Executive Summary

• [Do you recommend FOR or AGAINST buying the company? What are the
2 main reasons why?]
• [Qualitative Reason #1 – e.g. The company is the leader in a market that is
growing twice as quickly as the overall economy]

• [Qualitative Reason #2 – e.g. The company’s main competitor just made a

bad acquisition that resulted in a huge restructuring charge and delayed
product launches]
• [Quantitative Reason #1 – e.g. In the Base case, we could realize a 20-25%
IRR in 5 years, even with only moderate debt pay-down]
• [Quantitative Reason #2 – e.g. Even in a Downside case that’s more
pessimistic than Street estimates, the IRR would only drop to 16-17%]

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Market Overview
• [Are the company’s key markets growing or shrinking? Is there a lot of
growth potential left, or are they consolidating / declining?]
• [What does the company’s position in each market segment look like? Is it
in the #1 or #2 position, or is it further down the hierarchy? Is it likely to gain
or lose market share in future years?]

• [What future trends are likely to impact everything above? New

technologies? Pricing pressure? Government policy changes? Changing
demographics?]
• [How does all of this affect the company’s revenue and expenses? For
example, pricing pressure often leads to declining margins; a rapidly
growing market often implies strong revenue growth but sometimes lower
margins if the company is spending a lot on sales & marketing]

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The Competition
• [How does the company stack up to its top competitors in each segment?]
• [Does the company have any pricing power over competitors? Or do its
products command lower prices?]
• [What insights did your channel checks give you? What do real customers
and suppliers say about different companies’ products/services in this
market?]
• [What do these points about the competition mean for the company’s
financial prospects? For example, if the company is gaining market share
that implies stronger revenue growth and margins; if it’s losing share, it may
cut prices to compete, which reduces its margins]

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Growth Opportunities
• [Based on the market growth rates and the company’s share, what are its
best growth opportunities?]
• [In markets the company already operates in, it’s best to focus on segments
that are growing more quickly and/or ones where the company has some
type of competitive edge such as more effective cross-selling]

• [The company may not be able to enter new markets successfully, but you
could also discuss those (or acquisitions to enter those markets) here]
• [Do these growth opportunities support your financial forecasts? If the
markets the company is in are stagnant and its share is not changing, for
example, it’s hard to support a 10% annual revenue growth assumption]

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Risks
• [What are the top market-related and qualitative risks? You could include 1
market-related risk, 1 risk related to the competition, and 1 risk related to
the company’s growth opportunities]
• [Describe a market-related risk and how serious it is… for example, new
technology may displace a segment of the market and result in lower sales
to a certain customer segment]

• [Describe a competition-related risk – e.g. another company in the market

may acquire a “hot” start-up that could threaten the company’s business]
• [Describe a growth-related risk – e.g. although the company has gained
market share lately in one segment, it may stop gaining share going forward
because customer spending may fall]

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Deal and Company-Specific Factors
• [What else makes this deal and/or company unusual? Anything noteworthy
with the management team? The proposed capital structure? Other partners
involved in the deal? Founder or management rollovers? Does it make
sense to go private?]
• [Describe Factor #1 – e.g. The company’s CEO has a track record of
successful turnarounds and could do the same here]

• [Describe Factor #2 – e.g. To get the deal done, a much higher-than-

normal leverage ratio is required, which decreases the success probability]
• [Describe Factor #3 – e.g. Going private would help the company turn itself
around since it could focus on longer-term improvements for which public
markets investors would not give it credit]

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Valuation
• [Summarize the methodologies you used – e.g. how you picked public
comps and/or precedent transactions and the DCF assumptions used in
your analysis]
 [You could use a separate bullet or set of bullets for each methodology
here]

• [Based on all this, what’s a reasonable price? Something close to the

median of the methodologies or at least in the 25th – 75th percentile range is
usually a good bet… though market factors can influence that]
• [And how does that compare to the company’s current stock price / asking
price if it’s a private company? For example, even if your valuation implies
$80.00 / share, you can’t actually pay $80.00 / share if the company is
trading at $100.00 / share currently – you need to pay a premium, so you
must assess whether prices above $100.00 could also work]

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Valuation – Range of Methodologies
• [Paste in your “football field” chart here that lays out each methodology
side-by-side and shows the company’s implied share price, or, if private, its
implied Enterprise Value]
• [If you don’t have time to create this sort of graph, you could also just paste
in the public comps you’ve run – even a very simple analysis is better than
nothing – or the output of your simple DCF here. If you have the time, those
can be on separate pages, but they’re not 100% necessary in a PE / LBO
case study like this as long as you have the files on-hand.]

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“Base Case” Scenario
• [Base Case: Paste in a high-level summary of your projected revenue and
expenses from Excel in this part – for example, show revenue by key
segments and EBITDA or OpInc margins in the Base Case scenario over 5
years]
• [Indicate where your support for these numbers is coming from – channel
checks? Industry research? How do your numbers differ from the
consensus view of the company?]

