Hey guys, everyone's coming in. Welcome, welcome, welcome.

Uh, if you haven't met me before, my name's Gerard.

I'm gonna be your trainer for today's session and we're looking at the LBO deal structure.

We're gonna cover the things on screen.

It's going to be an LBO model. Let's try that again.

It's going to be an LBO model built over three Felix live sessions.

Okay? So if you were to look at the front page of Felix, you would see this and in the Felix live webinar program here today, we're doing LBO, the deal structure.

We're going to set up the deal, okay? We're gonna get ourselves to the deal date and we'll do the deal after that in two weeks time, not next week, but in two weeks time, Jonathan's gonna teach you about the debt schedule.

So you'll then look at the next seven to eight years paying down the debt and how you model that out.

A week after that, you'll then have Phil Bill's gonna come out and teach you guys LBO, the exit and analysis, okay? See if it's been a good deal and if not, perhaps why not? Let's have a look at the file, see what we're gonna do.

Marco, thank you very much.

Got loads of people, we've got, well, millions of you.

Okay, let's have a look at the file.

Here it is.

You might notice on the front page it says Debenhams LBO model.

Now, for those of you haven't heard of it, Debenhams about 10 years ago, was taken over by private equity group.

Debenhams used to be kind of large kinda shopping centers.

It's moved away from that business model altogether. It's now online, very much online, moved away from the physical shops.

We're going to try and recreate their deal in this model.

So what are we gonna do? Let's go to the LBO tab.

We'll start ourselves off there in the LBO tab.

We've got everything for the start of the deal.

In this top section here, we're gonna have to funds the deal and we're going to look at that through this.

Sources, sources and uses of funds section.

Okay? So that'll help us work out all of the funding.

So that'll get us up towards the deal date.

Then on the deal date, we're gonna have to buy the company, we're gonna have to do some accounting, we're gonna have to do some financial and not engineering financial adjustments and that in the next hour.

So this will take us an hour, that'll get us to the end of the deal day.

We'll own the company and in two weeks time come back and you guys will build some more.

Now, this is a part complete model. If you have a look at the name at the top, it is part complete.

So it's kind of already half built.

I'm gonna say the, the more repetitive and boring things we've done for you, leaving the more interesting things for me to take you as how much do I need to pay for it? And that we've got just here. It's the acquisition equity value, how much we're going to pay for this company.

In order to do that, I'm going to need to work out their acquisition EV, enterprise value.

Oh, I've got a question, a question in the in the chat from Fred.

Hey Fred, how do we access the recording at the end of the event? Yeah, great question Fred. Thank you very much.

What we'll do is we put those recordings here, so see more dates and recordings and you can see loads of old recordings that we've got here and there are absolutely loads of them.

Okay? So they're just there on the front page of the website of the Felix website.

Thanks Alfred. So to get my equity value, I have to work out my enterprise value and to get my enterprise value, we start off with an EV to LTM EBITDA of 7.5.

Basically, companies in this universe kind of shops universe valued at 7.5 times their ebitda.

So our first job is to go and find DES is historical ebitda.

So this how allows me to introduce the rest of the tabs to you.

We've got an IS tab, income statement, BS, balance sheets, CFS, cashflow statements.

We're going to get the EBITDA from the income statements. So let's go there. Cool. So here we are.

Income statement. It looks like any old income statement here, the deal is happening on the 31st of December, 2015.

So this is an old deal. It did happen.

The real deal did happen and I can see the EBITDA on that date was 238.6.

Great starting point. So we take that now, if that's my EBITDA and I value the company at 7.5 times that, then I get to my enterprise value.

Let's multiply them together.

Whoa, dividend's.

Not a small company, just shy of 2 billion pounds.

So this was a British company, so hence using very British pound.

So 1 billion, seven 89 million pounds. That's the EV.

I'm not necessarily going to pay the EV though.

I want to subtract net debts to get to the equity value, the amount I'll actually pay.

So I need the old net debt of Denis.

