We are on 12/31/2021. You are asked to evaluate the potential LBO of a private...
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We are on 12/31/2021. You are asked to evaluate the potential LBO of a private company called Skynet. These are some useful information: Current data as of 12/31/2021 EBITDA ($ million) Pre-LBO Debt [to be refinanced] ($ million) 20 Current market cap ($ million) Not available Excess Cash at entry ($million) 10 10 Transaction assumptions: LBO Debt / Current EBITDA Required IRR for equity investors Fees ($ million) No dividends can be paid 5x 25% 5 Assumption about exit Exit date EBITDA at exit ($ million) Debt at exit ($ million) Excess Cash at exit ($ million) Exit EV / Exit EBITDA 12/31/2026 15 40 10 8x (a) (10 points] What is Skynet's Enterprise Value (EV) and Equity value at exit? (b) (10 points] What is the highest purchase price the sponsors would be willing to pay for the equity of Skynet? (C) (10 points) What is the IRR if the LBO sponsors end up paying $60m for the equity of Skynet? What are the sources and uses of funds in that case
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