The model is an argument, not a forecast
Three habits from €2 billion of LBO work that still decide how I approach every deal.
Early in my career, at WestLB’s Private Equity Group, I worked on the modelling, presentation and documentation of more than €2 billion of MBO and LBO transactions. They included the financing of Formula 1 Holdings and Wembley Stadium, the acquisition of Whyte & Mackay, and Mid Kent Water.
Leveraged finance is an unforgiving teacher. Three habits from that period have stayed with me in every role since, from investment committees to startup boards.
The model is an argument
A deal model is not a forecast. Nobody knows what revenue will be in year four. A model is an argument for why a price, a capital structure and a plan hang together, and every assumption in it should be one you could defend in a credit committee.
When I review a model now, I look first for the two or three assumptions that carry the value. If those cannot be explained in a sentence, the model is not finished.
Documentation is where value is protected
The equity story gets the attention, but the documents decide what happens when the plan meets reality. Covenants, conditions, consent rights and information undertakings are where an investor’s position is won or lost. The best deal teams I worked with treated the term sheet as the start of the negotiation, not the end of it.
Cash comes before EBITDA
Leverage forgives a lot. It does not forgive running out of liquidity. A business can be profitable on paper and still miss an interest payment. I still start every review of a company, whether a buyout or a Series A startup, with the same question: how many weeks of cash are there, and what has to be true for that number to grow?
These habits are why I am most useful where capital and execution meet: raising it, deploying it and protecting it.