Now the net debt of Denis that was mainly held by H-S-B-C-H-S-B-C, they look at this deal and they say, no, no, this isn't for us. Thank you very much. We lent to a traditional company.

We did not lent private equity.

We HSBC, we're gonna walk away. That's fair enough.

So we need to find their net debt figure.

That's in the balance sheet tab.

So I go to the balance sheet and again, I'm looking for the dates across the top and it's the 31st, December 15 that I start starter.

I've got three items, three items from this column that I want to include in their net debt.

Two of them are debt, one of them is more of a financial asset.

The first is the long term debt of 1 9 7.

That's provided by HSBC. Need to pay that back.

We also add onto it a revolver.

Revolver is a revolving credit facility.

It's short term debt.

So that's their debt.

But to get to their net debt, I need to subtract off cash or anything that looks like cash.

So up at the top 50.1 of cash.

Great. Now I can see already lots more people coming in.

So just gimme two seconds. I'm just going to put the link to guys.

The link to the file I'm using, it's in the chat now for all of you who've just come in, grab that, you'll be able to catch up in a couple seconds.

So I've now done their net debt and I can finally work out their equity value.

How much do I need to pay if I want to buy dividends? Well, I'm gonna take that EV 1, 7, 8, 9.

I'll subtract off the net debt we owe. Two, we need to pay roughly one and a half billion pounds to buy this company.

Cool. So that's my first really big item that I need for my sources and uses of funds table. Here it is, our total sources, lots and lots and lots of debt.

Come back to that in a second.

But my total uses starts with the acquisition equity value.

So let's fill that number in.

My acquisition equity value, one of my uses of funds, I need to spell spend one and a half billion buying the company from shareholders.

Okay? The second thing I need to do is I actually need to pay back HSBC that refinance net debt. They've decided they're outta here, have to pay them that as well.

We'll probably get that from debt ourselves.

So debt comes in, debt goes out the refinance, net debt 3 0 2 0.4, but there's still another thing we need to pay for.

We also need to pay for fees.

We've got advisory fees, very likely we've got some debt issuance fees, probably no equity issuance fees, maybe lawyers, uh, due diligence from accountants, lots of work needed.

So those fees, we've got an assumption in the top right of our screen.

The fees are going to be 3% of EV, so not a small amount.

Multiply that up by the EV 1, 7, 8, 9 0.5.

We need to need to pay 50 set 3 million pound in fees.

So if we add it all together, I've now got my second really important number.

First one was the equity value.

My second really important number are the total uses of funds.

I summed the items above.

I karumba need to spend a lot of money buying this company and it's not just the 1.487.

I also need to pay back the debt.

I need to pay back the fees. And where are we going to get this money from? Well, luckily we have a very long list of sources of funds on the right hand side here.

Now it mentions a revolver, but we're not gonna pay, uh, take out a revolver at the beginning.

We will have one though that we can draw on.

We're then going to have a first lien debt, second lien debt and mezzanine financing.

So I want to spend a minute here, just a moment, just talk about these various types of debts.

The first one then is the first lien.

The first lien is called to the first lien because if anything goes wrong, they get paid their money first.

Okay? Not going to be the second lien or the junior notes or the pres or the common common equity.

The first lien debt, get paid their money first.

Now if we go to the debt tab, don't you go there, just watch me do it.

I go to the debt tab up at the top.

I've got some repayment assumptions for the first lien and I can see that the first lien, 12.4% of it is paid off in the first year.

Another 13.7 paid off next year, et cetera, et cetera, et cetera.

Because the debt is gradually paid off.

We call this amortizing debt. We spread the debt over time.

So back to my LBO tab.

That is amortizing debts.

I'm gonna spell it the American way with a Z. There we go.

Now that's our first lien. Get 400 million from them.

It's not quite enough. So I want a little bit more.

So we move on to the second lien.

Now the second lien is called the second lien 'cause they rank second.

