The document presents a simplified LBO model for acquiring a company for $17.5 million. It shows historical and projected financials including revenue, EBITDA, debt levels, and implied equity value over time. The acquisition is expected to generate a 19% IRR and pay down debt aggressively over 7 years until the company is eventually sold for an estimated $22.3 million, implying a 2.36x return on invested capital.

1. Simplified LBO Model Historical Financials in millions Projected Financials
Year1 Year2
Uses 12/31/2004 12/31/2005 12/31/2006 12/31/2007 12/31/2008 12/31/2009 12/31/2010
Acquistion Price (EV) 17.5 Revenue 10.6 12.4 13.7 14.6 14.5 15.3 16.0
EV/EBITDA multiple 6.7x % growth 17% 11% 6% (1%) 5% 5%
Total Uses 17.5
EBITDA 1.2 1.7 2.4 2.9 2.6 2.5 2.6
Sources of total % % of Revenue 11% 14% 17% 20% 18% 16% 16%
Debt 10.5 60%
Equity 7.0 40% Less:
Total Sources 17.5 Interest Expense -0.6 -0.5
Taxes 30.0% *(EBITDA minus Interest) assumes no D&A for simplification -0.6 -0.6
Input Increase in NWC (0.11) -0.1
Lev. Mult. 4.0x Capex -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2
Interest 6.0%
Free Cash Flow Available for Debt 1.1 1.2
Capex of sales % 1.0% Less: Debt Repayment Opening -1.1 -1.2
NWC of sales % 15.0%
Ending Debt Balance 10.5 9.4 8.2
Case Trigger 1
Active Case: Base Case Estimated Valuation 17.5 16.7 17.6
Less: Debt -10.5 -9.4 -8.2
Year 5 Assumptions Plus: Cash Balance 0.0 0.0 0.0
EBITDA 3.0
Exit Multiple 6.7x Implied Equity Value 7.0 7.3 9.3
Net Debt 3.8
Output
Year 5 IRR Calc
Entry 12/31/2008 -7
Exit 12/31/2013 17
IRR 19%
ROIC 2.36x
Credit Statistics
Year1 Year2 Year3 Year4 Year5 Year6 Year7
Debt / EBITDA 3.8x 3.1x 2.5x 1.9x 1.2x 0.6x 0.0x
EBITDA / Interest 4.2x 5.0x 6.1x 7.8x 11.0x 18.3x 53.6x
% Paydown 10% 22% 34% 48% 64% 81% 99%
D:ConFacconversion8656486lbomodel463.xlsx LBO Model 7/21/2011 12:34 PM LBO Model

2. Year3 Year4 Year5 Year6 Year7 CAGR CAGR
12/31/2011 12/30/2012 12/31/2013 12/31/2014 12/31/2015 '08 - '11 '08 - '11
16.8 17.7 18.6 19.5 20.5 5% 5%
5% 5% 5% 5% 5%
2.8 2.9 3.0 3.2 3.4 2% 3%
16% 16% 16% 16% 16%
-0.5 -0.4 -0.3 -0.2 -0.1
-0.7 -0.8 -0.8 -0.9 -1.0
-0.1 -0.1 -0.1 -0.1 -0.1
-0.2 -0.2 -0.2 -0.2 -0.2
1.3 1.5 1.6 1.8 2.0
-1.3 -1.5 -1.6 -1.8 -2.0
6.9 5.4 3.8 2.0 0.1
18.4 19.4 20.3 21.3 22.4
-6.9 -5.4 -3.8 -2.0 -0.1
0.0 0.0 0.0 0.0 0.0
11.5 13.9 16.5 19.3 22.3
D:ConFacconversion8656486lbomodel463.xlsx LBO Model 7/21/2011 12:34 PM LBO Model

3. Active Case 1
12/31/2008 12/31/2009 12/31/2010 12/31/2011 12/30/2012
Revenue (Active Case) 14.5 15.3 16.0 16.8 17.7
Base Case 14.5 15.3 16.0 16.8 17.7
Downside Case 14.5 15.0 15.4 15.9 16.4
Annual growth Base Case 5%
Annual growth Downside Case 3%
% EBITDA Margin (Active Case) 16.4% 16.4% 16.4% 16.4% 16.4%
Base Case 16.4% 16.4% 16.4% 16.4% 16.4%
Downside Case 14.4% 14.4% 14.4% 14.4% 14.4%

4. 12/31/2013 12/31/2014 12/31/2015
18.6 19.5 20.5
18.6 19.5 20.5
16.9 17.4 17.9
16.4% 16.4% 16.4%
16.4% 16.4% 16.4%
14.4% 14.4% 14.4%