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A buyout of a testing laboratories company in Spain
The prompt
Fictional and illustrative. A private equity fund can buy a Spanish testing laboratories company at 10 times EBITDA. EBITDA (profit before interest, tax, depreciation and amortisation) is EUR 20 million. The fund would pay with EUR 100 million of debt and the rest from the fund. The plan grows EBITDA to EUR 30 million in five years, with cash from the business paying debt down to EUR 60 million. Assume it sells at the same 10 times multiple. The fund wants at least 2 times its money and about 20 percent a year. Should it invest?
Your interviewer will share data as you ask for it. Ask clarifying questions, state a hypothesis, then lay out your structure out loud before you calculate.
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