How we assisted a Private Equity client to prepare a one-pager LBO template model to evaluate the initial phases of a deal

April 5, 2023

The Context

The client, a Private Equity firm asked the TresVista team to build a one-pager LBO template model. The client is a US-based independent sponsor focused on investments in industrial services. There were no strict guidelines or instructions provided by the client for this project.

The Objective

To prepare a one-pager template model which could be used as a second stage evaluation of deal that comes in.

The Approach

The TresVista team followed the following process:
• Browsed through a few CIM’s to see what kind of information is available in them to create a model
• Started from scratch and created a simple IS, BS and CF
• Prepared the model assumptions and linked all the relevant cells
• Prepared the deal assumptions part and created placeholders for multiple other sources and uses
• The final deliverable included an Income Statement, Balance Sheet, Cashflow, Debt Schedule, PP&E Schedule, Returns Analysis and a Covenants Analysis

The Challenges We Overcame

The major hurdles faced by the TresVista team were:
• Calculating the purchasing price
• Cash balance becoming negative
• Data tables not working
• Not having any strict guidelines on exactly what was to be included in the model
The team overcame these hurdles by recalculating the purchase price under uses to account for the percentage invested by the buyer when there is an equity rollover as well. The team created a revolver to draw extra cash in case of situations where the cash became negative. Additionally, TresVista team changed the internal links for the data tables multiple times since it did not work initially as the inputs did not influence the returns and build the model in such a way so that it could be used to evaluate any deal without having to spend any time in incorporating new elements into the model. Therefore, making provisions for most possible elements in a model.

Final Product

The Value Add – Catalyzing the Client’s Impact

The TresVista team streamlined the process to save time and hence made the task efficient. The team also created a flexible and easy to understand model with a visible flow of the data (good structure). Moreover the team prepared an extensive model by providing provisions for different kinds of financing structures (common equity, preferred equity, equity rollover, management option plan and senior debt, mezzanine debt and a revolver)