Fundamental Strategies Towards Sustainable Construction Construction Essay

Fundamental Strategies Towards Sustainable Construction Construction Essay Abstract- Since the construction industry has great impact on the environment, the consideration of sustainable development through sustainable construction is needed. Sustainable construction is a way for the building industry to move towards achieving sustainable development, taking into account the environmental, socio-economic and cultural issues. Specifically, it involves issues such as design and management of buildings, materials and building performance, energy and resource consumption. Therefore, sustainable construction provides solutions that require optimization all sort of environmental impacts since global warming is no longer a remote concept but a real threat to the future of mankind. This paper is review of sustainable practice in construction industry. Mixed methods of quantitative research by way of questionnaire survey and qualitative research using semi structured interview will be applied. For the first stage of data collection, the quantitative method will be a pplied to identify the barriers in implementing the sustainable construction. On the other hand, qualitative method will be used to produce strategies for the Malaysian construction participants to implement the sustainable construction. Interview session will be conducted among experienced professionals in construction industry in order to generate their opinion towards the implementation of sustainable construction in Malaysian construction industry. At the end of the research, discussion and recommendation will be covered, summarising the research content. This research is attempted to develop a framework policy of sustainable construction in Malaysia. A new strategies and guidelines seem to be part of the framework design. The framework derived from this research will be used as the criteria to benchmark the gaps in process and strategy for sustainable construction industry in order to capture good practices in terms of minimising environmental impacts and improve Malaysian read iness towards the sustainable issues. Keywords- Global warming, sustainable development, sustainable construction, environmental impact, policies Introduction The newly launched National Green Technology Policy in 2009 reflects Malaysian Governments seriousness in driving the message that clean and green is the way forward towards sustainable construction which will benefit current and future issues related to economic, social and environment and also quality of life. Such policy showed that government were seriously encouraged the efforts in tackling all related green issues in the country that complement the global vision on sustainable development. This research will be looking into the sustainable practices in Malaysian construction industry and will be focusing on the sustainable policy in other Asian countries such as Singapore, Thailand, Indonesia and Japan which very much active in Green Technology and sustainable projects. The reason for this is to show the gaps that should be filled in by the policy makers in order to catch up with the current developments that have been happening in other countries. The purpose of this paper is to disclose the overall structure of the research that is currently being undertaking by the researcher. Therefore, it is beyond the scope of this paper to discuss any findings from any of the research methodology adapted to date. PROBLEM STATEMENT Nowadays, one of the most pressing concerns for this industry is global warming which is an increase in the average temperature of the Earths atmosphere and oceans as a result of the buildup of greenhouse gases in the atmosphere [1]. Global warming, sometimes called climate change, is causing an increase in the earths near-surface temperature due to changes in the atmospheric composition. Many scientists believe recently observed global warming is partially caused by greenhouse gas emissions from energy production, transportation, industry and agriculture [2] (Oh and Chua, 2010; Radhi, 2009). In Malaysia, the major contributor of the greenhouse gas is carbon dioxide emissions and the trend has been increasing every year since 1982. The global carbon dioxide emission has risen significantly from 19,380 million tons in 1980 to 31,577 million tons in 2008. It is predicted that carbon dioxide emission will increase to 40 billion tons in year 2030 if no tremendous effort are thrown in to mitigate it [3-4]. In addition, according to Dato Sri Peter Chin Fah Kui Minister Of Energy, Green Technology And Water in his speech in the ASEAN Affairs and the Malaysia-Europe Forum, greenhouse gas emissions in Malaysia has increased substantially by 13% and 32% per GDP and per capita respectively between 1994 and 2000. Malaysian total greenhouse gas emissions increased by 55% in 2000 when compared with the 1994 levels. Furthermore, he stated that Malaysias emission of CO2 per capita which is about 7.1 tonne per capita was higher than the average for Asia Pacific of 2.6 tonne per capita based on the National Communications Report. Since global warming has emerged as the most serious environmental issues of our time and since sustainability becoming an important issue of economics and political debates worldwide therefore, it is vital important for Malaysian construction industry to further implement the sustainable construction which eliminates the negative impact on the construc tion industry. At present, Malaysia is a population with about 27.73 million covering area of 329,750 km2 based on the latest census in 2008 and the GDP grew at an average rate over 5.7% during the last 6 years [5]. As such, being a fast industrializing country, it is expected that an increased need for more houses, buildings and public infrastructure. Due to that matter, the government introduces the Sustainable Concept that can be applied to the construction industry to maintain the ecosystem and built environment as well. While standard building practices are guided by short term economic considerations, sustainable construction is based on best practices which emphasize long term affordability, quality and efficiency (Isover, 2009). Sustainable construction, which has inevitably been dubbed green construction, describes the responsibility of the construction industry in attaining sustainability (Nazirah, 2009). Besides that, sustainable construction aims at reducing the environmental impact of a building over its entire lifetime, while optimizing its economic viability and the comfort and safety of its occupants (Aguilar, 2008; Isover, 2009; PediaPress, 2009). Furthermore, sustainable construction is all about maintaining a balance between the human need for buildings for shelter and business operations and infrastructure for higher quality of well-being at one hand, and preserving natural resources and ecosystems, on which we and future generation depend at the other hand (Singh, 2007; Nazirah and Aini, 2010). As mentioned previously, sustainable construction is seen as a way for the construction industry to contribute to the effort to achieve sustainable development. However, in Malaysia, the green movement is still at low level where sustainable projects in Malaysia are mostly at the pioneer stage [6]. She pointed out that the modest number of sustainable projects being built in Malaysia is a sign of the slow intake of the sustainability concept among construction prac titioner. Thus, this indicates that the concerted efforts by the government, non-governmental and education institutions have not fully penetrated into construction activities. Looking the above statement, it can be conclude that there is still lack of effort in the application of the sustainable concept among construction practitioner and this scenario shown that it seems difficult for the Malaysian construction industry to further implement the sustainable construction. Thus, more efforts are needed and should be directed towards realising the green agenda of the industry to enhance the level of environmental awareness and civic consciousness among the people to build sustainably in the future. Therefore, this research will identify the barriers in implementing the sustainable construction in Malaysian Construction Industry. Government policies have been recognised as important instruments in driving the market for sustainable buildings [7]. At recent, the green technology promotion was further emphasized in the 9th Malaysia Plan (2006-2010). This indicate that government were seriously encouraged the efforts in tackling all related green issues in the country that complement the global vision on sustainable development. The establishment of the Ministry of Energy, Green Technology and Water to replace the Ministry of Energy, Communications and Multimedia in early 2009 reflects Malaysias seriousness in driving the message that clean and green is the way forward towards creating an economy that is based on sustainable solutions. The launch of the new National Green Technology Policy in April 2009 by the current Prime Minister, Datuk Seri Najib Tun Razak, shall provide guidance and create new opportunities for businesses and industries to impact on the economic growth positively. The National Green Technol ogy Policy is built on four pillars which are seek to attain energy independence and promote efficient utilization, conserve and minimize the impact on the environment, enhance the national economic development through the use of technology and improve the quality of life for all [8]. The National Policy on Environment seeks to integrate environment considerations into development activities to foster long-term economic growth and human development and to protect as well as enhancing the quality of environment. Thus, the National policy is seen as a major catalyst of the governments strategies in order to promote sustainable construction since sustainable construction is a way for the building industry to move towards achieving sustainable development. More strategies and actions should be pursued actively to speed up the process in creating sustainable oriented construction industry which is paramount towards building a sustainable future. Therefore, this research is an attempt to address the issues of sustainable construction and what approaches needs to be implemented for sustainable construction in Malaysia. THE EMERGENCE OF SUSTAINABLE DEVELOPMENT Sustainability has become an important issue worldwide. There is a growing concern for