Build Leveraged Buyout Model - LQ

Overview La Quinta Holdings Inc. was a leading owner, operator, and franchisor of select-service hotels, primarily serving the midscale and upper-midscale segments in the United States. As of December 31, 2017, the company operated a portfolio of 901 hotels with approximately 88,200 rooms, including 40,400 owned hotel rooms and 47,800 franchised hotel rooms. The company generated revenue from owned hotel operations, franchising fees, and other hotel-related services. In January 2018, Wyndham Worldwide announced an agreement to acquire La Quinta's hotel franchising and management businesses for approximately $1.95 billion. As part of the transaction, La Quinta separated its owned real estate assets into CorePoint Lodging Inc., which became a separately traded real estate investment trust. The acquisition was completed on May 30, 2018, expanding Wyndham's presence in the midscale and upper-midscale hotel markets. In this exercise, you will evaluate a private equity acquisition of La Quinta Holdings Inc. using its historical public financial data and transaction assumptions. You will project the company's operating performance, model debt financing and repayment, and evaluate potential investor returns over a five-year holding period. This exercise provides hands-on experience applying LBO modeling techniques to a real-world hotel company. Learning Goals Master LBO mechanics: Input transaction assumptions and debt assumptions, and calculate Sources of Funds and Uses of Funds to understand the deal structure. Project company performance: Complete the Income Statement, Balance Sheet, and Cash Flow Statement projections (2018–2022), including revenue growth, operating expenses, capital expenditures, and depreciation. Build debt schedules: Calculate interest expense, mandatory repayments, optional repayments, and cash available for debt repayment. Analyze investor returns: Calculate exit enterprise value, investor equity value, IRR, and MOIC to evaluate the investment. Perform sensitivity analysis: Evaluate how different purchase premiums, entry debt levels, and exit multiples affect investor returns. Key Concepts EBITDA: Key profitability metric used to assess operating performance and debt capacity. Hotel Revenue Drivers: Understand how Average Daily Rate (ADR), occupancy, and franchising activities contribute to hotel revenue. Capital Expenditures & Depreciation: Model maintenance and renovation spending and understand their impact on PP&E and operating cash flow. Debt Schedule: Track outstanding debt balances, interest expense, mandatory repayments, and optional repayments over the investment period. Cash Flow Analysis: Calculate free cash flow available for debt repayment and understand how cash generation contributes to deleveraging. Internal Rate of Return (IRR): Annualized return earned by equity investors over the investment period. MOIC (Multiple on Invested Capital): Total equity value returned to investors relative to their initial investment. Exit Valuation: Estimate the company's exit enterprise value using an EBITDA multiple. Sources of Funds & Uses of Funds: Understand how the transaction is financed and how the funds are allocated.

Practice Build Leveraged Buyout Model - LQ with interactive Excel modeling exercises in our LBO Modeling module.

This hands-on modeling exercise helps you master Build Leveraged Buyout Model - LQ through real-world Excel practice and financial modeling techniques.