Build Leveraged Buyout Model - PETM

Overview In December 2014, PetSmart, the leading pet retail chain in the U.S., was taken private in a high-profile leveraged buyout valued at approximately $6.2 billion. Investors saw an opportunity to transform the business by improving operational efficiency, optimizing the store footprint, and investing in growing segments like pet services and online sales. The deal came after a period of steady growth, but the company faced pressures from e-commerce competitors and changing consumer behavior. By taking PetSmart private, the investors could focus on long-term strategic initiatives without the scrutiny of public markets. The LBO provided the firm with the flexibility to restructure the capital base and execute growth plans over several years. As part of the deal, the investors built a detailed LBO model to project cash flows, debt repayment, and potential exit scenarios. The model allowed them to estimate the IRR and understand how operational improvements and debt leverage could drive investor returns. In this exercise, we simulate the real LBO by using public data and PE assumptions, giving you hands-on experience with modeling a leveraged buyout. Learning Goals Master LBO mechanics: Input transaction assumptions, debt assumptions, and project Sources & Uses of funds (Sources & Uses) to understand deal structure. Project company performance: Complete Income Statement, Balance Sheet, and Cash Flow Statement projections (2015–2019) and calculate interest expense/income using debt schedules. Analyze investor returns: Compute exit value, equity value, and IRR, and understand the impact of assumptions on equity returns. Key Concepts EBITDA: Core profitability metric used to assess operational performance and debt capacity. Goodwill & Intangible Assets: Calculate when purchase price exceeds net identifiable assets. Debt Schedule: Tracks principal, interest, and repayments over the investment period. Cash Flow Analysis: Includes free cash flow available for debt repayment and levered cash flows to equity investors. Internal Rate of Return (IRR): Annualized return on equity investors’ cash flows. MOIC (Multiple on Invested Capital): Total cash returned to investors relative to invested equity. Exit Valuation: Expected company sale value based on EBITDA multiples at exit. Sources of Funds & Uses of Funds: Capture how the transaction is financed and how proceeds are applied.

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

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