sustainability due to severe negative impacts of human development activities in the earth. The term sustainable development is basically emerged from The World Commission on Environment and Development established by the United Nations in 1983 and now known as the Brundtland Commission. The report, Our Common Future in the publication of Brundland Report provided the most simple and widely used definition for sustainable development as development to ensure that it meets the needs of the present without compromising the ability of future generations to meet their own needs [9]. The concept was given currency at the United Nations Conference on Environment and Development (UNCED) in 1992, and reinforced at the World Summit on Sustainable Development (WSSD) in 2002. UNCED saw the first global agreement on programmes for action in all areas relating to sustainable development, as documented in Agenda 21 [10]. During the United Nations Earth Summit held by the United Nations Environment Programme (UNEP) in Rio de Janeiro (1992), a sustainable development was defined as improving the quality of human life while living within the carrying capacity of supporting eco systems. This definition has an impact on the economic, social and environmental development and was later formally adopted worldwide [11]. This has lead to a growing concern around the world to improve the way of our development into a more responsible way without destroying the world we lived in. SUSTAINABILITY IN CONSTRUCTION Buildings, infrastructure and the environment are part of our living environment thus affecting our living conditions, social well-being and health. Hence, it is important to explore environmentally and economically sound design and development techniques for buildings and infrastructure for them to be sustainable, healthy and affordable, and also which encourage innovation in construction [11]. Previously, the concern on environment is relatively a small part of most of construction development. However, with the growing awareness on environmental protection due to the depletion of non-renewable resources, global warming and extremity of destruction to ecology and biodiversity impact, this issue have gain wider attention by the construction practitioners worldwide. Many efforts are being directed to build sustainable in construction world. The direction of the industry is now shifting from developing with environmental concern as a small part of the process into having the developme nt process being integrated within the wider context of environmental agenda [12]. With the implementation of sustainable construction, the construction industry is bound to bring about positive and proactive changes such as less pollution, waste and even constitutes to the well being of future generations. Therefore, the construction activities must work and comply with the need to protect and sustain the environment. As a consequence, achieving sustainability means achieving quality of life. Existing research shows that construction activities are a major contributor to environmental pollution [13]. Hence, sustainable development is an answer to reduce the major impact on the environment. Sustainable development requires the construction industry itself to be sustainable first. There are three elements that are related to sustainable development, which are economic, social and environment element [14]. Sustainable in economic includes increase profitability and competitiveness. Sustainable in social elements covers aspects of the delivery of buildings and infrastructures that meets the satisfactorily meets the requirement of the users and stakeholders. While sustainable in environment would consider the concerns on the conservation of natural ecosystems and minimization of environmental impacts and the consumption of energy and natural resources [10, 14]. Apart from that, sustainable construction is seems as a way for the construction industry to contribute to the effort to achieve sustainable development [6]. In brief, sustainable construction is the construction that contributes to the sustainable development. Abidin [15] suggested that the approach of sustainable construction will enable the construction practitioners to be more responsible to the environmental protection needs without neglecting the social and economic needs in striving for better living. Therefore, the challenge of the construction industry is to find the balance between three main pillars; environmental, economic and social in order for the construction industry to move towards sustainability. Since the construction industry has a great significant impact on the environment, the implementation of sustainable construction is a must. According to Tan, Shen and Yao [13] sustainable construction refers to the integration of environmental, social and economic considerations into construction business strategies and practices. It is the application of the principles of sustainable development to the comprehensive construction cycle from the extraction of raw materials, through the planning, design and construction of buildings and infrastructure, until their final deconstruction and management of the resultant waste. However Hamid, Noor, Kamar, Ghani, Zain, and Rahim [16] further explained that sustainable construction is the creation and responsible maintenance of a health built environment, based on ecological principles and by means of an efficient use of resources. In addition, sustainable construction is a way for the building industry to move towards achieving sustainable development, taking into account the environmental, socio-economic and cultural issues [11, 17]. Aguilar [18] pointed out that the adoption of sustainable construction practices also offers environmental protections as well economic advantages for consumers and communities offering substantial savings in the buildings life-cycle operating costs. Singh [19] further added that sustainability in construction is all about following suitable practices in terms of choice of materials, their sources, construction methodologies as well as design philosophy so as to be able to improve performance, decrease the environmental burden of the project, minimize waste and be ecologically friendlier. Consequently, sustainable construction deals with limited resources especially energy and how to reduce the impacts on the natural environment. Previous studies related to the research There were various research has been conducted in the area of sustainable construction and the quantity seems to increase over the years since environmental issues become more concerning worldwide. The research that has been done in the area of sustainable construction can be grouped into four which are research on sustainable practices, research on opportunities and awareness, research on materials and research on policy. The research that has been done in sustainable practices for instance is by Tan, Shen and Yao [13] which conducted a research on sustainable construction practice and contractors competitiveness which focuses on the relationship between sustainability performance and business competitiveness. The findings showed that there is no unique relationship between the two variables. But using a long-term view, sustainability performance will have greater contribution to business competitiveness in the future. Whereas Chen, Okudan, and Riley [20] conducted a research on sus tainable performance criteria for construction method selection in concrete buildings. The study was based on a qualitative research approach. In her study, she has identified a list of possible opportunities and strategic directions for government and industry stakeholders consideration in view of the future development. While Shen, Tam, Leona and Ji [21] discussed major challenges of conducting project feasibility study to the sustainable construction practices with reference to Mainland China construction industry. The study demonstrated that there is a need for shifting the traditional approach of project feasibility study to a new approach for embracing the principles of sustainable development. Besides, Shafii [11] has done a research on sustainable Construction in the developing countries of Southeast Asia and found that the status of sustainable construction in Southeast Asia is still in its infancy. Reffat [22] in his research addressed the essential requirements for develo ping sustainable construction in developing countries including considering sustainability as a necessity, efficient management of resources, shared responsibility, quality improvement of construction processes and products, improving the capacity of construction sector, and the need for integrated research. The innovation of building materials and technologies as an opportunity of sustainable construction in developing countries is introduced. A tool for sustainable building is also presented. Mohamad [23] conducted a research on Principles of Sustainable Development in Ibn Khalduns Economic Thought which focused on the nature of pursuable development in the economic model of Ibn Khaldun. The researcher cursorily examines Ibn Khaldun famous work al-Muqadimmah, as well as the interpretations of his work offered by contemporary scholars. This research reinterprets those views and concludes that the economic growth theory of Ibn Khaldun suggests sustainable development if one opts for a moderate rate of integrated development. Ibn Khaldunà ¢Ã¢â€š ¬Ã… ¸s theory of development runs towards the same direction as that of Basic Needs, Dematerialisation, and de-growth in our time. Overconsumption, corruption of morality, and the greed for luxury are recognised the indicators of fall of civilisations which are taken here to be the indicators of unsustainable development. His views can guide Muslim countries in drafting development policy and also can be used by educators for promoting sustainable development in Muslim Countries. A research done by Destatte [24] discussed that foresight could be a major tool in tackling sustainability as well as one of the best methods of preparing sustainable strategies and policies since the efforts made to construct specific methods dedicated to building sustainable strategies seem rather weak. Futurists themselves underestimate the relationship between sustainable development and foresight, even if they are talking about sustainabl e planning. Research on opportunities and awareness for instance has been done by [6, 15] on awareness and application of sustainable construction concept by Malaysian