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Advanced LBO Modeling

This course is a more thorough treatment of the standard LBO course covered in the Premium Package, and is designed for investment banking and private equity professionals who want to take their LBO modeling skills to the next level.  Trainees build a full LBO model with stock vs asset sale toggles, multiple tranches of debt, PIK toggles, and sophisticated deferred tax and depreciation schedules.

Course Samples

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Reviewing Our LBO Model

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Distribution Waterfall Exercise

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WSP Course Manual

Leveraged Buyout Modeling Course Notes


What You Will Learn

  • Learn how an LBO / Recapitalization works given today’s benchmarks and credit environment
  • Develop an “industrial strength” LBO model driven off a fully integrated 3 statement model
  • Integrate switches for LBO vs. Recap accounting treatment
  • Toggle between tax and valuation implications of asset deals, (338(h)(10) election, and stock sale
  • Learn best practices for modeling Senior, Revolver, Sub, Mezzanine and Preferred stock
  • Add a PIK toggle to various debt tranches
  • Integrate cash sweep functionality into term loan debt tranches
  • Build the Sources & Uses (S&U) schedule – the correct way
  • Analyze & sensitize IRRs for sponsors, management, preferreds, and mezzanine
  • Modeling complex accounting adjustments including deferred taxes, fair value write ups, and goodwill
  • Attach a DCF valuation to your LBO
  • Use as a reference to get ahead on the job and in your career
  • Gain the confidence to ace your private equity interviews

Advanced LBO Modeling Highlights

  1. Step-By-Step Modeling Instruction

    Wall Street Prep’s Advanced LBO Modeling Self Study Program teaches students how to build, analyze, and interpret LBO models and transactions in a step-by-step fasion using videos, readings, ready-to-use LBO models and exercises using a real case study.

  2. Real World “On the Job” Investment Banking Training

    The Advanced LBO Modeling Program bridges the gap between academics and the real world to equip students with the practical financial skill set that they will need in private equity and leveraged finance. Students learn LBO modeling in Excel from scratch using intuitive, step-by-step instruction and model templates the way it is actually performed in private equity. The program utilizes a case study format, as students follow their tutorial guide alongside the Excel model templates, and are directed to the appropriate external documents (SEC filings, research reports, etc.) in order to build complex LBO model the way they would on the job.

  3. Support Center

    Upon enrollment, students gain 24-month free access to Wall Street Prep’s Online Support Center, where they receive answers to questions, free downloads, and important updates.

  1. Boost Add-In for Excel

    Free Access to Boost, an all-in-one suite of time-saving tools designed for people who build financial models in Excel. Key features include: Easily assign custom shortcuts to all of Boost’s features; Easily understand long formulas with the powerful ‘Precedents’ and ‘Dependents’ Tool; A fully functioning classic 2003 menu (in ’07 and ’10 Excel); And much more!


  • Accounting: The program assumes a basic introductory knowledge of accounting (e.g. interaction of balance sheet, cash flow, and income statement). Students with no prior background in Accounting should enroll in the Accounting Refresher Supplement in addition to the Self Study Program (option available at check-out).
  • Corporate Finance: Although general exposure to corporate finance is helpful, it is not required.
  • Excel: Basic introductory Excel knowledge is highly recommended. Students with limited or no experience using Excel should enroll in the Excel Crash Course Supplement in addition to the Self Study Program (option available at check-out).

Advanced LBO Modeling Agenda

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Introduction to LBOs and recaps

  • Understanding concepts: Working through an LBO on a cocktail napkin
  • What is the current financing and valuation environment?
  • What are key industry benchmarks?
  • LBO capital structure: TLs, Bonds, Mezz, Preferred, Bridge Loans and Equity

The Structure of PE Firms & Investor Dynamics

  • How PE funds work and where they fit in the financial system
  • GP vs LP dynamics
  • PE Economics: The distribution waterfall

LBO model development

  • Setting up the initial valuation and general assumptions
  • Calculating diluted shares
  • Building the Sources & Uses schedule
    • Build a heavy duty, yet flexible, sources & uses of funds schedule
    • Make adjustments in one place – watch it flow error-free throughout entire model
  • Line-by-line build-up and forecasting of the income statement and working capital schedules
  • Modeling LBO debt
    • Term loan A/B/C– Modeling mandatory amortization as well as cash sweeps
    • Revolver – Automatic cash sweep, minimum cash balance, and maximum borrowing capacity
    • Pricing matrix driven off LIBOR spot rates + spread
    • Senior and Sub Notes – Modeling PIK vs Cash interest
    • Preferred stock – Allowing for equity kickers
  • LBO returns and exit analysis for all providers of capital:
    • Sponsor equity and management rollover
    • Lenders and preferreds
  • LBO modeling best practices
    • Circularity breaker and error trapping – no more DIV#0 and REF#!
    • Building key sensitivities into model outputs

Advanced LBO modeling

  • Building PIK toggles into debt tranches
  • Layering a Pro Forma 3 Statement Model on the LBO Analysis
    • Key balance sheet adjustments in an LBO
    • Advanced Purchase Price Allocation (PPA) modeling:
      • Goodwill
      • Asset write-ups
      • Deferred taxes created in the deal
    • Toggling between LBO and recapitalization accounting treatment
    • Creating a switch for Asset sale/338 vs Stock Sale tax treatment
  • Modeling dividend recaps
  • Attaching a DCF analysis to an LBO model