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Paper LBO Tutorial
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Basics of an LBO Model
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Basic LBO Modeling Test
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Standard LBO Modeling Test
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Advanced LBO Modeling Test
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Private Equity Interview Questions
Top 25 Technicals →
Internal Rate of Return (IRR)
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Multiple on Invested Capital (MOIC)
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All Private Equity Content
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Ability to Pay Analysis (ATP)
Ability to Pay Analysis (ATP)What is Ability to Pay Analysis? Ability-to-Pay Analysis (ATP) is a method used by private equity investors to guide pricing and determine the affordability of a potential LBO acquisition. Often refer...
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Acquisition Financing
Acquisition FinancingWhat is Acquisition Financing? Acquisition Financing refers to the initial capital sources obtained to fund the purchase of a target business, (i.e. the mix of debt and equity in the capital structure...
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Add-On Acquisition
Add-On AcquisitionWhat is an Add On Acquisition? An Add On Acquisition in private equity refers to the purchase of a smaller-sized target by an existing portfolio company, where the acquired company is integrated into...
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Advanced LBO Modeling Test
Advanced LBO Modeling TestAdvanced LBO Modeling Test: Training Guide The following Advanced LBO Modeling Test training guide provides a step-by-step tutorial to complete a 3-hour practice LBO modeling test of advanced difficul...
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Basic LBO Modeling Test
Basic LBO Modeling TestWhat is an LBO Model Test? The LBO Model Test refers to a common interview exercise given to prospective candidates during the private equity recruiting process. Usually, the interviewee will receive...
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Basics of an LBO Model
Basics of an LBO ModelHow to Build an LBO Model LBO Modeling is a method to measure the implied returns on a leveraged buyout transaction (LBO), which is a specialized type of acquisition where a substantial percentage of...
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BMC Software Recapitalization
BMC Software RecapitalizationBMC Software Recapitalization In our LBO Modeling courses, our students learn that private equity investors have 3 strategies that they can deploy to exit their investments – 1) sell the investment co...
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Buy Side vs. Sell Side
Buy Side vs. Sell SideWhat is Buy-Side vs. Sell-Side? You'll often hear finance professionals describe their role as being either on the “sell side” or on the “buy side.” As is the case with a lot of finance jargon, what t...
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Cash Sweep
Cash SweepWhat is a Cash Sweep? The Cash Sweep refers to the optional prepayment of debt using excess free cash flows in advance of the originally scheduled repayment date. Once all mandatory payments have been...
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Cash-Free Debt-Free (CFDF)
Cash-Free Debt-Free (CFDF)What is Cash Free Debt Free? Cash Free Debt Free (CFDF) is a transaction structure where the buyer does not assume any debt on the seller’s balance sheet, nor gets to keep any leftover cash.
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Corporate Takeover
Corporate TakeoverWhat is Corporate Takeover? A Corporate Takeover describes an acquisition of a company, in which the acquirer obtains a controlling stake in the target.
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Customer Concentration
Customer ConcentrationWhat is Customer Concentration? Customer Concentration refers to the risk attributable to a company’s revenue being too reliant on a small subset of customers. Simply put, customer concentration risk...
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Deleveraging
DeleveragingWhat is Deleveraging? Deleveraging refers to the reduction of debt by a company in order to lessen the degree of financial leverage. In the specific context of a leveraged buyout (LBO), deleveraging d...
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Distribution to Paid-In Capital (DPI)
Distribution to Paid-In Capital (DPI)What is Distribution to Paid-In Capital? The Distribution to Paid-In Capital (DPI) ratio measures the cumulative proceeds returned to its investors by a fund relative to its paid-in capital.
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Dividend Recapitalization
Dividend RecapitalizationWhat is a Dividend Recapitalization? A Dividend Recapitalization is a strategy used by private equity firms to increase their fund returns from a leveraged buyout (LBO). In a dividend recapitalization...
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Dry Powder
Dry PowderWhat is Dry Powder? Dry Powder is a term referring to capital committed to private investment firms that still remains unallocated. Under the specific context of the private equity industry, dry powde...
