New here? Every junior finance job in London, each one explained in plain English. Start with what the words mean, then work down the board.
LBO / Buyout Execution
In an LBO, every deal collapses into one identity: EV − net debt − debt-like + cash-like ± working capital peg − minorities + associates + ticker − leakage = equity purchase price. That bridge is the central artefact - a living spreadsheet, often 200+ rows, fought over line by line. Sponsors bid on Enterprise Value because it prices the operating engine independent of the seller's financing; the bridge walks you to the cash the seller receives. Locked box fixes price at signing on a historical balance sheet, with a ticker (4–8% simple) and a leakage indemnity - default in European sponsor deals. Completion accounts fix price at closing then true-up 60–90 days later via expert determination - default in the US. W&I insurance is market standard in European PE. The buyer insures warranty breach with an A-rated carrier (retention 0.5–1% of EV, limit 10–20%), letting the seller exit clean. It costs 0.8–1.5% of the limit but is never primary protection. Advisor fees on a £1bn deal run £30–50m. Sell-side M&A takes 0.8–1.5% of EV; debt arranging is the biggest bucket at 1.5–3.0% of underwritten debt - on a sponsor LBO it dwarfs the advisory fee. Each workstream has its own incentive structure: tiered fees, Lehman ladders, retainers, tails, abort fees, expense caps. The associate running the bridge coordinates them - bankers own headline EV and the peg, accountants own debt-like items, tax the tax lines, lawyers the SPA definitions, actuaries the pension.
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