If anything goes wrong, they will get their money out second, not um, uh, only after the first lien's been paid in full.

Okay, what else is different about that debt? If I go back to the debt tab again, the mandatory repayments for the second lien, oh, it's all paid off at the end, right? That is a completely different type of debt.

Our second lien is therefore called a bullet repayment debt.

Our bullets all paid off in one go at the end.

Now that means a little bit more risk for the debt holder.

The debt holders are thinking, oh my god, oh my god, I'm not getting any, I'm not getting any debt from them for like seven, eight years.

They'll receive interest every year.

They're not getting any of their debt back.

So the second lien, they're going to charge slightly higher interest rates.

So here we go. We've got the interest rate on the first lien.

It's 5% above one of these items at the top here. So maybe L-I-B-O-R, but it is gonna be LIO, the Gils and then second lien, 9% above.

So they take a higher risk, no money for seven or eight years.

They get to earn a higher interest rate. Okay? Then the third, the third type of debt we've got here is mezzanine.

Now mezzanine here, this one is going to be called a pick note.

A pick note is called paid in kind.

So why is it called that? Well, we're going to borrow 300 million, 300 million pounds of debt and what we'll do is we will get paid, excuse me, we're going to borrow, we will pay back in kind, we will pay back debt, but we'll pay back more, a lot more debt.

The big thing about pick notes is that no interest is paid until the end.

Okay? So, oh, I can't write there because I need to write somewhere else.

So my pick notes interest is going to be paid at the end, only at the end of the debt's. Life interest paid at end of the debt's life. There'll be no interest paid for seven or eight years.

Hang on, I'm a pick note.

Debt holder, I'm feeling very scared.

The first lien, they're getting debt and interest paid in year one.

The second lien, they're getting no debt paid back in year one, but they're getting some interest.

The mezzanine, the pick note, we're getting nothing back in year one and in fact we won't get anything back at all until the end of the debt slide.

No interest at all. So the risk to your pick note holder is much higher.

So again, I'd expect a higher interest rate to be charged.

And that's exactly what we've got here.

We're going to charge 12%. Okay? So we're understanding our deal structure.

Now if I oh, and we've also got 10 million of common equity, I'm going to ignore the pres, the preference shares, lemme just write that out for, I'm going to ignore the preference shares for now.

I'm going to sum up the total sources of funds.

So sum, sum up all of these items above.

What sources do we have? Well, we've got 1000 221, 1 0.2 billion pounds.

Hang on. I'm pretty sure when we did our total uses over here, we needed 1.8 billion.

So we've got a major, major gap that's appeared in the middle and this is not going to make for a happy deal.

So what we've missed now are the preference shares and the preference shares are really important to the deal.

Before we do the preference shares though, let's just have a quick look at what percentage each of these types of debt represent of the total.

So I'll start with the first lien.

Take that 400, I'm going to divide it by the total source and I want to lock, I want to lock onto G 20 lock with those dollar signs, there they are.

Press F four. To do that, press enter.

Ah, my first lien is going to be 30, 33 ish percent of my total uh, sources.

I'm going to copy that down so I could just drag that down with my mouse or copy down the control D or copy paste however you want.

Copy down. And what do we notice? Whoa, at the moment we are not putting in much debt at all.

Our, excuse me, equity.

We're not putting much in much equity at all.

Our equity represents 0.8% of the funding.

That's totally unrealistic, wildly unrealistic.

Your equity is likely to be a third at the lowest, less aggressive deals.

Your equity's gonna be more like half the funding. Okay? So our equity at the moment, way off, way off, what we're missing is the preference equity or the preference shares.

So we are gonna do that number.

It's just a plug, there's nothing difficult about it.

But I need you to understand why preference share are so important in a private equity deal.

So I'm gonna go to a blank piece of paper just for a moment.

Just wanna show you why preference shares are so important.

Now, preference shares, uh, they can have other names as well. They could be called that shareholder loans.

They're going to safeguard your common equity holders drive equity.

