The 50/50% capital structure would be used. When calculating WACC, we assume the optimal target capital structure, which is the capital structure the company will have in the long term and the optimal capital structure for a company in that industry....

The leverage multiple, debt / EBITDA, is a common metric comparing debt and EBITDA. EBITDA is a proxy for cash flow that can be used to pay back the debt. It’s also a measure of the core profitability of the business that remains neutral in terms of capital structure, tax jurisdiction, and account...

Operational improvements adds more value as the impact is far more permanent than temporarily playing around with the capital structure. Strategic shifts or operational improvements may last a lifetime, while capital structure changes and financial engineering will only affect the company until the ...

This depends if the ratio between the capital lease and the lease payment is higher or lower than the EV / EBITDA of the company. A capital lease is like buying the asset with debt. You pay interest and principal repayments. These payments are below EBITDA, meaning they are not treated as operating ...

A PE firm can incentivize management to stay by getting management to put up some equity for the acquisition, also known as management rollover. Usually, management will anywhere from 5-20% of the company to ensure they have “skin in the game.” Another common method to incentivize management is ...

The advantage of being the only PE firm involved in the LBO is that you have complete control. You can dictate the type of debt financing to be raised and take full control when negotiating the financing terms with banks / institutions. You can choose whether or not to hire an investment bank as an ...

A capital call is when a portfolio company needs to go back to its investor(s) to ask for more equity investment. This could be to finance an add-on acquisition or a new growth strategy. A capital call may also occur if the company is simply low on cash and needs more capital to stay afloat [&hellip...

A sale-leaseback involves selling property ownership to a third party and then renting that property back from that third party at a rate that was previously agreed upon. This is also a common way to generate cash to fund other projects. Companies may also wish to do this to reduce their real estate...