Technical Note | HBS Case Collection | July 2001

Technical Note on LBO Valuation (A): LBO Structure and the Target IRR Method of Valuation

by Carliss Y. Baldwin

Abstract

Explains the equity cash flow method of valuation as it applies to leveraged buyouts. Also explains: 1) earnings and cash flow forecasts, 2) debt structure and the cash sweep, 3) the cashing out horizon and terminal valuation, and 4) the target IRR method of valuation.

Keywords: Valuation; Leveraged Buyouts; Capital Budgeting; Borrowing and Debt; Cash Flow; Equity; Profit; Price; Forecasting and Prediction;

Citation:

Baldwin, Carliss Y. "Technical Note on LBO Valuation (A): LBO Structure and the Target IRR Method of Valuation." Harvard Business School Technical Note 902-004, July 2001.