They're gonna safeguard them if things go wrong.

So I've already given you the punchline if things go wrong, the private equity is gonna have a little bit, little bit of safety.

Let me explain that to you.

So imagine the following.

We are at deal entry, we're about to do a deal.

I need some funding from private equity and we're also gonna get some funding from the company's management.

Private equity decide they're gonna put in 290 million.

Management are going to put in 10 million pounds.

But this is where things get a bit more interesting.

The ownership of the company is not split exactly by the pounds.

If we were going with the pounds then management are put in 10 out of 300, it's about 3%.

We're going to give management 10% ownership.

Whoa, why would we do this? The answer is we want to incentivize them to work really hard to make a really efficient company paying down lots of debts.

Management are about to have a couple of really hard years, maybe 4, 5, 6, 7 really hard years of working really hard.

We've got to incentivize them.

Otherwise they'll upticks and they'll leave after a year or two.

So they're gonna get 10 cents. PE will get the remaining 90.

However, this very sensible structure we've got has shortcomings.

We're going to exit. So it's now a year later or something and unfortunately we're going to exit for only 250 pounds and we do, we put in 300, we're gonna exit for two 50.

Things have not gone well.

So let's work out what each group gets.

Private equity, they're gonna get 90% times by the 250.

They're gonna come out with 225 private equity.

They're feeling sad.

But management, it's completely different for management.

Can use a bit shorthand here.

MGT for management, they get 10% of that 250, they're coming out with 25 million.

They originally started with only 10.

They're now coming out with 25.

Management are over the moon.

They're having the time of their lives, they're having a party, get a little party thing going.

Woohoo. Looks like he's smoking so that's not good. Okay? Management are over the moon and what we've done is we've actually incentivized them to push the company into the ground as quickly as possible.

Okay? Create a fire sale, sell it for two 50, management, walk away with a load of money.

So how do preference shares help us out? How does a shareholder loan help us out? We redo the deal.

My private equity and management gonna put in some money and private equity, they're still gonna put in equity or common equity, but this time it's only going to be 90 because they're also gonna put in some prefs of 200 management still put in their 10 and the percentage ownership they're going to have 90% and 10%.

Same as before.

But now we've got some preps we're going to exit for two 50.

Same as before. Nothing has changed.

Fire sale, it's all going wrong.

What do private equity come out with? Well, they initially get their preference shares first.

Don't get me wrong, any debt has to be paid off first. That's happened. Private equity, they get their 200 of prefs first.

200. 200.

So how much money have we now got left over? Oh God, we've only got, we've got about 50, we've only got 50 left over now.

So of that 50 private equity are going to get 90%.

That's gonna leave them with 245 in total.

Hmm. They're still unhappy.

They put in 290, they're coming out with 245.

Sad fa. Oh, quite an angry face. Quite an angry face. That one. What's about management? Well, management had no preps and of the remaining 50, they get 10%, they're gonna come away with five.

They are unhappy as well.

And now private equity and management, their incentives are aligned.

Everyone's working for the same outcome.

No one wants a fire sale.

Preference shares or shareholder loan have created this and that's why they're so important in a private equity deal.

So let's go back into the model. Let's calculate those pres.

You'll see they're gonna be quite enormous in this deal.

So preference shares how much we're gonna have.

Well I need in orange 1,800, how much have I got in orange here? I've only got 1,200.

I'm about 600 short between those two orange cells.

So I'm going to take the 1,800 and I'm going to subtract, be careful here. Be careful. Don't create a circular. Be careful.

I'm gonna subtract the sum of all of my debt items and comma my equity.

So just be careful. Your formula looks the same as mine. Guys don't. Don't just take orange minus orange or it won't work.

You got weird circular. There we go.

6 2, 2 0.2. And my two orange cells now balance.

I feel a lot happier now. Two orange cells balance. Great.

