If you're interested in the Wall Street Prep + Wharton Private Equity online certification program, be sure to use my code RARELIQUID for a $300-500 discount! ► New cohorts are constantly opening up so you can use code RARELIQUID at any time ► tinyurl.com/54zjjhv4 💻FREE LBO Model💻 ► tinyurl.com/rareliquid-simple-lbo 🍎Sign up for my courses🍎 ► How to get into MBA programs: forms.gle/9yEyycuP7NnQBjue8 ► How to get into investment banking: forms.gle/wt4cZrezbxVgNzGUA
I’ve watched all of BIWS and WSP and you demo better than them because you build the model from scratch and we can understand why you’re making every decision/assumption. A lot more applicable, would def buy a full modeling course from you.
Greetings from Frankfurt, Germany! I’m continuously amazed by the exceptional quality of your financial modeling content on RUclips. Your expertise in simplifying complex finance concepts and making them accessible to everyone is truly remarkable. In today’s world, where such knowledge is often behind paywalls, your generosity in sharing it for free is highly commendable. Your contributions are not just educational but also inspirational for aspiring finance professionals globally. Keep up the fantastic work!
Just a hint for everyone else: If you press F4 to fix the row for the revenue you can copy paste the formula for all other items in the model. That you way you don't need to reference revenue all the time :) Thanks for the video!
Honestly the best LBO model tutorial I have ever seen! Can you please do the same for M&A model? Thank you for all your hard work, truly appreciate the content!!!
I loved the real estate analogies. Super helpful! It seems like this model could even be used to make a real estate purchase if I’m understanding correctly. It might even be easier to make certain assumptions in real estate as opposed to a business.
Very good video, watched it all start to finish. You learn something new everyday! I work for a hedge fund for a convertible strategy, but always interested in learning new modelling - even after 10 years in the industry. All the best
Fantastic video! The step-by-step approach to building an LBO model is incredibly clear and easy to follow. I especially appreciate the free Excel file-it's a great resource for practicing the concepts discussed. Thanks for sharing such valuable content!
Hi... I have started watching your videos from DCF valuation methods and they are quite interesting and easy to follow. I have one request to you to make one video on IPO Valuation Model (build it from scratch) as I have not seen any detailed video on that. Thank you so much for all the work you are doing!!
Amazing, suuuper helpful!! When is the more detail LBO case study video (incl scenarios, sensitivities, different types of debt etc) coming?? Cant wait!
Hey @rareliquid , I am relatively new to finance and haven't studied it. I saw on most sources that we should always aim to pay off higher-interest debt, so would you mind quickly telling me why the bank debt is being paid off before the senior notes for this specific example? I don't think it affects the theoretical model in this case, but I'm guessing in practice, people would fight over who gets their money first, yes?
Hi, i was just wondering why you decided to pay down the bank debt first then senior note? wouldn't you want to pay off the debt with a higher interest rate first?
Hi, in step 2 for sources and uses, why have you said that the total sources xEBITDA is 10.2? I understand that's what it adds up to in the uses table, but for the sources side it adds up to equal 16.2x.
Hey Ben, I’m an incoming summer analyst at JPM in the SF HC group. I really enjoy your videos and they helped me a lot with my recruiting process. I’d love to hop on a 15 min call at some point and hear a bit more about your experience if you have anytime in the next few weeks. Thanks!
Great video. Can you explain why you call it levered cash flow instead of unlevered cash flow as you do not take the debt and interest payments into account?
In the explanation for the debt waterfall you said that the higher-interest debt should be paid first (to minimize interest expense). In the example, however, you started principal repayment from the bank debt (6%) to only pay the senior notes (12%) afterwards. I'm wondering if there's a reason for that that maybe I missed because I would've expected the opposite waterfall order... thanks in advance!
That must’ve been a mistake. You’re correct, he should be modeling to pay off the higher interest debt first. Also, he is using the entire amount of levered free cash flow to pay the principal without considering that he needs to subtract the interest from that since he will not have the full amount of levered FCF to apply towards the principal because of the interest payments.
Its my first time watching your video and thanks for the great stuff!! One question I had was, whether it is usually the case that the sponsor will have to paydown all of the tranche 1 principal before paying down any of the tranche 2 principal. Obviously, tranche 1 lender will not want the sponsor to paydown any of tranche 2 before tranche 1 principal is fully paid down, but I wonder if there are real world cases where sponsors are allowed to pay down at list a portion of tranche 2
Hey, wanted to say big thanks for such a great tutorial, however, there is 1 question I have. When you calculate IRR, you raise MOIC to the power of 1/n. I checked approximate IRR for this model, by solving npv = 0 via solver and excel and got approximately same result for irr (24,95%). Could you please share some link with explanation on what is the math behind the formula you used in the model, because I fail to understand this unfortunately =(
Hey! Thanks for your video. Just wanted to ask about the paydown on the senior notes. Shouldn't the formula be something like =MIN(Levered FCF, MIN((Levered FCF - Bank Debt Paydown), Beg Balance of Senior Notes). Because if let's say the amount of LCFC you have after paying down your bank debt exceeds the beginning balance of your senior notes, then that would give you a negative ending balance for your senior notes right? Thanks!
