Written by Neil Ackroyd
An integrated financial model is an essential element of any management buyout process. A fully integrated financial model will typically take a five year profit and loss forecast for the business, take the working capital cycle of the specific business to drive through a balance sheet and cashflow statement and then overlay a funding structure to demonstrate returns for all investors and the management team. That is clearly a very long sentence, but I didn’t want to break it down as it is all one thing. The model is also essential in writing a business plan that can be readily used by a venture capital, Private equity or Debt funder. A five year financial model is the key to controlling the process and any subsequent negotiation. In my opinion, and contrary to some advice, it is the job of the lead advisory firm to structure and manage this.