Okay, just before we carry on, I just want to check my debt to ebitda. Duh. When we're trying to get all this debt from these various different providers, we go to the first lien bank, we go to a second lien bank and then we go to mezzanine maybe, maybe some, some weird private credit providing that to us.

We're trying to get as much debt as possible, but if that debt becomes too high, any one of these three might say, whoa, this is too much debt, this is too risky for us.

Uh, we're outta here. So what is that level of too much debt? It will depend on the deal on the company you're talking about the industry, it'll depend on the debt providers, but a handy maximum that the industry tends to use is a debt to EBITDA of six.

That used to be the law in America, used to be the law. It's been repealed, but the industry has still carried on with that number.

It seems to be a really sensible number When debt to EBITDA goes above six companies get into a bit of financial distress.

I should point out some deals do happen above six.

Vast majority of deals happen below.

And in fact, loads of deals happen at about 4.5 or five times at debt to ebitda.

Depends on the industry, depends on the target. My name.

So I want to work out this debt to EBITDA here.

How am I going going to do it? I'm gonna start here in H 14.

I'll press equals and what I'll do is I'm gonna sum my revolver and my first lien and brackets.

I want to lock that G 13, lock that revolver because I'm gonna copy this down in a minute.

I don't want that revolver to move on. That's stay where it's, so I'll lock that with some dollar signs And then I'm going to divide that by the historical EBITDA up here.

Okay, my historical ebitda, again, I'll lock that as well.

Lock with dollar signs.

Okay, I'm going to reveal that formula above just so you guys can see it. There you go.

Okay, I now want to copy this down.

So you could drag it down with a handle.

You can select down and press CTRL D.

We can copy and paste it doesn't matter. So, And What figure did we get to? 5.1 times EBITDA, our debt to EBITDA 5.1. That's healthy.

That's okay. If it was pushing six, I'd be getting very nervous to be honest. If it was pushing much above five, a lot of debt providers starts getting nervous.

5.1, we're okay for now. Good.

There's Only one more thing I want to do on this tab.

And remember we're getting ourselves to the deal date where we can actually buy the target.

Just one more thing we need to do and it's this Get rid, It's this goodwill down here.

So what is goodwill? Goodwill is the premium.

The premium paid above the book.

Value of targets equity.

Quite a mouthful. It's the premium you pay above the book. Value targets equity, Right? So I'm just gonna expand this out a bit.

There we go. So how are we going to do it? Well, I'll find the equity purchase price.

I'm gonna make up some numbers just for a second.

Let's say we buy the company for a hundred, then I find the targets.

Net identifiable assets.

Now I'm gonna say for now that that's the targets book value of equity, the targets book value of equity.

Now you certainly can get more complex than that. You can have all kinds of reasons why that targets actually might go up or might go down due to step ups and step down, skip that further. Now for argument's sake, let's say the targets book value of equity is 85.

Then what's the premium paid? The premium must be 50.

Okay, So we need to work out these real numbers that happened in dividends.

Well we'll start with the equity purchase price and we've already got that number.

It's over on the left hand side here.

Acquisition equity value 1 4 8, 7 0.1.

Start there.

But now I need the nets identifiable assets.

Basically the targets equity and we can find that on the targets balance sheets.

Okay, another great reason for us to just go have a look at that balance sheet.

Let's go to the balance sheet tab.

On the balance sheet tab. The targets equity.

Remember we're looking column F here.

This deal happened December 15.

The targets equity is 8 5 3 0.3.

I'm going to make that a negative.

What times it by minus one.

So hang on, we're paying 1,487 million for something that should only be worth 853.

Hmm. Oh well.

So the premium that we have paid now some of the items above, ooh 633.8.

Cool. So not quite half, not quite half of the extra price was goodwill but, but getting on for half.

Okay, that gives us all of the numbers that we need on this tab here.

Gives us all the numbers we need to get us to the deal date.

Okay, now I need to introduce what happens on the deal date to you and how we're going to combine this target and all these weird financing.

Put them together. Let me introduce on a blank sheet for starters, what we're gonna do is we're going to take the target company.

