) Year 2 2010 Year 3 2011 Year 4 2012 Projection Period Year 5 Year 6 2013 2014 Year 7 2015 Year 8 2016 Year 9 2017 Year 10 2018 -

-%

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($ in millions, fiscal year ending December 31)

Debt Schedule
Pro forma 2008 -% Year 1 2009 -% Year 2 2010 -% Year 3 2011 -% Year 4 2012 -% Projection Period Year 5 Year 6 2013 2014 -% -% Year 7 2015 -% Year 8 2016 -% Year 9 2017 -% Year 10 2018 -%

Forward LIBOR Curve

Cash Flow from Operating Activities Cash Flow from Investing Activities Cash Available for Debt Repayment Total Mandatory Repayments MinCash Cash From Balance Sheet Cash Available for Optional Debt Repayment Revolving Credit Facility Revolving Credit Facility Size Spread Term Commitment Fee on Unused Portion Beginning Balance Drawdown/(Repayment) Ending Balance Interest Rate Average Interest Expense Commitment Fee Term Loan B Facility Size Spread Term Repayment Schedule Beginning Balance Mandatory Repayments Optional Repayments Ending Balance Interest Rate Interest Expense Senior Subordinated Notes Size Coupon Term Beginning Balance Repayment Ending Balance Interest Expense

-% 0 years -% -

-% 0 years - % Per Annum, Bullet at Maturity -

-% 0 years -

($ in millions, fiscal year ending December 31)

Returns Analysis
Pro forma 2008 Entry EBITDA Multiple Initial Equity Investment EBITDA Exit EBITDA Multiple Enterprise Value at Exit Less: Net Debt Revolving Credit Facility Term Loan A Term Loan B Term Loan C Existing Term Loan 2nd Lien Senior Notes Senior Subordinated Notes Other Debt Total Debt Less: Cash and Cash Equivalents Net Debt Equity Value at Exit Cash Return NM Year 1 2009 Initial Equity Investment Equity Proceeds -x -x Year 1 2009 Year 2 2010 Year 3 2011 Year 4 2012 Projection Period Year 5 Year 6 2013 2014 Year 7 2015 Year 8 2016 Year 9 2017 Year 10 2018

NM Year 2 2010

NM Year 3 2011 -

NM Year 4 2012 -

NM Year 5 2013 -

NM Year 6 2014 -

NM Year 7 2015 -

NM Year 8 2016 -

NM Year 9 2017 -

NM Year 10 2018 NA

IRR

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA Entry Multiple -1.0x -0.5x 0.0x 0.5x 1.0x

-1.0x NA NA NA NA NA

IRR - Assuming Exit in 2013E Exit Multiple -0.5x 0.0x NA NA NA NA NA NA NA NA NA NA

0.5x NA NA NA NA NA

1.0x NA NA NA NA NA

Exit Multiple

6.5x 7.0x 7.5x 8.0x 8.5x

-2 NA NA NA NA NA

IRR - Assuming 0.0x Entry Multiple Exit Year -1 0 NA NA NA NA NA NA NA NA NA NA

1 NA NA NA NA NA

2 NA NA NA NA NA

Assumptions Page 1 - Income Statement and Cash Flow Statement


Year 1 2009 Income Statement Assumptions Sales (% growth) Base Sponsor Management Downside 1 Downside 2 Cost of Goods Sold (% sales) Base Sponsor Management Downside 1 Downside 2 SG&A (% sales) Base Sponsor Management Downside 1 Downside 2 Depreciation & Amortization (% sales) Base Sponsor Management Downside 1 Downside 2 Interest Income Base Sponsor Management Downside 1 Downside 2 Cash Flow Statement Assumptions Capital Expenditures (% sales) Base Sponsor Management Downside 1 Downside 2 Year 2 2010 Year 3 2011 Year 4 2012 Projection Period Year 5 Year 6 2013 2014 Year 7 2015 Year 8 2016 Year 9 2017 Year 10 2018