developers. This study has been conducted to investigate the level of awareness, knowledge and implementation of sustainable practices based on the perceptions of the project developers in Malaysia. The findings was only large developers are beginning to take heed towards sustainable implementation in their projects. Due to limited understanding and the concern about cost, many developers are still reluctant and uncertain concerning pursuit of sustainability in their projects. Whereas in the research, The Way Forward of Sustainable Construction and Green Technology In Malaysia conducted by Hamid, Noor, Kamar, Ghani, Zain, and Rahim [10] investigated the challenges facing by the industry in developing sustainable agenda and discusses Construction Industry Development Board (CIDB)s initiatives in implementing sustainable agenda. Fur thermore, he highlighted current research on sustainable construction and green technology and provides strategic recommendations as the way forward. While Shafii, Ali, and Othman [11] in their study focused on the public private initiatives, partnerships and international co-operations to support sustainable building development in Malaysia. The finding was there is increasing public awareness and interest in how buildings affect the environment, worker productivity and public health. As a result, both the public and private sector are beginning to demand buildings that optimize energy use; promote resource efficiency; and improve indoor environmental quality. Developers, owners, operators, insurers, and the public at large are beginning to value and market the benefits of sustainable building. Despite these responses and demand, the development in sustainable building is relatively slow; this in part, might be due to the lack of incentives and regulatory procedures to guide susta inable building construction. The Green Building Mission launched recently by the Malaysian Government is an indication of a promising effort to ensure sustainable production and delivery of the construction industry products to fulfill these demands. The paper also discussed on the trends, challenges and barriers for implementations of sustainable building with recommendations for establishing clear policy targets. Research that has been conducted on materials basically focused on the sustainable material in construction industry and based on laboratory oriented. For instance research conducted by Voo [25] presents an overview of the material characteristics of a Malaysia blend of ultra-high performance ductile concrete (UHPdC) know as DURA. The comparison studies show that many structures constructed from UHPdC are generally more environmentally sustainable than built of the conventional reinforced concrete with respect to the reduction of CO2 emissions and embodied energy. However, in this paper, the researcher intends to focus on sustainable policy. Generally, there is no similar thorough research which has been done by any other researcher in the Malaysian construction industry regarding on policy since Malaysia still do not have policy on the sustainable construction based on the preliminary interview that has been done with Encik Ishamuddin bin Mazlan from the Ministry of Energy, Green Technology and Water (KeTTHA). If any, it merely focuses on the Environmental policy for instance a research conducted by Ambali [26] on Malaysian Experience in Policy of Sustainable Environment. The findings of the paper have shown an empirical relationship between environmental degradations and indicators of human development activities in Malaysia and elsewhere in the world. However, the paper reflects some fundamental issues that need to be addressed by the government for future direction of its policy efforts towards protection of natural resources and the envir onment at large. Whereas Zhang and Wen [27] in her research, review and challenges of policies of environmental protection and sustainable development in China determine how best to coordinate the relationship between the environment and the economy by taking a look at the development of Chinese environmental policy in order to improve quality of life and the sustainability of Chinas resources and environment. Examples of important measures include the adjustment of economic structure, reform of energy policy, development of environmental industry, pollution prevention and ecological conservation, capacity building, and international cooperation and public participation. While a research conducted by Hezri and Hasan [28] views the recent history of Malaysias evolving policy response to development needs and environmental change as consisting of four distinct stages. Despite an impressive array of policy statements and strategies to implement sustainable development, many challenges remain today. A clear articulation of normative principles of sustainable development is of paramount importance, as is the monumental task of policy implementation. The article argues that the trajectory of Malaysias policy on natural resources and environmental issues bears the characteristics of path dependent evolution. At PhD level, Kumorotomo [29] discussed the process of decision-making on Indonesian fiscal decentralisation policy in order to explain policy changes and continuities. It focuses on developments from 1974 to 2004. Based on the review of the previous studies related to the research that have been discussed above there seems no study that has been done (yet) in the area of sustainable construction policy and this will be discussed by the researcher in this Master research. Therefore, the gap has been identified and in order to contribute to the existing body of knowledge. RESEARCH AIM AND OBJECTIVES The aim of this research is to develop framework policy for the Malaysian Construction participants to move towards sustainable construction. In order to achieve this aim the following objectives were identified: Objective 1: To determined the importance of implementing the sustainable construction in Malaysian Construction Industry. Objective 2: To identified the barriers in order to implement sustainable construction in Malaysian Construction Industry. Objective 3: To develop fundamental strategies in promoting the sustainable construction in Malaysian construction industry. RESEARCH QUESTIONS Research questions serves as a guide in fulfill the aim and objectives of the research. In order to resolve the research problem, the following research questions were applied: Research question for objective 1 What and why sustainable construction is important in the Malaysian construction industry? How important of implementation of sustainable construction in Malaysian? How sustainable construction can reduce the global warming or climate change in Malaysia? Research question for objective 2 What are the barriers in implementing the sustainable construction in Malaysian Construction Industry? How to minimise the barriers? Research question for objective 3 What are the strategies in promoting the sustainable construction in Malaysian construction industry? What are the roles of various sectors in promoting the sustainable construction in Malaysian Construction Industry? 2.1 What are the roles of the government agencies? 2.2 Private sector? Developers? Contractors? RESEARCH METHODOLOGY The research methodology serves as a guide in achieving the aim and objectives of the study. This section would focus on the method of study to be carried out in order to achieve the objective of this research. In this research, mix method of questionnaire survey and case study will be applied. Quantitative Approach For the first stage of data collection, the quantitative method will be applied in order to identify the barriers in implementing sustainable construction in Malaysian construction industry. Qualitative Approach On the other hand, qualitative method will be used in order to produce strategies to further implement the sustainable construction. Interview session will be conducted among experienced professionals who involved directly in construction industry. The aim is to generate their opinion towards the implementation of sustainable construction in Malaysian construction industry. SIGNIFICANT OF THE RESEARCH This research will add to the body of knowledge that with the implementation of sustainable construction the construction industry is bound to bring about positive changes for instance less pollution, waste and even constitutes of well being future generations. This research is expected to develop a framework policy of sustainable construction in Malaysia. A new strategies and guidelines seem to be part of the framework design. This research will emphasize the importance of implementation of sustainable construction in Malaysian construction industry in order to sustain ecological system and enhance the social well being of all Malaysian citizens. Besides that, this research will identify the barriers in implementing the sustainable construction so that methods can be taken in order to minimise those barriers and finally come out with the strategies so that Malaysian participants can further implement the sustainable construction. Apart from that, the findings that meet the objective s of this research will open new fields for future researchers and academicians to carry out extensive researches on the topics concerned. In addition, data and output analyzed from the findings can be further referred or elaborated in any educational deliverance or scholarly materials. Therefore it is anticipated that this research will generate interests from the public, academicians and also practitioners. In short, the outcome of this research will affect various parties involved in construction industry including government and private agencies, construction suppliers and finally end users. Therefore, this research will certainly be beneficial to all parties. EXPECTED FINDINGS This research is attempted to develop a framework policy of sustainable construction in Malaysia since there is no specific policy on sustainable construction. Compared to other developed countries such as UK, Sweden and even our neighborhood countries like Singapore and Thailand have their own policies on Sustainable construction. Therefore, a new strategies and guidelines seem to be part of the framework design. At the end of the research it targets to improve the practice of sustainable policy is Malaysian construction industry and indirectly assists the developers, architects and contractors in improving the performance of our industry towards sustainable issues.