So what happens on the deal day? We're going to take the target company, we'll take their balance sheet targets balance sheet and we're going to add onto it.

Move this up, give ourselves a small room.

I'm gonna add onto that or subtract deal adjustments.

Now those deal adjustments, that's where you earn your money, that's where it gets a little bit tricky and you have to work out where everything goes.

That will then get us to the post deal balance sheets and we can model the company into the future and start paying down their debt.

And that's what you're gonna do in two weeks time.

But Jonathan, So these deal adjustments, if that's where I make my money, what adjustments do we need to make? The first ones we're going, first one we're gonna look at is financing.

We're going to have to make quite a few financing deal adjustments.

We're going to have new debts.

The first lien, the second lien, the mezzanine, that all needs to come in.

So we'll add in the new debts, we'll add in the new pres, the preference shares, we'll add in the new equity.

We've put in another 10 million of shares.

That is new equity, that's new financing for the company.

Hang on, we had to pay some fees, so we'll have to subtract out those fees.

All those lawyers and accountants, we'll have to get rid of the old debts.

The HSBC debts will get rid of that.

They've been paid off. HSBC will walk away.

We're going to have to take out the old equity.

This is a bit of a bit of a head screw for some people and I totally understand it because I didn't understand it when I first saw this.

The old equity, any money that was due to them that they were owed, maybe retained earnings in the balance sheet that's gone.

They have been paid, we have paid them about one and a half billion pounds, we've paid them to go away.

So the old equity that needs to be um, taken out, zeroed out.

And then the very last thing we'll have is goodwill.

So quite a few adjustments to make here.

So this is where we're gonna spend the next 15 minutes or so.

I'll get end of the session.

Let's go to the balance sheet tab then let's explain what's going on here.

So I'll move to the balance sheet tab.

Let me show you a link between this here and that page that we just did.

The balance sheet at December 15.

That is the targets, old balance sheets, there we go.

And in column I, we've called it here the combo, the combo balance sheets, that's the post deal balance sheet.

It combines the old and the new bins.

And in between we've got two columns.

We've called them accounting and financing and they are for deal adjustments.

In fact, I'll just call them adjustments. So they fit in.

Now you could have as many adjustment columns as you want.

Some people just go for one. I find that very jumbled. You end up with loads and loads of calculations in the same cells and some people go for 2, 3, 4, 5, 6 columns. Really doesn't where we are going to start.

We'll start with the post deal column, then we'll do the tricky green columns.

Now I know some of you guys are following along with me and you click, click, click it clicking and you're desperately trying to keep up.

Great for you. If you're just watching and soaking up the info, good for you too.

For this next bit, just for the next 30 seconds, I would suggest take your hands off, watch me do it and then you'll go, I got it.

And then I'll do it second time you can catch up.

Okay, so the post deal column, we're going to start hands off the keyboards. Just watch by summing up the targets balance sheets.

This one's cash. So the targets balance sheet, cash and the deal adjustments.

Keep watching, keep watching, keep watching.

So this means whenever I've got a blue hardcoded number here.

Basically it's not a black subtotal.

Whenever I've got a blue hardcoded number here, I'm going to sum to the left.

So just watch me do it guys. I'll do it really quickly.

So I'm going to copy and paste, paste, paste.

Sum me to the left, sum to left. Some means to left sum to left. But when I get down to my total current assets down here, that number's black.

That's a calculation. And I want to sum vertically.

So quick shortcut. Quick shortcut for you guys.

Let's just take, let's copy this formula here. Copy.

I've copied it, goes to the right and now I want to paste it.

And that is something upwards.

So I'm going to reveal my formulas to the left hand side here.

A little bit confusing. Let me copy that all the way down.

It'll look a lot better in a minute.

And if you, again, if you just watch me for two seconds, this will all make loads of sense, I promise.

So when the numbers are blue, we go to the left.

I copy, paste, paste, paste, paste and paste once more.

