LBO valuation using flows-to-equity

Cooper, I A and Nyborg, K G (2023) LBO valuation using flows-to-equity. In: The Palgrave Encyclopaedia of Private Equity. Springer Nature. ISBN 97830303873891 (In Press)


The flows to equity method is commonly used in leveraged buyouts and other highly levered transactions. These flows are hybrid flows, mixing expected operating cash flows with promised debt payments under a planned debt schedule. Because of this, it is difficult to accurately estimate the appropriate discount rate, a difficulty that is compounded by the typically changing leverage over time under the planned debt schedule. We show how the flows to equity approach works and discuss its benefits and drawbacks as compared with other, ‘more standard’ methods.

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Item Type: Book Section
Subject Areas: Finance
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© 2024 The Author(s), under exclusive licence to Springer Nature Switzerland AG

Date Deposited: 15 Nov 2023 17:12
Date of first compliant deposit: 30 Aug 2023
Subjects: Equity capital
Last Modified: 21 Mar 2024 06:28

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