What are the key variables for sensitivity analysis performed in LBO analysis? I Purchase price II Financing Structure III Historial Dividends IV Exit Multiple

In a Leveraged Buyout (LBO) analysis, sensitivity analysis is performed to understand how the variation in an output is affected by changes in the inputs. The key variables for sensitivity analysis in LBO are:

I. Purchase Price: This is the price paid to acquire the company. Changes in the purchase price can significantly affect the returns of the buyout. A higher purchase price might require more debt and could potentially lower the equity returns.

II. Financing Structure: This refers to the mix of debt and equity used to finance the purchase. Changes in the financing structure can affect the cost of capital and the risk profile of the investment. More debt increases the risk but also the potential returns.

III. Historical Dividends: While not typically a key variable in LBO sensitivity analysis, historical dividends can provide some insight into the company's ability to generate cash flow. However, future cash flows and the company's ability to service its debt are usually more important.

IV. Exit Multiple: This is the multiple of EBITDA that the company is expected to be sold for at the end of the investment period. Changes in the exit multiple can have a significant impact on the returns of the buyout. A higher exit multiple can increase the returns, while a lower exit multiple can decrease the returns.