So I paste it to the left each time.

But when I get to a black number like this, I won't sum to the left.

I'll sum upwards and I'm going to cheat by copying this formula here basically over here.

Guys, can you do that please? So I promise I'll do it one more time if you want.

Let me leave, leave some of those numbers there.

So get going guys up at the top here.

I'll do it one more time. We sum to the left 1, 2, 3 sales.

So sum them up, 1, 2, 3.

Then whenever there's a blue number, I copy and paste and I paste and I paste.

But whenever there's a black number, once it sum upwards, so I copy and I cheat, I copy that subtotal here, I paste it over here like that.

Okay, I'm gonna finish this up and I'll give you guys a minute to catch up with me.

All of my formulas on screen.

So if you any doubts, just have a look at my formulas, that'll help you out and I'll get rid of all these NAS and that'll look a bit more sensible. There we go guys, I'm gonna give you a good 30 seconds.

Catch up with me if there are any questions, jump on the chat, ask me some questions.

Okay, I'm gonna assume you guys are all good. Fantastic.

So my column, my post deal balance sheet, all done.

It balances. I've got this.

Okay, at the bottom balance sheet, I'm just gonna say total assets minus total bilities equity.

Okay, so now we need to earn our money, we need to understand these adjustments and they're a bit harder.

Let's have a look at our list.

The first one says here is new debt.

So I'm gonna tick that off. So we're gonna do that.

I need to grab the new debt, add it to the balance sheets, the new debt.

We'll put this into the financing column.

Starts with the first lien.

I'm an H 22 and our new debt was in the sources and uses funds.

Let's go to the LBO tab. Here's my first lick. There it is. Got it in row 14 and it was 400.

Now I notice that the cells below give us the second lien and the cells below that are the junior notes, mezzanine preps.

So first, second, junior Mez preps.

If I go back to the balance sheet, I press enter, go back to the balance sheet.

They're in the same order here.

First, second junior Mez preps.

So I can take that 400, just copy it down and all of those new debt figures come in and the preface as well.

So I'm gonna go back, uh, pardon me, hang on, let me reveal my formulas so you guys can see what I'm doing just in case you're having any trouble at all.

There we go.

So I'm gonna gonna go back to my scribbles.

Gonna tick off those prefs just on them as well.

New Prefs, tick.

Now I need the new equity, 10 million.

We need that to come in as well.

So down to my equity down here on my formula. Here it is.

Nothing at the moment I press equals don't, don't worry about that.

Na, that'll fix itself in a second.

So my equity I press equals and I go back to the sources and uses of funds.

This is why we did the sources use of funds, the new equity.

Here it is in row 19. That's the 10.

So grab the 10. Fantastic. Another one is duck.

Okay, next up I need the fees.

I need the fees. They're also in the sources and uses of funds.

So I'll take that off my fees.

Now where do they go? Good question. This one, the fees, something really weird happens here.

Fees go through an income statements.

I do not see an income statements. What? What are we doing? The income statement exists just for one day and for one item, which are the fees.

So we don't really need a whole income statement do it.

Those fees or those costs blow through the income statements into retained earnings.

Okay? So they'll flow through into the equity line here.

So what we'll get is a negative, however much it was 50 or something.

So I'm gonna put that in with this 10.

I'm gonna have these two items on top of each other.

So I've got LBOG 19 minus, I need to subtract these fees. There are cost, they reduce our equity, they reduce our retained earnings.

So I subtract LBO and I can see the fees.

Oh there they are. 53, 53 0.7.

There we go. Great.

So we're getting through our adjustments. This is great.

What's next on the list? The next we've got on the list is the, are the old debt.

And I should say I should actually be very particular here.

That was of course their next debt. Bold net debt.

We need to go pay all that off HSBC. They're gone.

So we need to pay them to go away.

I'm going to put that into this accounting column.

But some people would say, oh it's fine, put it in the financing. It's no big deal. Okay, I'm gonna put it in the accounting column.

