Do you need to fully project all three statements to complete a basic LBO?
Answer
The short answer is no. Most of the balance sheet and cash flow statement can be cut. You can generally make assumptions for FCF items so all you need is:
- a) Condensed income statement
- b) Section to track cash flow items for FCF
c) Section to track debt balances (a paper LBO skips this, and you won’t need to walk through one)
Why this matters to bankers
Portions of all three statements are used to calculate FCF, although bankers don’t always calculate fulsome three-statement models.