Free Essays - Comparing Time in Macbeth and As You Like It :: comparison compare contrast essays

A Comparison of Time in Macbeth and As You Like It  Ã‚     In Shakespearean drama, a dynamic and explosive fusion of jealousy, pride, anger and ambition is characteristic for heroes’ behaviour. The tragedy was caused by the excessive flaw in character - self-respect and dignity combined with the feelings of hate and revenge. A disaster usually occurred to lead to destruction of the protagonist. Due to divine justice, punishment is inevitable and therefore no happy ending is possible. Therefore, time is the hero’s main enemy, mercilessly working against him. The mystery of tragedy is that once the protagonist has learnt a lesson of how to renew the order in himself, death is the only outcome /no memento mori, however/. Comedy differs in the mood it approaches and addresses life. It presents situations which deal with common ground of man’s social experience rather than limits of his behaviour – it is not life in the tragic mode, lived at the difficult and perilous limits of the human condition. In â€Å"Macbeth† the first scene presents a meeting of three witches during stormy weather. Shakespeare shows disturbed, angry nature - thunder and lighting represent light - daytime and dark – night-time. Light is the metaphor for innocence, purity, truth, and goodness as opposed to dark - evil. It is also a suggestion that the innocent will suffer as well as the guilty. The fog and filthy air signify moral and spiritual obscurity and â€Å"the set of sun† means the end of the reign and kingship. The sun appears only twice – when Duncan sees the swallows flying around the castle of death and during the army gathering to purify the earth of its shame (traitors). There is very strong sense of predestination (‘when’ instead of ‘if’) while in â€Å"As You Like It† Orlando’s flight is pathless and the meeting of lovers – an act of Fate. In both plays the succession of the scenes is very swift; in tragedy the impression is that longer time elapsed than provided for because passage from thought to a critical resolution is difficult. The outcome of the comedy is obvious while Macbeth enters the spiral of decline within his imagination. Sleep has been banished – the protagonist is aware of the nightmare; his only one dream is the murder which would break the cycle and show the way out of the nightmare – liberation.

Lbo Model

Leveraged Buyout Model (LBO) Copyright 2009 Investment Banking Institute www. ibtraining. com Table of Contents I. Uses for An LBO Model on Sell-side and Buy-side Construction of LBO Model Structure and Assumptions Worksheet Purchase price calculation and considerations Sources and Uses II. Capital Structure Alternatives Integration of Proforma Balance Sheet into Financial Model Income Statement, Balance Sheet and Cash Flow Projections Integration III. IRR Analysis for Financial Sponsor and Hybrid Debt Lender IV. Sensitivity Tables V. Credit Ratios 2 Uses for an LBO Model on the Buy-SideA Leveraged Buyout Model (â€Å"LBO Model†) is a key analysis used by private equity firms / financial sponsors to evaluate a potential acquisition The goal of an LBO is to acquire a company by financing the purchase with as much debt as the cash flows of the business and the debt markets will support The more debt a financial sponsor is able to obtain to finance an acquisition, the less of an equity investment the financial sponsor has to make The higher the leverage levels, the higher the expected Internal Rate of Return (â€Å"IRR†) is for the financial sponsor / private equity firm The goal of an LBO model is to establish expected internal rates of return (â€Å"IRR†) for the acquisition using a financial model that reflects the following: Purchase price assumptions and the necessary cash needed to finance the acquisition (uses of cash) Capitalization assumptions: leverage (amount of debt), different debt tranches, equity investment amounts (sources of cash) Base case financial projections for the income statement, balance sheet and cash flow based upon the purchase price and capitalization assumptions The LBO model should be built with the ability to run sensitivities for a range of purchase prices, capitalization structures, operating assumptions, etc. 3 Uses for an LBO Model on the Buy-Side Private Equity Firms / Financial Sponsors usually have a requ ired rate of return hurdle f the expected IRR range for a potential acquisition does not meet or exceed the hurdle rate, often the PE firm / financial sponsor does not move forward with the acquisition PE firms required rates of return usually range from 15% on the low-side to 30% on the high-side, with the typical range targeted at 18% – 25% The IRR analysis is strongly driven by the amount of leverage With higher leverage levels, the financial sponsor has to invest less equity, and therefore has a higher IRR Therefore, often the goal is to leverage up the Company as much as the cash flow of the business and the debt markets will permit More leverage makes the business inherently riskier, as more of the cash flows generated by the business will be used to pay interest expense and debt serviceThe amount of leverage is largely determined by the state of the debt markets 4 Uses for an LBO Model on the Buy-Side The amount of leverage is largely determined by the state of the deb t markets For the last several years, the debt markets have been experiencing excess liquidity Because of the excess liquidity, lenders have been allowing higher leverage levels Depending on the industry and business, transactions over the last several years have been leveraged at between 4. 0x – 6. 0x recent EBITDA These higher leverage levels allow the financial sponsor to pay more for the company and still attain its required IRR The leverage level of 4. 