Firstly, this revolver, do we still owe HSBC 155.4? No. So I press equals minus 155.4 gone.

The new revolver balance is now zero.

Same for this long-term debt here we owed 197 to HSBC.

Do we owe them anymore? Do the old Instagram thing.

I subtract 197.1.

My new long-term debt balance zero.

That was the debt, but we said net debt.

See if I go up to the top, that 50.1, that cash, we're gonna take that cash, we use that to pay off some of the debt.

So again, equals negative.

And I pay off the 50.1 rates, my postal cash zero.

So our net debt is now done winning.

Next up is the old equity.

We don't owe the old shareholders any money anymore. They're gone. We got rid of them.

That old equity is this 853 here.

Now to get your head around it, that 853 might be amounts invested years ago.

It may have gone up each year as the company retains earnings, retains earnings, retains earnings.

We could have paid that out as a dividend to the shareholders.

We retain it, we thus we owe it to them.

Hang on, we don't owe them anymore. We've paid that off.

So 8 5 3 equals minus sign.

Get rid of that. 8 5 3 gone.

Great. So I'll reveal my formula underneath.

I will try to reveal my formula underneath. There we go.

And I'll do the same thing here for the sell above rates.

Still one more to go. Still one more deal adjustment.

Let's go back to our list and it's the goodwill.

Now I think this is the trickiest one to get your head around.

What you've basically done Is you have bought a company, okay, so you've bought a load of company, a load of this stuff here.

You have bought this.

Yeah, let's say that's a thousand.

Your deal adjustments are all of your financing.

So your financing is ah, right, okay, deal adjustments, great hit.

So 1100 and then you go, hang on, how can this be? Right? Paid 1100 for something worth a that and the differences, the goodwill.

Okay, so the goodwill balances it out.

I bought something worth a thousand. No you didn't.

You paid a premium for it. Okay.

So those numbers were entirely made up just to help with the teaching.

So our last one then is Goodwill.

I'll press equals Goodwill was also on the LBO tab.

So I go to the LBO tab.

It was in the bottom right hand corner, that's 633.8 press enter and you should hopefully now have a perfectly balanced balance sheet.

I'll just give you guys a few seconds to do that.

Make sure everyone's good.

If it's balanced for you, give yourself a little at the fist bump.

Yeah man, good for you.

Great stuff.

So quite a lot going on just to get us to the deal date and then do the deal.

Alright, now the next steps, which we're not gonna do now, but Jonathan will take you through in two weeks time as a reminder of that date.

It's on our website. Here it is.

So that's us doing it today, two weeks time, LBO, the debt schedule.

Okay? And then after that, Phil will finish it up week after that.

What are you gonna do after that? Well, you need to start by modeling out the future.

And we've done all the basic stuff. Like we've done stuff like, you know, oh, excuse me, lemme go back.

We've done things like accounts receivable, we've done inventories.

So you might want to go away today guys, just have a look at what we've done.

So if I show you the, uh, let's take an easy, okay, for accounts receivable, you go to the inputs tab receivable days.

Oh right, 3.9.

Okay? So we model out the future, the things we haven't modeled out yet.

It's the future debt, the future revolver.

The future cash.

So Jonathan will take you through the debt schedule, gonna build all of this up with you, show you how you can pay down that debt.

That'll get you through all of, um, his session.

And then the final session will be trying to analyze the deal.

Is it a good deal? Is it a bad deal? Have we paid up enough debt? Is the company looking healthy? Is it good for the investors or not? Cool, That gets us to the end of the session.

So guys, I hope, let me put this back on the balance sheet.

I hope you found that useful as, uh, Fred asked at the beginning, when's the recording gonna be coming out? The recording it will be placed here.

It won't be done today at all.

It might come out over the weekend, but much more likely to happen on Day. Cool Guys, I hope you had a good time.

Hope you enjoyed it. Hope to see you on another Helix live soon.

Enjoy the rest of your day guys. Bye-bye.