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1、P1:ABC/ABCP2:c/dQC:e/fT1:gc05JWBT063-RosenbaumMarch18,200915:37PrinterName:HamiltonCHAPTER5LBOAnalysisBOanalysisisthecoreanalyticaltoolusedtoassessfinancingstructure,invest-Lmentreturns,andvaluationinleveragedbuyoutscenarios.Thesametechniquescanalsobeusedtoassessrefi
2、nancingopportunitiesandrestructuringalternativesforcorporateissuers.LBOanalysisisamorecomplexmethodologythanthosepreviouslydiscussedinthisbookasitrequiresspecializedknowledgeoffinancialmodeling,leverageddebtcapitalmarkets,M&A,andaccounting.AtthecenterofanLBOanalysis
3、isafinancialmodel(the“LBOmodel”),whichisconstructedwiththeflexibilitytoanalyzeagiventarget’sperformanceundermultiplefinancingstructuresandoperatingscenarios.FinancingStructureOnthedebtfinancingside,thebankerusesLBOanalysistohelpcraftaviablefinancingstructureforthetarget
4、,whichencompassestheamountandtypeofdebt(includingkeytermsoutlinedinChapter4),aswellasanequitycontributionfromafinancialsponsor.Themodeloutputenablesthebankertoanalyzeagivenfinancingstructureonthebasisofcashflowgeneration,debtrepayment,creditstatistics,andinvestmentret
5、urnsoveraprojectionperiod.TheanalysisofanLBOfinancingstructureistypicallyspearheadedbyaninvest-mentbank’sleveragedfinanceandcapitalmarketteams(alongwithasectorcoverageteam,collectivelythe“dealteam”).Thegoalistopresentafinancialsponsorwithtailoredfinancingoptionsthatmax
6、imizereturnswhileremainingmarketabletoin-vestors.Thefinancingstructuremustalsoprovidethetargetwithsufficientflexibilityandcushiontorunitsbusinessaccordingtoplan.AsdiscussedinChapter4,sponsorstypicallyworkcloselywithfinancingproviders(e.g.,investmentbanks)todeterminethe
7、financingstructureforaparticu-lartransaction.Oncethesponsorchoosesthepreferredfinancingstructure(oftenacompilationofthebesttermsfromproposalssolicitedfromseveralbanks),thedealteampresentsittothebank’sinternalcreditcommittee(s)forapproval.Followingcommitteeapproval,th
8、einvestmentbankstypicallyprovideafinancingcommit-ment,whichisthensubmittedtotheselleranditsadvisor(s)aspartofitsfinalbidpackage(seeChapter6).Valuat