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Financial Buyer
Financial BuyerWhat is a Financial Buyer? A Financial Buyer in M&A is defined as an acquirer that purchases a company as an investment to achieve a targeted return. Unlike strategic acquirers, financial buyers a...
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Fund of Funds (FOF)
Fund of Funds (FOF)What is Fund of Funds? Fund of Funds (FOF) refers to a pooled investment vehicle in which capital commitments from investors are allocated to a predetermined number of funds with different strategies.
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Growth Equity Primer
Growth Equity PrimerWhat is Growth Equity? Growth Equity is an investment strategy oriented around acquiring minority stakes in late-stage companies exhibiting high growth with significant upside potential in expansion,...
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Internal Rate of Return (IRR)
Internal Rate of Return (IRR)What is IRR? The Internal Rate of Return (IRR) is the annualized interest rate at which the initial capital investment must have grown to reach the ending value from the beginning value. The IRR measu...
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Investment Banking vs. Private Equity
Investment Banking vs. Private EquityInvestment Banking vs. Private Equity: What is the Difference? The private equity (PE) industry tends to be a common exit path for investment banking analysts and management consultants. As a result,...
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J-Curve
J-CurveWhat is the J-Curve? The J-Curve illustrates the timing of the receipt of proceeds by a private equity fund’s limited partners (LPs).
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LBO Analysis on a Cocktail Napkin
LBO Analysis on a Cocktail NapkinLBO Model from Scratch: Cocktail Napkin LBO Analysis As many of you know, Wall Street Prep conduct LBO Modeling boot camps across the globe. We get into relatively sophisticated modeling techniques an...
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LBO Candidate Characteristics
LBO Candidate CharacteristicsWhat Makes a Good LBO Candidate? LBO Candidates are characterized by strong, predictable free cash flow (FCF) generation, recurring revenue, and high profit margins from favorable unit economics.
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LBO Returns Attribution Analysis
LBO Returns Attribution AnalysisWhat is an LBO Returns Attribution Analysis? An LBO Returns Attribution Analysis quantifies the contribution from each of the main value creation drivers in private equity investments. The framework f...
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LTM EBITDA
LTM EBITDAWhat is LTM EBITDA? LTM EBITDA is a company’s earnings before interest, taxes, depreciation, and amortization across the trailing twelve months.
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Management Buyout (MBO)
Management Buyout (MBO)What is Management Buyout? A Management Buyout (MBO) is a leveraged buyout transaction structure in which a significant portion of the post-LBO equity contribution comes from the prior management team...
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Mandatory Debt Amortization
Mandatory Debt AmortizationWhat is Debt Amortization? Mandatory Debt Amortization is the contractually required repayment of the original principal by a borrower throughout the lending term. Typically required by senior lenders...
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Minimum Equity Ratio
Minimum Equity RatioWhat is Minimum Equity Ratio? The Minimum Equity Ratio is the threshold requirement established by lenders to determine the equity contribution by a financial sponsor in a leveraged buyout (LBO). The...
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Minority Interest
Minority InterestWhat is a Minority Interest? A Minority Interest is a non-controlling investment (<50%) into a company’s equity, in which the firm does not possess majority ownership.
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Multiple Expansion
Multiple ExpansionWhat is Multiple Expansion? Multiple Expansion is when an asset is purchased and later sold at a higher valuation multiple relative to the original multiple paid. If a company undergoes a leveraged bu...
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Multiple of Money (MoM)
Multiple of Money (MoM)What is Multiple of Money? The Multiple of Money (MoM) compares the amount of equity the sponsor takes out on the date of exit relative to their initial equity contribution. Otherwise, referred to as...
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Multiple on Invested Capital (MOIC)
Multiple on Invested Capital (MOIC)What is MOIC? MOIC stands for “Multiple on Invested Capital” and measures investment returns by comparing the value of an investment on the exit date to the initial equity contribution. The MOIC is of...