0x – 6. x recent EBITDA is comprised of some combination of senior secured loans and junior loans (second lien, third lien, unsecured loan, hybrid debt / equity securities) Lenders may require the financial sponsor to have a minimum equity investment as % of total capitalization Minimum equity contribution is typically around 20% – 25%, depending on industry and purchase price 5 Uses for an LBO Model on the Buy-Side The LBO Model is also used for the Lenders’ perspectives Lenders like to see expected l everage and coverage ratios based upon the Company’s projected income statement, balance sheet, cash flow, and capitalization Typical ratios that lenders like to see are: Leverage RatiosTotal Debt / EBITDA Net Debt / EBITDA Secured Debt / EBITDA EBITDA / Net Interest Expense EBITDA / Cash Interest Expense Interest Coverage Statistics EBITDA / Net Interest Expense EBITDA / Cash Interest EBITDA – Capex / Net Interest Expense EBITDA – Capex / Cash Interest Expense EBITDA – Capex – ? W/C / Net Interest Expense EBITDA – Capex – ? W/C / Cash Interest Expense EBITDA – Capex – ? W/C – Taxes/ Net Interest Expense EBITDA – Capex – ? W/C – Taxes/ Cash Interest Expense 6 Uses for an LBO Model on the Sell-Side Investment Bankers often construct LBO models to: Provide this service to a financial sponsor client that is interested in pursuing an acquisitionProvide this service to a Company client where the co mpany is being sold – Illustrates the range of purchase prices financial buyers could pay and still attain their required IRR – Uses the current debt markets conditions as assumptions for the capitalization As a â€Å"gut-check† for other valuation methodologies (DCF, Public comparable company multiples, acquisition multiples) 7 Table of Contents I. Uses for An LBO Model on Sell-side and Buy-side Construction of LBO Model Structure and Assumptions Worksheet Purchase price calculation and considerations Sources and Uses II. Capital Structure Alternatives Integration of Proforma Balance Sheet into Financial ModelIncome Statement, Balance Sheet and Cash Flow Projections Integration III. IRR Analysis for Financial Sponsor and Hybrid Debt Lender IV. Sensitivity Tables V. Credit Ratios 8 Construction of LBO Model Structure and Assumptions Worksheet Build upon the Financial Model template, and modify accordingly Add a worksheet for the LBO Model Structure and Assumptio ns The LBO Assumptions tab will have drivers for Purchase price assumptions Uses: Cash required to acquire the company and pay associated fees Sources: Cash available to acquire the company (debt, equity) USES = SOURCES Capitalization assumptions IRR Analyses 9 Purchase Price Calculation and ConsiderationsThe determination of the purchase price is complicated and typically involves a full-scale valuation (DCF, public company multiples and transaction multiples) as well as extensive due diligence on Company’s operations, financial condition, management team, customers, suppliers, assets, etc. If the Company has publicly traded equity, then typically a purchase price would be calculated much as TEV is calculated: (Offer price per share * fully diluted shares) + debt + minority interest + preferred interest – cash For the purposes of this model, we are assuming the LBO of a private company, and therefore using the most recent 12 month EBITDA and EBITDA multiple as the dri vers of purchase price Purchase price = EBITDA * EBITDA multiple We are assuming the transaction closes on December 31, 2008 LBO of Company A ($ in millions) TRANSACTION ASSUMPTIONS Closing Date 31-Dec-08 2008 EBITDA $60. 0 EBITDA Multiple 6. 0xTransaction (Enterprise) Value $360. 0 Less: Existing Debt ($190. 8) Plus: Cash $0. 0 Implied Equity Purchase Price $169. 2 10 Sources and Uses Total Uses is the amount of cash necessary to complete the transaction Usually equals the purchase price plus transaction fees and any other cash payment required as part of the transaction – For the LBO of a publicly traded company, purchase price is calculated as (offer price per share * shares outstanding ) + debt + minority interest + preferred equity – cash, and cash on target’s balance sheet is used as a source Other required cash payments could be payments to certain parties that kick-in with a change of control (e. g. anagement payments, premiums to outstanding notes, etc. ) Total Sources illustrates the sources of capital to complete the transaction Usually equals debt + equity + any other cash available Total Uses = Total Sources LBO of Company A ($ in millions) TRANSACTION ASSUMPTIONS Closing Date 31-Dec-08 2008 EBITDA $60. 0 EBITDA Multiple 6. 0x Transaction (Enterprise) Value $360. 0 Less: Existing Debt ($190. 8) Plus: Cash $0. 0 Implied Equity Purchase Price $169. 2 TOTAL USES Uses Equity Purchase Price Paydown Existing Debt Financing Fees Investment Banking Fees Legal Fees Other Fees and Expenses $169. 2 $190. 8 8. 0 4. 0 1. 0 1. 0 Total Uses $374. 0 TOTAL SOURCES Amount EBITDA of Funded Multiple Capitalization $0. 0 0. 0x 0. 0% 0. 0 0. 0x 0. 0% 120. 0 2. 0x 32. 1% 90. 0 1. 5x 24. 1% 60. 0 1. 0x 16. 0% 270. 0 4. 5x 72. 2% 104. 0 27. 8% $374. 0 100. 0% Capitalization Cash Revolver Term Loan Senior Bonds Unsecured Notes with Warrants Total Debt Sponsor Equity Total Sources 11 Interest Rate Cash Pay PIK 7. 0% 7. 5% 9. 5% 0. 0% 0. 0% 0. 0% 0. 0% 1 0. 0% % of Fully Diluted Equity na na na 5. 0% Capital Structure Alternatives The Total Sources Side is comprised of the capitalization assumptions The financial sponsor typically wants to leverage the transaction as much as the business’s cash flow and the lenders will allowDepending on the conditions of the debt markets and lenders’ requirements, financial sponsors would typically provide approximately 20% – 30% of the capitalization as an equity investment The debt is comprised of different securities usually provided by different lenders Revolver / Term loan (senior secured loans) are usually provided by typical commercial banks such as Citigroup, JPMorganChase, GE Commercial Finance, etc. , and have lower interest rates Junior loans such as second and third lien pieces and unsecured loans can be provided by public markets (high yield issue) and private placements (hedge funds, junior loan providers, investment bank providing balance sheet financing, etc. )O ften, the most junior piece on the capital structure will have equity warrants attached; the most junior lender will require a much higher rate of return than the more senior lenders The financial sponsors want to attain as much of the lower-priced debt as possible; in this example, we have assumed that total senior leverage (revolver + term loan) = 2. 0x EBITDA The example shows a 4. 