How come you didn't include the debt repayments in computing LFCF? Also how come you started your waterfall paying down the lower cost debt first? Would you not pay down the 12% senior notes first? Thanks for this tutorial regardless - super helpful!
Hi thanks for always putting out great content. I wanted to ask if you have a real estate valuation course? One that lets you calculate the expected return on a rental purchased?
In the model you took an assumption of 10× multiple which reflects a hurdle rate of 7%~ required by investors, but you also pointed that the usual hurdle rate (wacc) required by PE is usually 15% , which reflects a 5× multiple. How do you settle the contradiction?
Hey you are saying levered free cash flow but according to your formula it is unlevered free cash flow as you are not subtracting interest. Can you please confirm if it is unlevered or levered free cash flow? Also i can't find the pdf
Appreciate your videos. However, I will give one point of feedback. This makes the PE process seem so simple. I understand there are use cases for a high-level LBO, but think for those looking into this, it would be helpful to at least mention that in general, there is a massive underlying operating model that is leveraged. It isn't just plugging in a margin expansion and revenue growth rate.
The formula for the Paydown of Tranche B (Sr. Notes) is problematic and should not be used. Although it works for this particular model because Tranche B debt is untouched here, you will end up with negative values when Tranche A is completely paid off within the LBO period. You should use: =IF(Tranche A ending bal.>0,0,MAX(0,MIN(Levered FCF - Tranche A paydown,Tranche B opening bal)))
Wouldn’t this create a circularity? Cause the interest expense affects the levered fcf which affects the debt paid down and the interest paid? Or am I tripping?
If you're interested in the Wall Street Prep + Wharton Private Equity online certification program, be sure to use my code RARELIQUID for a $300-500 discount!
► New cohorts are constantly opening up so you can use code RARELIQUID at any time
► tinyurl.com/54zjjhv4
💻FREE LBO Model💻
► tinyurl.com/rareliquid-simple-lbo
🍎Sign up for my courses🍎
► How to get into MBA programs: forms.gle/9yEyycuP7NnQBjue8
► How to get into investment banking: forms.gle/wt4cZrezbxVgNzGUA
Why did you start reimbursing the cheapest debt instead of reimbursing the 12% debt ?
I’ve watched all of BIWS and WSP and you demo better than them because you build the model from scratch and we can understand why you’re making every decision/assumption. A lot more applicable, would def buy a full modeling course from you.
Thanks!
Greetings from Frankfurt, Germany! I’m continuously amazed by the exceptional quality of your financial modeling content on RUclips. Your expertise in simplifying complex finance concepts and making them accessible to everyone is truly remarkable. In today’s world, where such knowledge is often behind paywalls, your generosity in sharing it for free is highly commendable. Your contributions are not just educational but also inspirational for aspiring finance professionals globally. Keep up the fantastic work!
best LBO model video I've watched so far! thanks a lot!
Just a hint for everyone else: If you press F4 to fix the row for the revenue you can copy paste the formula for all other items in the model. That you way you don't need to reference revenue all the time :)
Thanks for the video!
Honestly the best LBO model tutorial I have ever seen! Can you please do the same for M&A model? Thank you for all your hard work, truly appreciate the content!!!
bro you are amazing ,i don't understand how you're not at 800 000 subscribers...thank you so much for your content, time and effort
This video is unreal ! Thank you Ben
All crystal clear to improve my models! Thank you!
I loved the real estate analogies. Super helpful! It seems like this model could even be used to make a real estate purchase if I’m understanding correctly. It might even be easier to make certain assumptions in real estate as opposed to a business.
Literally was looking for lbo today..man amazing work 👏
Literally the best LBO tutorial on the market! Could you also share one tutorial for project financing and one for real estate sector? Thank you!!
Loved the video. People like you sharing such realistic financial models are seriously rare. Really thankful for it.❤❤
Very good video, watched it all start to finish. You learn something new everyday! I work for a hedge fund for a convertible strategy, but always interested in learning new modelling - even after 10 years in the industry. All the best
Thanks for putting this fantastic lecture. Please we want more advanced LBO lectures.
Fantastic video! The step-by-step approach to building an LBO model is incredibly clear and easy to follow. I especially appreciate the free Excel file-it's a great resource for practicing the concepts discussed. Thanks for sharing such valuable content!
glad it was helpful!
geeeez, super useful!!!!! thank you !!! already follow and looking forward to watching other videos!!