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NTM EBITDA
NTM EBITDAWhat is NTM EBITDA? NTM EBITDA is a forward-looking profitability metric that reflects a company’s projected operating performance in the coming year. In practice, the NTM EBITDA metric is most often...
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Paper LBO
Paper LBOWhat is the Paper LBO? The Paper LBO is a common exercise completed during the private equity interview process, for which we’ll provide an example step-by-step practice test along with a walkth...
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PIK Interest
PIK InterestWhat is PIK Interest? PIK Interest, or “Paid-in-Kind” interest, is a feature of debt that allows interest expense to be accrued for a set number of years, rather than be paid in cash in th...
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Private Equity Certification
Private Equity CertificationWhat is the Best Private Equity Certification? The Private Equity Masterclass is a private equity certification by Wall Street Prep designed to help prepare candidates recruiting for competitive roles...
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Private Equity Interview Questions
Private Equity Interview QuestionsCommon Private Equity Interview Questions The Top 25 Private Equity Interview Questions covered in our comprehensive interview guide are intended to help prepare candidates for the competitive recruit...
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Private Equity Salary
Private Equity SalaryWhat is the Salary in Private Equity? The Private Equity Salary is a major consideration for candidates, namely investment bankers, considering an exit to the buy side. The following private equity co...
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Private Equity vs. Venture Capital
Private Equity vs. Venture CapitalPrivate Equity vs. Venture Capital: What is the Difference? Private Equity (PE) and Venture Capital (VC) are two common yet distinct investment strategies in the private markets, where the differences...
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Rollover Equity
Rollover EquityWhat is Rollover Equity? Rollover Equity refers to the exit proceeds reinvested by a seller into the equity of the newly formed entity post-acquisition. An equity rollover is therefore designed to ali...
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Secondary Buyout (SBO)
Secondary Buyout (SBO)What is a Secondary Buyout? A Secondary Buyout, or “sponsor-to-sponsor deal”, is an exit strategy in private equity wherein the investment (i.e. the portfolio company) is sold to another f...
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Shareholder Loan
Shareholder LoanWhat is a Shareholder Loan? A Shareholder Loan is a form of specialized financing with features that blend debt and equity, most often structured with a PIK interest component.
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Short-Form LBO Model
Short-Form LBO ModelWhat is a Short-Form LBO Model? The following Short-Form LBO Model tutorial will walk through building a simple LBO model step-by-step in Excel, with a template provided. Throughout the tutorial, a ba...
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Simple LBO Model
Simple LBO ModelSimple LBO Model: Video Tutorial In this video tutorial, we'll build a leveraged buyout (LBO) model, given some operating and valuation assumptions, in Excel. The goal of this video is to show you tha...
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Sources and Uses of Funds
Sources and Uses of FundsWhat are Sources and Uses? The Sources and Uses of Funds is a table summarizing the total amount of funding required to complete an M&A transaction, such as a leveraged buyout (LBO).
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Standard LBO Modeling Test
Standard LBO Modeling TestWhat is an LBO Modeling Test? The Standard LBO Modeling Test is the most common type of modeling exercise an interviewee will be given during the private equity recruiting cycle. The LBO modeling test...
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Strategic Buyer
Strategic BuyerWhat is a Strategic Buyer? A Strategic Buyer describes an acquirer that is another company, as opposed to a financial buyer (e.g. private equity firm). The strategic buyer, or “strategic” for short, m...
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Take-Private
Take-PrivateWhat is Take-Private? Take-Private refers to the transaction structure, wherein a publicly-traded company is acquired and the target’s shares are de-listed from a public exchange post-closing (or priv...
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The Rule of 72
The Rule of 72What is the Rule of 72? The Rule of 72 is a shorthand method to estimate the number of years required for an investment to double in value (2x). In practice, the Rule of 72 is a “back-of-the-env...
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Total Value to Paid-In Capital (TVPI)
Total Value to Paid-In Capital (TVPI)What is TVPI? The Total Value to Paid-In Capital (TVPI) ratio compares the distributions returned to investors by a fund and the residual value not yet realized relative to the contributed paid-in cap...