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Basic Question 0 of 5

The LBO model is a:

I. Valuation model.
II. Negotiation tool.
III. Acquisition model.
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User Contributed Comments 4

User Comment
vi2009 A LBO model is a valuation model! was what I thought ... but read Curriculum p 54 and this explains why it is a negotiation tool!
CarsonBJ P. 59 paragraph 3 states "On the basis of the input parameters, the LBO model provides the maximum price that can be paid to the seller while satisfying the target returns for the providors of financing. This is why the LBO model is not a valuation methodology per se. It is a valuation tool that helps develop a range of acceptable prices to conclude the transaction."
Allen88 Thanks CarsonBJ
sogah its page 58 paragraph 3
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I used your notes and passed ... highly recommended!
Lauren

Lauren

Learning Outcome Statements

compare and contrast characteristics of buyout and venture capital investments;

interpret LBO model and VC method output;

explain alternative exit routes in private equity and their impact on value;

CFA® 2024 Level II Curriculum, Volume 5, Module 38.