This is extremely helpful!! Thank you so much!!
This video was super interesting. I am waiting for the next one, thank you.
Would love to see an M&A model in the future as well, great stuff as always!
Yess!!
Very cool video Ben, thank you. I enjoy these model videos. That anime glass glare is a nice bonus haha.
Hi...
I have started watching your videos from DCF valuation methods and they are quite interesting and easy to follow. I have one request to you to make one video on IPO Valuation Model (build it from scratch) as I have not seen any detailed video on that. Thank you so much for all the work you are doing!!
hello i got lots and lots of help from your video while preparing for private equity internship thank you so much for such a quality video!
great to hear!
Hi Ben, your videos are always helpful. Please make a advance video with sensitivity table analysis
This was fantastic. Thank you.
Great tutorial! Thank you so much
Amazing content!!! So easy to understand
Your videos are super clear and helpful! Thank you for putting these together! ❤
Got served an IG ad for an LBO tutorial/template behind a pay wall - thanks for posting. Ain't no way I'm spending to unlock
Wow that's like a new version of merger and inquisition. It is really cool that you do this kind of vid's
thank you!
Thanks for the model. Would love to see a more detailed one with variable scenarios. Cheers
yes please do more advanced LBO especially with the sesetivity analysis or table
Amazing, suuuper helpful!! When is the more detail LBO case study video (incl scenarios, sensitivities, different types of debt etc) coming?? Cant wait!
This is awesome! Thanks for the video and your time.
My pleasure!
I see Ben post new modeling tutorial, i hit like button. very simple
I would like an advanced LBO topics video. Great stuff
Very useful, Thank you.
Thanks for such a succinct explanation!
Crisp and clear video. Thanks for educating
Thanks bro, this is very helpful! Looking forward to the advanced topics in LBO!
your videos help a ton!
Thanks for these videos ❤
Hey @rareliquid , I am relatively new to finance and haven't studied it. I saw on most sources that we should always aim to pay off higher-interest debt, so would you mind quickly telling me why the bank debt is being paid off before the senior notes for this specific example? I don't think it affects the theoretical model in this case, but I'm guessing in practice, people would fight over who gets their money first, yes?
mistake on my part lol
HAHAHA the glasses - love it.
thanks, really useful!
Please do an accretion dilution video for M&A as well! Thanks for this video ❤
I love this type of content. Keep it up!
Hi, i was just wondering why you decided to pay down the bank debt first then senior note? wouldn't you want to pay off the debt with a higher interest rate first?
This is perfect! Loved it!
Hi, in step 2 for sources and uses, why have you said that the total sources xEBITDA is 10.2? I understand that's what it adds up to in the uses table, but for the sources side it adds up to equal 16.2x.
When creating the debt schedule: Wouldn't we pay of the Sr. Notes first? Since Seniority Notes take priority?
in the debt schedule you could pay out the senior notes first since they bear more interest than the bank debt?
Hey Ben, I’m an incoming summer analyst at JPM in the SF HC group. I really enjoy your videos and they helped me a lot with my recruiting process. I’d love to hop on a 15 min call at some point and hear a bit more about your experience if you have anytime in the next few weeks. Thanks!
How is it going
Great video. Can you explain why you call it levered cash flow instead of unlevered cash flow as you do not take the debt and interest payments into account?
In the explanation for the debt waterfall you said that the higher-interest debt should be paid first (to minimize interest expense). In the example, however, you started principal repayment from the bank debt (6%) to only pay the senior notes (12%) afterwards. I'm wondering if there's a reason for that that maybe I missed because I would've expected the opposite waterfall order... thanks in advance!
That must’ve been a mistake. You’re correct, he should be modeling to pay off the higher interest debt first. Also, he is using the entire amount of levered free cash flow to pay the principal without considering that he needs to subtract the interest from that since he will not have the full amount of levered FCF to apply towards the principal because of the interest payments.
If we paydown only 49 and so on which is less than total interest payment won't it be a negative sign for banks and will add up penalty to it?
Hi Ben! Can you do a model for Growth Equity? (Do they use LBO Modeling too?)
Hi! thank you for the video but the free LBO download seems to have a bit problem since it says page not found after my registration
Its my first time watching your video and thanks for the great stuff!!
One question I had was,
whether it is usually the case that the sponsor will have to paydown all of the tranche 1 principal before paying down any of the tranche 2 principal.
Obviously, tranche 1 lender will not want the sponsor to paydown any of tranche 2 before tranche 1 principal is fully paid down,
but I wonder if there are real world cases where sponsors are allowed to pay down at list a portion of tranche 2
Hi Ben! For the next tutorial video could you build a company deck/pitch deck in powerpoint as an investment banker usually does? Thanks!
