What does a company need for an LBO to be reasonable?
Answer
This is the same answer as with a DCF. A company must have relatively stable and/or predictable cash flows. A lack of CapEx requirements to scale is another reason too, but this is inherently tied to the point about cash flows.
Why this matters to bankers
Bankers must know when a method is relevant to determine if they should use it. LBOs are no different.