Management Buyout (MBO) Financial Projection Model (Excel XLSX)

A Management Buyout (MBO) Financial Projection Model is crucial for management teams looking to purchase a company they currently work for. It forecasts income, expenses, and cash flows, enabling strategic planning and funding negotiations. It supports decision-making related to valuation, debt structure, and return on investment. Accurate projections empower MBO teams to secure financing, assess the feasibility of the buyout, and ensure the company's continued success under new ownership. It enhances financial stability, attracts investors, and aligns financial strategies with the MBO objectives, making it an indispensable tool for a smooth transition of ownership and long-term business success.

PURPOSE OF MODEL
User-friendly financial model to project and analyse the financial outcomes of a management buyout (MBO) transaction. The model enables the user to project the financial performance and position (3-statement financial forecast) and investor IRR over a 5-year period post MBO transaction including any revenue and cost changes/improvements expected to be generated under the new ownership. The model also enables the user to qualify the intrinsic value of the business pre and post MBO transaction using the discounted cashflow (DCF) approach.

The model compares these outputs in a dashboard to help the user calculate and understand the financial feasibility of the MBO transaction including, amongst others:
•  Investor IRR
•  Sources and uses of funds
•  Transaction details and financing requirements
•  Projected revenue, EBITDA and net profit performance pre and post MBO transaction
•  Intrinsic enterprise and equity values before and after the transaction
•  Gearing, ROE and margin development pre and post MBO transaction

The model includes 3 scenarios for post-MBO revenue and cost changes/improvements and projected financial statements both pre and post MBO transaction showing goodwill and impact changes in capital structure.

The model follows good practice financial modelling principles and includes instructions, checks and input validations.

KEY OUTPUTS
The key outputs include:
•  Projected full financial statements (Income Statement, Balance Sheet and Cash flow Statement) across 5 years presented on a yearly basis for the company pre and post MBO transaction;
•  Discounted cash flow valuation using the projected cash flow output pre and post MBO transation
•  Ratio Analysis based on projected financial statements
•  Summarised tables and charts showing:
Key transaction details including offer price, financing requirements, sources and uses of funds
Investor cumulative net cash flow and IRR by projection yearo IRR Sensitivity analysis to exit multiple and offer premium
Key performance metrics and ratio comparison between pre and post MBO company including revenue growth, EBITDA, net profit, margin, ROE and debt to equity ratios)
Key valuation comparison pre and post MBO transaction

KEY INPUTS
Inputs are split into Setup inputs, Pre-MBO assumptions and assumptions for MBO transaction

Setup Inputs:
•  Names of transaction and company;
•  Currency;
•  Transaction close period;
•  Naming for post-MBO scenarios;
•  Naming for debt and equity sources of funds for MBO transaction.

Pre-MBO Projection Inputs:
•  Latest P&L and balance sheet actuals;
•  Forecast revenue;
•  Forecast cost of sales;
•  Forecast operating expenses including depreciation;
•  Fixed asset additions;
•  Borrowing additions/repayments;
•  Dividend distributions;
•  Tax rate and interest rates;
•  Debtor and creditor days;
•  Inventory percentage of cost of sales;
•  Discount rate and terminal growth rate.

Post-MBO Inputs:
•  Financing details including offer premium, transaction fees, working capital requirement, capex investment, contributions by each debt and equity investor
•  Capex investments and useful lives
•  Goodwill amortisation (if applicable)
•  Post-MBO exit multiples, discount rate and terminal value growth rate
•  MBO-driven changes/improvements (revenue increases, cost reductions, dividend distributions) for each scenario
•  Pro-forma opening balance sheet adjustments.

MODEL STRUCTURE
The model comprises of 8 tabs split into input ('i_'), calculation ('c_'), output ('o_') and system tabs. The tabs to be populated by the user are the input tabs which include ‘i_Setup' for model and transaction general assumptions and ‘i_Pre_MBO' for specific projection assumptions relating to the company pre-MBO and ‘i_Post_MBO' for the detailed MBO related assumptions. The calculation tabs uses the user-defined inputs to calculate and produce the projection outputs which are presented in the calculation tabs and ‘o_Dashboard' tab.

System tabs include:
•  A 'Front Sheet' containing a disclaimer, instructions and contents;
•  A checks dashboard containing a summary of checks by tab.

KEY FEATURES
Other key features of this model include the following:
•  The model follows good practice financial modelling guidelines and includes instructions, checks and input validations to help ensure input fields are populated accurately;
•  The model enables the user to prepare projections for the company on a pre and post-MBO basis;
•  The model includes the possibility to model 3 scenarios for MBO-driven changes/improvements with a drop down in the dashboard tab to change scenario.
•  The model is not password protected and can be modified as required following download;
•  The model is reviewed using specialised model audit software to help reduce risk of formula inconsistencies;
•  Apart from projecting revenue and costs the model includes the possibility to model receivables and payables, inventory, fixed assets, borrowings, dividends and corporate tax;
•  Business names, currency and transaction close date are fully customisable;
•  The model included an integrated discounted cash flow valuation for the company on a pre and post-MBO basis;
•  The model includes up to 6 separate debt and 6 separate equity investors financing the MBO transactions with IRR calculations computed for each equity investor across the projection period.
•  The model includes a checks dashboard which summarises all the checks included in the various tabs making it easier to identify any errors.