5x EBITDA leverage ratio, and 1. 7x EBITDA equity ratio (LTM EBITDA is $60 million in this case) Capitalization Cash Revolver Term Loan Senior Bonds Unsecured Notes with Warrants Total Debt Sponsor Equity Total Sources TOTAL SOURCES Amount EBITDA % of Funded Multiple Capitalization $0. 0 0. 0x 0. 0% 0. 0 0. 0x 0. 0% 120. 0 2. 0x 32. 1% 90. 0 1. 5x 24. 1% 60. 0 1. 0x 16. 0% 70. 0 4. 5x 72. 2% 104. 0 27. 8% $374. 0 100. 0% 12 Interest Rate Cash Pay PIK 7. 0% 7. 5% 9. 5% 0. 0% 0. 0% 0. 0% 0. 0% 10. 0% % of Fully Diluted Equity na na na 5. 0% Creation of Proforma Balance Sheet Proforma Balance Sheet ($ in millions) Balance Sheet Assets Cash Accounts Receivable Inventory Other Current Assets Total Current Assets Historical Dec. 31 2008 $0. 0 $16. 0 $10. 0 $1. 0 $27. 0 Financing/ Transaction Adjustments $0. 0 0. 0 0. 0 0. 0 $0. 0 Proforma Dec. 31 2008 $0. 0 16. 0 10. 0 1. 0 $27. 0 Gross PP&E Cumulative Depreciation Net PP&E $323. 2 $45. 0 $278. 2 $0. 0 0. 0 $0. 0 $323. 2 45. 0 $278. 2 Amortizable Intangibles GoodwillTotal Assets $0. 0 5. 0 $310. 2 $8. 0 65. 2 $73. 2 $8. 0 70. 2 $383. 4 Liabilities Accounts Payable Accrued Liabilities Other Current Liabilities Total Current Liabilities $11. 0 $2. 4 $0. 0 $13. 4 $0. 0 0. 0 0. 0 $0. 0 $11. 0 $2. 4 0. 0 $13. 4 Existing Debt Revolving Credit Facility Term Loan Unsecured Debt $40. 8 $100. 0 $50. 0 New Debt Revolving Credit Facility Term Loan Second Lien Unsecured Debt $0. 0 0. 0 0. 0 0. 0 $0. 0 $120. 0 $90. 0 $60. 0 $0. 0 $120. 0 $90. 0 $60. 0 Other Liabilities Total Liabilities $2. 0 $206. 2 $0. 0 $79. 2 $2. 0 $285. 4 Shareholders Equity Re tained Earnings Common Stock Total Shareholders Equity $94. 0 10. 0 $104. ($100. 0) $94. 0 ($6. 0) Total Liabilities and Equity Check $310. 2 $0. 0 $73. 2 $0. 0 ($40. 8) ($100. 0) ($50. 0) $0. 0 $0. 0 $0. 0 ($6. 0) 104. 0 $98. 0 $383. 4 $0. 0 13 Creating a proforma balance sheet on a new worksheet allows for the integration of the new capital structure / sources into the existing financial model In the purchase of a private company, the seller typically sweeps all of the cash on the balance sheet at closing In the LBO of a publicly traded company, cash would not typically be swept as it is part of the offer price per share There may be a writeup or writedown of the value of the AR, Inventory and PP&E; this has an mpact on the tax basis All financing fees incurred in the transaction can still be capitalized and amortized The Goodwill is Purchase Price + M&A Fees – New Debt – Old Book Value of Equity; this amount can no longer be amortized In the purchase of a public com pany, goodwill is calculated as equity value of purchase – book value of equity The buyer typically assumes all of the normalcourse short term liabilities The â€Å"old debt† is eliminated (as the seller typically uses proceeds from the sale to pay all existing debt) In the purchase of a public company, often the existing debt of the acquired company remains outstanding, and is â€Å"assumed† by the acquirerThe â€Å"new debt† is fed from the Total Sources cells Shareholders’ Equity may require a plug to allow for the Total Assets to equal Total Liabilities + Shareholders’ Equity Creation of Proforma Balance Sheet ($ in millions) PROJECTED FINANCIAL STATEMENTS Fiscal Year Ending December 31, 2009P 2010P 2011P 2012P 2013P 2008A Pro Forma 2008P Balance Sheet Assets Cash Accounts Receivable Inventory Other Current Assets Total Current Assets $0. 0 $16. 0 $10. 0 $1. 0 $27. 0 $0. 0 $16. 0 $10. 0 $1. 0 $27. 0 $0. 0 $17. 5 $10. 5 $1. 0 $29. 0 $0. 0 $18. 4 $11. 0 $1. 0 $30. 4 $1. 9 $19. 3 $11. 6 $1. 0 $33. 8 $7. 5 $20. 3 $12. 2 $1. 0 $40. 9 $0. 0 $21. 3 $12. 8 $1. 0 $35. 0 Gross PP&ECumulative Depreciation Net PP&E $323. 2 $45. 0 $278. 2 $323. 2 $45. 0 $278. 2 $337. 9 $51. 8 $286. 1 $353. 3 $58. 8 $294. 5 $369. 5 $66. 2 $303. 3 $386. 6 $73. 9 $312. 6 $404. 4 $82. 0 $322. 4 Amortizable Intangibles Goodwill Total Assets $0. 0 $5. 0 $310. 2 $8. 0 $70. 2 $383. 4 $6. 4 $70. 2 $391. 7 $4. 8 $70. 2 $399. 9 $3. 2 $70. 2 $410. 5 $1. 6 $70. 2 $425. 4 $0. 0 $70. 2 $427. 6 Liabilities Accounts Payable Accrued Liabilities Other Current Liabilities Total Current Liabilities $11. 0 $2. 4 $0. 0 $13. 4 $11. 0 $2. 4 $0. 0 $13. 4 $11. 7 $2. 5 $1. 0 $15. 2 $12. 3 $2. 6 $1. 0 $15. 9 $12. 9 $2. 8 $1. 0 $16. 6 $13. 5 $2. 9 $1. 0 $17. 4 $14. 2 $3. 1 1. 0 $18. 2 Existing Debt: Revolving Credit Facility Term Loan Unsecured Debt $40. 8 $100. 0 $50. 0 $0. 0 $0. 0 $0. 0 $0. 0 $0. 0 $0. 0 $0. 0 $0. 0 $0. 0 $0. 0 $0. 0 $0. 0 $0. 0 $0. 0 $0. 0 $0. 0 $0. 0 $0 . 0 New Debt Revolving Credit Facility Term Loan Senior Bonds Unsecured Debt $0. 0 $0. 0 $0. 0 $0. 0 $0. 0 $120. 0 $90. 0 $60. 0 $1. 5 $100. 0 $90. 0 $66. 0 $1. 0 $80. 0 $90. 0 $72. 6 $0. 0 $60. 0 $90. 0 $79. 9 $0. 0 $40. 0 $90. 0 $87. 8 $3. 8 $0. 0 $90. 0 $96. 6 Other Liabilities Total Liabilities $2. 0 $206. 2 $2. 0 $285. 4 $2. 0 $274. 7 $2. 0 $261. 5 $2. 0 $248. 5 $2. 0 $237. 3 $2. 0 $210. 7 Shareholders Equity Retained Earnings Common StockTotal Shareholders Equity $94. 0 $10. 0 $104. 0 ($6. 0) $104. 0 $98. 0 $13. 1 $104. 0 $117. 1 $34. 4 $104. 0 $138. 4 $58. 0 $104. 0 $162. 0 $84. 1 $104. 0 $188. 1 $112. 9 $104. 0 $216. 9 Total Liabilities and Equity Check $310. 2 $0. 0 $383. 4 $0. 0 $391. 7 $0. 0 $399. 9 $0. 0 $410. 5 $0. 0 $425. 4 $0. 0 $427. 6 $0. 0 14 The Proforma Balance Sheet is then fed into the existing model’s balance sheet, and integrated appropriately into the cash flow and income statement We are assuming the transaction occurs on Dec. 31, 2008 Be careful whe n you are integrating to NOT CHANGE the income statement, balance sheet and cash flow statement for the period right efore the transaction date The income statement and cash flows for 2008 will not change because of the acquisition (as it occurs on Dec. 31, 2008, after the 2008 period has ended) Only the 2009 and onward income statement and cash flows will reflect the impact of the new capital structure / balance sheet Income Statement, Balance Sheet and Cash Flow Projections Integration The remainder of the projection model is completed as we discussed in the last class Construction of a debt and interest schedule and revolver model allows the integration of the income statement, balance sheet and cash flow projections Be careful to make