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A Quick And Dirty LBO Screen

Tyler Durden's picture




 

With each day bringing new and more ridiculous M&A, and now LBO rumors, we thought it would be a good idea to highlight the public companies that have at least a fighting chance of going private. Using a simplistic template from UBS, we present the thirty companies which would generate the highest stock return should they get acquired, assuming a 4.5x Debt/EBITDA pro forma leverage (as much as TPG would like, 10x leverage is not coming back...Unless Joe Cassano is hired to run Chrysler's take private group), and also assuming a 40% equity portion in the transaction. In other words, these are the companies that at least on paper have the highest equity expansion potential in a 7.5x EV/EBITDA. While this analysis ignores whether or not any of these companies actually generate substantial cash flow to cover pro forma interest, or are a logical fit for any financial acquiror, any company not on this list is likely already equity heavy and as a result even if acquired will not result in material upside. As the chart below shows, the maximum stock upside ranges between over 200% in the case of R, to just over 22% in the case of BBY. This below list by no means suggests that any of these companies on it will be LBOed: it should merely be used a benchmark for modeling purposes.

 

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Fri, 03/26/2010 - 18:19 | 277596 swamp
swamp's picture

If short term memory for detail is accurate, the other day Tyler reported that JP Morgan issued a buy on the Euro and Tyler's comment was that it was time to buy. Right on the money!

Fri, 03/26/2010 - 18:43 | 277624 alphaninja
Fri, 03/26/2010 - 18:44 | 277627 Racer
Racer's picture

this reminds me, you did a junk stock (not to pick on fundamentals but who cares in this market) pick a while ago... would be nice to see an update of how well they have done?  :)

Tue, 04/13/2010 - 06:04 | 297752 mark456
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