Why Leverage Buyouts Are Back
by Femi Enigbokan, MBA '14 (3/7/13)
When I decided to attend business school, other than its collaborative atmosphere and student body filled with friendly, clever people, the Investment Banking Immersion was paramount in my decision to attend Johnson. The Immersion has managed to exceed my lofty expectations, providing challenging and extremely interesting cases where my classmates and I use the information learned during the core, combined with Old Ezra Finance Club’s useful industry knowledge resources to provide our “clients” with investment banking advisory recommendations.
Under the guidance of Drew Pascarella ‘01, our Immersion Leader, we kicked off the Immersion by visiting our Alumni on ‘the street’, then we educated the CFO of a food and beverage firm on the current state of the bond market, discussing debt financing with the current Anheuser-Busch INBev / Modelo acquisition. Most recently we were tasked with advising the CEO of a digital media company on the current state of the Leveraged Buyout (LBO) market, using Michael Dell’s recent attempt to take Dell private as a proxy. We were then to propose LBO opportunities by modeling out, and pitching, a potential LBO transaction.
The LBO case required my fellow first year immersion classmates and I to work in teams of 4-5 students. As is customary, we were given approximately a week to analyze current deals in the LBO market, discuss recent transactions in the sector, analyze our client’s firm, and provide intelligent next steps—determining whether or not an LBO would be ideal for our ‘client’.
Projects such as these reflect the best of Johnson and the Investment Banking Immersion program. The camaraderie that we develop with each other during the first semester investment banking informational process is on display throughout the case work. My teammates are hardworking, intelligent aspiring bankers.
As we prepare for our summer internships in investment banking, these experiences will prepare us for the team-driven, excellence-required deliverable environment that is investment banking. The project allowed each of us the opportunity to implement the LBO modeling skills that we have developed and continue to hone during the Immersion’s financial modeling class, and our required multi-day training course.
When my group reconvened for our final meeting, we each had solid working knowledge of our LBO model. We then created a presentation that reflected our positive outlook on the LBO market, based on recent activity. We concluded our deck with our view of the potential IRR of an LBO for both the private equity sponsor, and the current management team, based on model assumptions and forecasted financials, with data minded from analyst reports and financial statements.
My favorite part of the entire process is the final presentation and case discussion. Here, teams present their unique recommendations, and we end the class with active discussion and review of the case, the subject matter (in this case the LBO market), and then Drew shares his industry experiences and best practices. I am a kinetic learner, so these sessions are invaluable.
The Investment Banking Immersion at the Johnson School provides first year MBA students with a baseline introduction into the world of investment banking. As we look forward to next week’s investment banking case, and onward to our summer internships, the Immersion Program is preparing us for our future careers in investment banking.