sure that the cash flow for the period irectly following the transaction closing is being calculated as the changes in the proforma balance sheet and that period directly following the transaction 15 Table of Contents I. Uses for An LBO Model on Se ll-side and Buy-side Construction of LBO Model Structure and Assumptions Worksheet Purchase price calculation and considerations Sources and Uses II. Capital Structure Alternatives Integration of Proforma Balance Sheet into Financial Model Income Statement, Balance Sheet and Cash Flow Projections Integration III. IRR Analysis for Financial Sponsor and Hybrid Debt Lender IV. Sensitivity Tables V. Credit Ratios 16 IRR Analysis for Financial SponsorsThe financial sponsor’s IRR analysis accounts for all cash flows coming from the financial sponsor for or to the Company, as well as all cash flows from the Company to the financial sponsor during the period from closing the acquisition to the sale of the company (other than management fees) Often, the company pays the financial sponsor â€Å"management fees† in exchange for the financial sponsor’s ongoing support, management and advice provided to the management team as well as covering the financial sponsor’s d irect expenses and overhead allocation Management fees are expensed as an SG&A expense on the company’s income statement and range greatly, depending on company’s sizeTypically financial sponsors do not include the payment of management fees in the IRR analysis 17 IRR Analysis for Financial Sponsors Amounts that the financial sponsor pays for or to the company are counted as cash outflows; examples include Initial equity investment Any additional equity investments made into the company during the holding period Any amount received by the financial sponsor from or by the company are counted as cash inflows (other than management fees); examples include: Proceeds from sale of the company Common or preferred dividends paid to financial sponsor Proceeds from a recapitalization 18 IRR Analysis for Financial SponsorsCalculate the sale of the business, assuming it is sold on December 31, 2013 Use the 2013 projected EBITDA, and the same EBITDA multiple assumption used for the purchase of the Company in 2008 Calculate the proceeds to the financial sponsor, taking into account any equity dilution that may result from warrants, management stock plan, transaction fees, etc. SALE OF COMPANY A IN 2013 Closing Date 31-Dec-13 2012 EBITDA EBITDA Multiple Transaction Value Less: Total Debt Plus: Cash Balance $76. 6 6. 0x $459. 5 (190. 5) 0. 0 Less: Transaction Fees (1) Equity Value % Equity to Sponsor Equity to Sponsor (6. 6) $262. 4 95. 0% $249. 3 % Equity to Unsecured Lender Equity to Unsecured Lender 5. 0% 13. 1 (1) Assumes 1% of Purchase Price for Investment Banking Fees, plus $2 million in legal and other expenses. 19 IRR Analysis for Financial Sponsors The following table illustrates the categories to calculate the IRR to the financial sponsor Any cash flow from the financial sponsor for or to the company is negative Any cash flow from or for the company to the financial sponsor is positive In general there is no closed-form solution for IRR, particularly w ith variable cash flows for each year; however, excel can easily calculate the IRR using the following formula: = IRR (total cash flows over period, estimated IRR) From Total Sources tableSALE OF COMPANY A IN 2013 Closing Date 31-Dec-13 2012 EBITDA EBITDA Multiple Transaction Value Less: Total Debt Plus: Cash Balance Less: Transaction Fees Equity Value % Equity to Sponsor Equity to Sponsor $76. 6 6. 0x $459. 5 (190. 5) 0. 0 (1) % Equity to Unsecured Lender Equity to Unsecured Lender IRR to Financial Sponsor Initial Equity Investment Dividends Proceeds at Sale Total Cash Flows to Sponsor IRR Calculation 12/31/08 ($104. 0) 0. 0 0. 0 ($104. 0) 19. 1% 12/31/09 $0. 0 0. 0 0. 0 $0. 0 12/31/10 $0. 0 0. 0 0. 0 $0. 0 12/31/11 $0. 0 0. 0 0. 0 $0. 0 12/31/12 $0. 0 0. 0 0. 0 $0. 0 12/31/13 $0. 0 0. 0 249. 3 $249. 3 (6. 6) $262. 4 95. 0% $249. 3 5. 0% $13. 1IRR = IRR (Total Cash flows to sponsor 2009 – 2013, estimated IRR) 20 IRR for Hybrid Securities Holder The following table illustrate s the categories to calculate the IRR to the Unsecured Lender Recall from the sources and uses, that the unsecured lender loaned an amount of $60 million at a 10% PIK interest rate, with equity warrants equal to 5% of the fully-diluted equity of the company upon a sale Any cash flow from the lender to the company is negative (initial loan) Any cash flow from the company to the lender is positive (includes any cash interest received during the period, the payment of the principal balance plus any accrued interest at maturity, and equity to the unsecured lender at a sale)In certain cases, the exercise of the warrants would require the payment by the warrant holders to the Company of an exercise price; the proceeds from the warrant exercise would be a source of cash for the seller This is very transaction-specific and would be extensively negotiated in the agreement between the company and the lenders From Total Sources table IRR to Unsecured Lender Initial Loan Cash Interest Received Principal Repayment at Sale Equity from Warrants at Sale Total Cash Flows to Lender IRR Calculation From Debt and Interest Schedule – Cash Interest only 12/31/08 ($60. 0) 0. 0 0. 0 0. 0 ($60. 0) 12. 8% 12/31/09 $0. 0 0. 0 0. 0 0. 0 $0. 0 12/31/10 $0. 0 0. 0 0. 0 0. 0 $0. 0 12/31/11 $0. 0 0. 0 0. 0 0. 0 $0. 0 12/31/12 0. 0 0. 0 0. 0 0. 0 $0. 0 12/31/13 $0. 0 0. 0 96. 6 13. 1 $109. 