Private Equity Leveraged Buyout Analysis: Evidence from Citrix Transaction

Abstract

Evaluations of the leveraged buyout and the consideration of debt schedule are critical for private equity funds. Large amounts of debt can create value for a firm but increase the risk simultaneously. This paper describes the result of a specific transaction’s valuation based on the adjusted present value, the weighted average cost of capital method, and the equity cash flow valuation methods. The same results are presented by each method, but the interpretation can be quite different. Besides, the value creation to the firm through each variable in different methods and the validation steps are discussed. Furthermore, this paper presents the performance indicators: internal rate of return and cash on cash multiple. These results shed light on demonstrating the impact of tax shield and capital structure on the enterprise value, cost of equity, and cost of capital calculation.