LBO & Paper LBO
In a typical paper LBO with no excess-cash sweep modeled, where does 'debt paydown' value actually come from — repayment or cash accumulation?
Model answer
It depends on assumptions. If you model a cash sweep / mandatory amortization, FCF reduces debt directly, lowering net debt. If you do NOT sweep, FCF accumulates as cash on the balance sheet, which…
The full, human-reviewed answer is in the bank.
Sign up free and Daily 10 serves you 10 questions a day from all 1,500+ — or go Pro for unlimited reps.
More from LBO & Paper LBO
- What is a leveraged buyout?
- What makes a company a good LBO candidate?
- What drives returns in an LBO?
- Why does using more leverage increase equity returns (when it works)?
- At a high level, how do you calculate the IRR or money multiple on an LBO?
- Name the three primary value-creation (returns) drivers in an LBO.