How well can you PE

Investment

100

Name 3 Valuation Methods 

DCF, Multiples (trading comps), Precedent Transactions (deal comps) LBO, Asset-based (cost approach) 

200

A company's EBITDA is 120M and trades at 13x EBITDA. What is the implied enterprise value and if it has 500M in net debt, what is the implied equity value?

EV = 1.56M, Equity Value = 1.06B

300

If exit multiple stays the same and EBITDA does not grow, can you still generate an attractive IRR? If you can, how would you do it?

Yes, through deleveraging (paying down debt)

Operations

100

Name three value creation levers to increase EBITDA for a portfolio company. 

Increase revenue streams, supplier negotiation, decrease cost of fixed assets

200

A portfolio company has $100M in revenue and 20% EBITDA margins.
COGS is 60% of revenue.
Procurement improvements reduce COGS by 10%.

What is the new EBITDA margin (assuming direct flow from COGS to EBITDA)?

26%

300

 A portfolio company has $200M revenue, 25% gross margin, and $30M fixed operating costs. 

If revenue increases by 10%, what happens to EBITDA?

Increase from 20 to 25M

Miscellaneous

100

What does IRR stand for?

Internal rate of return

200

If interest rates rise significantly, what happens to:

The amount of leverage a PE firm can use and the expected IRR

Both decrease

300

Pitch one company you would acquire as a PE firm and explain your investment thesis 

As long as it wasn't boof it can be right