Yeah, I love this idea!
Thank you!
Thanks! for the video but can you also upload a M&A Model soon?
Why didn’t we choose to pay down the senior debt first and then the bank debt, as the senior debt has higher interest expense?
Hey, wanted to say big thanks for such a great tutorial, however, there is 1 question I have. When you calculate IRR, you raise MOIC to the power of 1/n. I checked approximate IRR for this model, by solving npv = 0 via solver and excel and got approximately same result for irr (24,95%). Could you please share some link with explanation on what is the math behind the formula you used in the model, because I fail to understand this unfortunately =(
Can you help doing a merger model with accretion/dilution? Thanks!
Why do we pay off the bank debt first if its interest rate is lower than that of the senior notes?
Thanks ! 🙂
Could you do a DCF model for a renewable energy or utilities company?
I couldn't donwload the video's LBO model, I got a "Page not found message" someone has it?
Bro please make a more advanced lbo model please 🙏🏼
Hey! Thanks for your video. Just wanted to ask about the paydown on the senior notes. Shouldn't the formula be something like =MIN(Levered FCF, MIN((Levered FCF - Bank Debt Paydown), Beg Balance of Senior Notes). Because if let's say the amount of LCFC you have after paying down your bank debt exceeds the beginning balance of your senior notes, then that would give you a negative ending balance for your senior notes right? Thanks!
I get why you’d want to pay down the higher interest trance first, but surely the lower interest is less risky and therefore more senior?
How come you didn't include the debt repayments in computing LFCF? Also how come you started your waterfall paying down the lower cost debt first? Would you not pay down the 12% senior notes first? Thanks for this tutorial regardless - super helpful!
I think the bank requires you to pay down their debt first, its one of their commands
@@axeldahlman2405 Correct
Hi Ben, Are you aware of debt beta which is prevalent in the PE domain? If yes, please make a video on it.
why is the net present value of free cash flow not calculated?
Can you model out the 3 statements and then perform a DCF?
Goat🔥
Thanks dear 😊
if terminal value is given alongside levered FCFs, should I do TV+PV(sum of FCFF) - Net Debt or PV - Net Debt ??
Shouldn't Senior Note's Paydown be changed from "min(Levered Cash Flow, (Levered Cash Flow - Tranche 1 Paydown))" to "min(min(Levered Cash Flow, (Levered Cash Flow - Tranche 1 Paydown)), Tranche 2 Beginning balance)"?
Thanks for the video! Cant seem to be able to download the template from your email tho
Hi thanks for always putting out great content. I wanted to ask if you have a real estate valuation course? One that lets you calculate the expected return on a rental purchased?
yeah but how do you raise money to get this
In the model you took an assumption of 10× multiple which reflects a hurdle rate of 7%~ required by investors, but you also pointed that the usual hurdle rate (wacc) required by PE is usually 15% , which reflects a 5× multiple. How do you settle the contradiction?
Hi, Can't download the excel. Could you share the link please ?
Hi, do you have modeling for private debt /credit? Thanks
Hey you are saying levered free cash flow but according to your formula it is unlevered free cash flow as you are not subtracting interest.
Can you please confirm if it is unlevered or levered free cash flow?
Also i can't find the pdf
Wouldn’t it make more sense to pay off the debt with the higher interest rate?
yup i made a mistake lol
i have a doubt i am not getting why you calculated paydown value differently for in debt schedule for bank debt and sr notes can you clarify that
why didn't you pay senior debts for first, given they have higher cost in percentage?
Appreciate your videos. However, I will give one point of feedback. This makes the PE process seem so simple. I understand there are use cases for a high-level LBO, but think for those looking into this, it would be helpful to at least mention that in general, there is a massive underlying operating model that is leveraged. It isn't just plugging in a margin expansion and revenue growth rate.
Fantastic breakdown 🥸
Thank you ! 🙏
Does the link to the free LBO model still work? I tried accessing it but was told that the page no longer exist
What do you think about AI in the financial industry
You didn’t address the circularity from interest payments…does this model not need a circuit breaker?
The formula for the Paydown of Tranche B (Sr. Notes) is problematic and should not be used. Although it works for this particular model because Tranche B debt is untouched here, you will end up with negative values when Tranche A is completely paid off within the LBO period. You should use:
=IF(Tranche A ending bal.>0,0,MAX(0,MIN(Levered FCF - Tranche A paydown,Tranche B opening bal)))
Thank you very much for this correction!
Wouldn’t this create a circularity? Cause the interest expense affects the levered fcf which affects the debt paid down and the interest paid? Or am I tripping?
Anyone know what mechanical keyboard he uses?
I didn't find any free excel template.. why you claiming it to be there in video section ?
The problem is gone buddy, the link is in the description and it works now.