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Private Equity

Lecture 9 - 10: LBO Model, EV to Equity and Exit

Comprehensive quiz covering LBO model construction, types of EBITDA, value creation strategies, the EV-to-Equity bridge, net debt and working capital adjustments, completion mechanisms (locked box vs. completion accounts), governance, and exit routes.

Question 25 of 52

Case

Case study: Working capital moves while net debt is flat

Expand / collapse

The same company is acquired at an Enterprise Value of 1,000. Net debt is 100 at both signing and closing, but working capital rises from 100 at signing to 150 at closing. The parties consider a normalised working capital reference of 100.

In the original case the WC mechanism removed a price difference; here it creates one (950 vs 900). Explain why both outcomes are correct, and what this tells you about the real purpose of the mechanism.

Write your answer in your own words. It will be graded with Gemini.

Answer freely: concise wording is fine as long as it covers the lecture point.