8 From Balance Sheet IRR = IRR (Total Cash flows to lender 2006 – 2010, estimated IRR) 21 Table of Contents I. Uses for An LBO Model on Sell-side and Buy-side Construction of LBO Model Structure and Assumptions Worksheet Purchase price calculation and considerations Sources and Uses II. Capital Structure Alternatives Integration of Proforma Balance Sheet into Financial Model Income Statement, Balance Sheet and Cash Flow Projections Integration III. IRR Analysis for Financial Sponsor and Hybrid Debt Lender IV. Sensitivity Tables V. Credit Ratios 22 Sensitivities on Financial ModelRunning sensit ivities on your LBO assumptions is a good check to make sure the model is running properly as well as being able to show how a change in one variable will impact the whole model Sensitivity tables illustrate the impact on the model for a range of variable changes, and this LBO model has the flexibility to run sensitivities on the LBO assumptions (purchase price, capital structure, etc. ) and the business’s operations (growth rates, margins, etc) to see the impact on the expected IRRs of the financial sponsor and unsecured lender Setting up a sensitivity table: Input a range of variables on the x-axis of the chart Input a second range of variables on the y-axis of the chart link the intersection cell on the left hand corner of the chart to the cell that has the proper formula Highlight the data sensitivity tableGo to â€Å"Data† toolbar, select â€Å"Table†; a box pops up that has Row Input Cell and Column Input Cell – – For Row Input Cell, click on the cell that has the driver / assumption input for the x axis variable For the Column Input Cell, click on the cell that has the driver / assumption input for the y axis variable 23 Table of Contents I. Uses for An LBO Model on Sell-side and Buy-side Construction of LBO Model Structure and Assumptions Worksheet Purchase price calculation and considerations Sources and Uses II. Capital Structure Alternatives Integration of Proforma Balance Sheet into Financial Model Income Statement, Balance Sheet and Cash Flow Projections Integration III.IRR Analysis for Financial Sponsor and Hybrid Debt Lender IV. Sensitivity Tables V. Credit Ratios 24 Credit Ratios In determining how much money to lend to companies / financial sponsors for an acquisition, lenders analyze the amount of coverage they will have on their loans Lenders typically look at the following projected credit ratios, based on the base case scenarios, and then will run stress tests on the model to look at the impact on these r atios in the event the company takes a turn for the worse Leverage Ratios Total Debt / EBITDA Net Debt / EBITDA Secured Debt / EBITDA EBITDA / Net Interest Expense EBITDA / Cash Interest Expense 4. 1x 4. 1x 3. 0x 2. 8x 3. 7x 3. 7x 3. 7x 2. 6x 3. 0x 4. 3x 3. x 3. 3x 2. 2x 3. 3x 5. 0x 3. 0x 2. 9x 1. 8x 3. 6x 5. 9x 2. 5x 2. 5x 1. 2x 4. 1x 7. 5x Interest Coverage Statistics EBITDA / Net Interest Expense EBITDA / Cash Interest EBITDA – Capex / Net Interest Expense EBITDA – Capex / Cash Interest Expense EBITDA – Capex – ? W/C / Net Interest Expense EBITDA – Capex – ? W/C / Cash Interest Expense EBITDA – Capex – ? W/C – Taxes/ Net Interest Expense EBITDA – Capex – ? W/C – Taxes/ Cash Interest Expense 2. 8x 3. 7x 2. 1x 2. 9x 2. 1x 2. 9x 1. 6x 2. 1x 3. 0x 4. 3x 2. 3x 3. 3x 2. 3x 3. 3x 1. 7x 2. 4x 3. 3x 5. 0x 2. 5x 3. 8x 2. 6x 3. 9x 1. 8x 2. 8x 3. 6x 5. 9x 2. 8x 4. 5x 2. 8x 4. 6x 2. 0x 3. 2x 4. 1x 7. 5x 3. x 5 . 8x 3. 2x 5. 8x 2. 1x 4. 0x 25 Build an LBO Model from Scratch Build an LBO Model for Company B, using the historic financial statements (available electronically) Use the assumptions you feel are appropriate for projecting the Income Statement, balance sheet, and cash flow Use the following assumptions for the acquisition and financing: Acquisition – Closing date is December 31, 2008 – Purchase price is 7. 0x 2008 EBITDA Multiple Uses – Financing Fees are equal to 3% of purchase price – Investment banking fees are equal to 1% of purchase price – Legal fees are equal to $1 million – Other fees and expenses are equal to $1 million Sources Equity must equal 20% of total uses / sources – Revolver availability is $20 million, with total amount funded equal to 75% of Inventory and 65% of Accounts Receivable at a 5% cash pay interest rate – Term Loan is equal to 2. 5x 2008 EBITDA, to be amortized over 7 years, at a 5% cash pay inter est rate – Second Lien debt is equal to 1. 5x 2008 EBITDA, with a 10% cash pay interest rate – Unsecured Notes with Warrants fill the balance of the capital structure; 10% PIK rate with warrants equal to 15% of fully diluted equity upon sale of company Annual management fees to financial sponsor of $1 mm starting in 2007 Amortize fees over 5 year periodSale of Business in 2012 – Sold at 7. 0x 2012 multiple – Transaction fee equal to 1% of purchase price for investment banking fees plus $2 million in legal and other expenses Calculate the IRR to the financial sponsor Calculate the IRR to the unsecured lender with warrants Calculate sensitivity tables for the following: – IRR to financial sponsor for range of multiples paid and equity investment as % of total capital – IRR to unsecured lender for range of multiples paid and equity investment as % of total capital – Maximum revolver drawn for range of multiples paid and equity investment as % of total capital Add summary and credit ratios tables 26

How Is the T Pronounced in French

Its important to learn the proper pronunciations as youre studying French and it all begins with the alphabet. While the letter T may seem like an easy one, your tongue may tell you differently. This lesson will show you how the English and French T differ and give you some good words to practice with. Pronouncing the French Letter T The letter T in French is fairly straightforward as it is pronounced more or less like the English T. The difference is that in French, it is pronounced with the tongue against the upper teeth, rather than behind them, as in the English T. When found in the combination TH, the sound remains the same as for the lone T. For example,  le  thà ©Ã‚  sounds much like its English word, tea. A word like  le  thà ©Ãƒ ¢tre  (theater) is just a little different, but similar. When T Becomes TI There is another letter combination in which the pronunciation changes. This is TI as in the adjectives  timide  (shy) and  tià ¨de  (tepid, mild). Can you hear the difference? When followed by a vowel, TI sounds like [sy]. You can hear this in  the word un(e)  rà ©ceptionniste  (receptionist).When TI is followed by a consonant,  the T and I follow their own rules. For example,  ultime  (final, ultimate). French Words With T The most difficult part of learning to pronounce the French T is probably going to be the tongue movement. Use these three very simple words to train your tongue when youre speaking in French. Notice how each has two Ts? All the better for practicing. tarte  (pie)tante  (aunt)tomate  (tomato)