In this session, we'll look at the Felix LBO challenge. If you want, post your video right now, read through the handout and come back and we'll go through some of the highlights. Now before we begin, it is important to note that in this session we're gonna be using data as of the recording data. In your analysis, you're gonna be using live data, so your numbers will be different. However, your overall output and analysis should be very similar.
Okay, so you're part of a team who is advising a private equity firm. Your client and the client has asked for some ideas regarding some LBO targets. Within the consumer space, the client would like to generate an IRR in excess of 20%. Your MD has asked you to run an LBO analysis for a company called Flowers Foods with a ticker FLO as a potential target. Now, here is some useful information. The estimated deal date is as of December 31st, 2025. We're gonna be using forecasts from Felix as well as the latest filings such as the 10 K and the 10 Q of the target company. You're being told to assume a minimum acquisition premium of 30% over the one month volume weighted average price. Our exit multiple is gonna be the same as our entry multiple, and we're gonna assume deal fees of 2% of acquisition enterprise value. The maximum debt capacity for the target is five times LTM ebitda. We are told that the cost of debt is gonna be based on sulfur plus some spread, and we're also told to assume operational improvements of 1.5% of LTM revenue. Now, these improvements are not achieved all at once in year one, but they're gonna be achieved over a period of three years. Other assumptions, such as revenue growth, EBITDA margin, CapEx, and so on, are gonna be provided in an Excel template file where we're gonna be building the LBO model. Now, once you have completed the model and you have your actual IRR, you have to check if the IRR is in excess of 20%, which is our target IRR. If that's not the case, we might need to make some amendments or modifications to the model to see if we can reach that target. IRR of 20%.
Felix LBO Challenge Handout
