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LBO Case: Should you acquire MécaPro?
You are a PE analyst. Your partner asks you to evaluate an industrial deal in 8 steps — from normalized EBITDA to the investment recommendation.
PE / LBOIntermediateCalculation
Monday morning, 8am. Your partner walks into the office:
"We received a teaser on MécaPro, automotive subcontractor. The seller is asking €210M. See if it holds up. I have a meeting with bankers at 2pm."
Here is the teaser information:
- Revenue: €280M
- Reported EBITDA: €35M
- But the footnote states: includes €5M of non-recurring R&D tax credit and €2M of asset disposals
- Banks are willing to lend 4x adjusted EBITDA
- Senior debt rate: 5%
- Management believes they can grow EBITDA by 8%/year
- Exit horizon: 5 years
- Your fund targets a minimum IRR of 25%
Given
| Reported EBITDA | 35 M€ |
| Non-recurring R&D credit | 5 M€ |
| Asset disposals | 2 M€ |
| Asking price (EV) | 210 M€ |
| Bank leverage | 4 x adj. EBITDA |
| Debt rate | 5 % |
| EBITDA growth/year | 8 % |
| Fund target IRR | 25 % |
Question 1/8
Step 1 — Normalization. What is the normalized EBITDA? (Reported EBITDA contains non-recurring items a buyer cannot count on.)
Your answerEnter a number in M€
M€
0/8