In an LBO model, which scenario is considered the most conservative?
A)Management case
B)Base case
C)Sponsor case
D)Downside case

Question

Quizplus · Accepted Answer

The downside case is considered the most conservative scenario in an LBO model because it assumes lower revenue growth, higher expenses, and/or higher interest rates than the base case. It typically represents a worst-case scenario for the company's financial performance and is used to assess the level of risk involved in the transaction. The management case, base case, and sponsor case all assume different levels of financial performance based on various assumptions, but the downside case is the most cautious of the four.

In an LBO Model, Which Scenario Is Considered the Most