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Other Operating Scenarios
• [On this slide, you would lay out the other scenarios you’ve created, e.g. the
Upside and Downside cases and how they compare to the Base Case
scenario in terms of revenue growth and margins]
• [If you haven’t had time to create “official” scenarios in your model, try
increasing or decreasing the revenue growth and margins in future years via
simple input cells in the model and showing what these “Upside” and
“Downside” cases look like… perhaps try to match them to the rough range
of Wall Street analyst estimates]
Support for Your Scenarios
• [What research and/or channel checks support the different scenarios
you’ve built? Does the company disclose enough information, such as
revenue and expenses by segment, to make reasonable forecasts?]
• [Are there any factors which decrease the likelihood of your forecasts being
accurate? Were there major obstacles in creating these projections in the
first place?]

• [How do your scenarios compare to Wall Street analyst expectations (if you
haven’t already addressed this)?]
Conclusions on Scenarios
• [Which case(s) is (are) most likely? Does a certain segment contribute more
or less to revenue and operating income / cash flow than other segments?]
• [How did your market research and due diligence / channel checks impact
these numbers? For example, did you find evidence of pricing pressure in
one market, which may support your assumption that margins will decline
modestly?]

• [Jump ahead and state how sensitive the LBO is to these different cases –
how much does the IRR change in the best case vs. the worst case?]
• [How does this support your investment recommendation? For example, if
the Base Case scenario is most likely and that one shows an IRR of only
10-15% and the Downside Case is even worse, that’s a pretty clear signal
NOT to acquire this company]

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LBO Model Assumptions & Output
• [Summarize the key assumptions here, such as purchase price, leverage,
debt tranches, holding period, and exit multiples]
• [Also include a sensitivity table for the IRR under tweaks to those
assumptions, e.g. different exit multiples and purchase prices]

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The Numbers in Other Cases
• [Briefly discuss what might happen if the company’s revenue growth is
higher/lower than expected and the same for margins, and how likely those
scenarios are]
• [You can include 1-2 sensitivity tables if it’s possible to fit them on this page
as well]

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Commentary on the Numbers
• [What are the key reasons why the deal works / doesn’t work? For example,
if the company trades at a low EBITDA multiple and generates substantial
FCF, or has a huge cash balance that can be used to fund the deal, those
are reasons why the numbers might work]
• [Likewise, the deal might not work because its current multiples are too high
and its effective yield is too low, or because the exit multiple is likely to fall,
or because growth and margins can’t be sustained]
• [Elaborate on these reasons and then summarize your conclusions at the
bottom]

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And in the Downside Cases…
• [If you’re making an INVEST recommendation, you need to show how even
in more pessimistic scenarios, it’s still plausible to avoid a loss on the
investment… and if it’s a NO INVEST recommendation, you need to show
how the Downside cases are very plausible and how they would result in
total disaster]
• [To do this, you can paste in sensitivity tables for the IRRs under more
pessimistic cases for growth, margins, and exit multiples and point out the
regions of those tables that are more / less likely… and if you’re in favor of
the deal, point out why the regions with disastrous IRRs are highly unlikely,
and do the opposite if you’re recommending against the deal and show why
those outcomes are very possible]

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How Could We Be Wrong?
• [Highlight the 2-3 key reasons why your recommendation might be
completely wrong… so if you’re recommending against the deal, point out
why it might work anyway, and if you’re in favor of the deal, point out what
might cause it to end disastrously]
• [Reason #1 – e.g. Revenue growth may be lower than expected due to
demographic changes in the market… which impacts IRR by…]

• [Reason #2 – e.g. The company may lose its market leadership position,
meaning that its exit multiple could fall substantially over what we assumed,
which impacts IRR by…]
• [Reason #3 – e.g. Pricing pressure with the company’s top 2 competitors
may compress margins, resulting in less debt being paid off and an IRR
impact of…]

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How Serious Are These Risk Factors?
• [On this slide, you want to address how serious each risk factor is, or, in the
case of an NO INVEST recommendation, the likelihood of the deal actually
being a good one despite what you’ve recommended]
• [Risk Factor #1 – e.g. There is a moderate risk of demographic changes
that reduce revenue growth, but that would likely only impact IRR by…]

• [Risk Factor #2 – e.g. The company is unlikely to lose its market leadership
position because of key partnerships or multi-year contract lock-in]
• [Risk Factor #3 – e.g. Pricing pressure is unlikely because the competitors
serve different customer segments, but even if it happens, margin
compression would only impact IRR by…]

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How Can We Hedge Ourselves?
• [Often, there is very little you can do to hedge against downside risk in an
LBO… but if you’re making an INVEST recommendation and anything
comes to mind, these points are worth listing here]
• [Example: If you acquire less than 100% of the company, that can often
reduce your losses if the company underperforms – so you might give the
management team a higher rollover, or bring in partners]

• [Another Example: You could push lenders to impose incurrence

covenants that restrict the company from spending a lot of cash on CapEx,
acquisitions, and so on, until debt is repaid]
• [Much tougher to “hedge” yourself if you’re recommending AGAINST the
deal, so not even worth addressing unless you can somehow recommend
other companies in the sector to analyze]

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Conclusions
• [This slide is very similar to your first one, and you can restate your
recommendation and conclusions from there]
• [The difference is that on this slide, you can go into more detail on the
specific numbers you highlighted and make points that were difficult to
illustrate on the first slide]

• [See our example included in this ZIP file for a demonstration of what to
write about on the Conclusions slide at the end vs. the Executive Summary
slide in the beginning]

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