1 2 3 4 5

-% -% -% -% -% -% -% -% -% -% -% -% -% -% -% -% -% -% -% -% -% -% -% -% -% -% -% -% -% -%

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Assumptions Page 2 - Balance Sheet


Year 1 2009 Current Assets Days Sales Outstanding (DSO) Base Sponsor Management Downside 1 Downside 2 Days Inventory Held (DIH) Base Sponsor Management Downside 1 Downside 2 Prepaids and Other Current Assets (% sales) Base Sponsor Management Downside 1 Downside 2 Current Liabilities Days Payable Outstanding (DPO) Base Sponsor Management Downside 1 Downside 2 Accrued Liabilities (% sales) Base Sponsor Management Downside 1 Downside 2 Other Current Liabilities (% sales) Base Sponsor Management Downside 1 Downside 2 Year 2 2010 Year 3 2011 Year 4 2012 Projection Period Year 5 Year 6 2013 2014 Year 7 2015 Year 8 2016 Year 9 2017 Year 10 2018

1 2 3 4 5

-% -% -% -% -% -%

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1 2 3 4 5

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1 2 3 4 5

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-% -% -% -% -% -% -% -% -% -% -% -%

-% -% -% -% -% -% -% -% -% -% -% -%

1 2 3 4 5

1 2 3 4 5

($ in millions)

Assumptions Page 3 - Financing Structures and Fees


Financing Structures 1 Structure 1 2 Structure 2 Structure 3 Structure 3 4 Structure 4 5 Status Quo Purchase Price Public / Private Target Entry EBITDA Multiple LTM 9/30/2008 EBITDA Enterprise Value Less: Total Debt Less: Preferred Securities Less: Noncontrolling Interest Plus: Cash and Cash Equivalents Equity Purchase Price 2 -x -

Sources of Funds Revolving Credit Facility Size Revolving Credit Facility Draw Term Loan A Term Loan B Term Loan C 2nd Lien Senior Notes Senior Subordinated Notes Equity Contribution Rollover Equity Cash on Hand Total Sources of Funds Uses of Funds Equity Purchase Price Repay Existing Bank Debt Tender / Call Premiums Financing Fees Other Fees and Expenses Total Uses of Funds Financing Fees

Calculation of Fully Diluted Shares Outstanding Offer Price per Share Basic Shares Outstanding Plus: Shares from In-the-Money Options Less: Shares Repurchased Net New Shares from Options Plus: Shares from Convertible Securities Fully Diluted Shares Outstanding -

Options/Warrants Tranche Tranche 1 Tranche 2 Tranche 3 Tranche 4 Tranche 5 Total Convertible Securities Amount Issue 1 Issue 2 Issue 3 Issue 4 Issue 5 Total Conversion Price Conversion Ratio New Shares Number of Shares Exercise Price In-the-Money Shares Proceeds -

Fees Structure 1 Revolving Credit Facility Size Term Loan A Term Loan B Term Loan C 2nd Lien Senior Notes Senior Subordinated Notes Senior Bridge Facility Senior Subordinated Bridge Facility Other Financing Fees & Expenses Total Financing Fees Amortization of Financing Fees Term Revolving Credit Facility Size Term Loan A Term Loan B Term Loan C 2nd Lien Senior Notes Senior Subordinated Notes Senior Bridge Facility Senior Subordinated Bridge Facility Other Financing Fees & Expenses Annual Amortization Administrative Agent Fee Year 1 2009 Year 2 2010 Year 3 2011 Year 4 2012 Year 5 2013 Size (%) ($) -

Year 6 2014 -

Year 7 2015 -

Year 8 2016 -

Year 9 2017 -

Year 10 2018 -

Copyright 2009 by Joshua Rosenbaum and Joshua Pearl. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 750-4470, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com.

Library of Congress Cataloging-in-Publication Data:

ISBN-13 978-0-470-44220-3 Printed in the United States of America 10 9 8 7 6 5 4 3 2 1

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