Module IV· Operating ForecastBasic

Question

What does LTM EBITDA mean and why is it so important in an LBO?

Answer

What

LTM = last twelve months. The most recent 12-month period, often not aligned with the fiscal year.

Calculation

last annual accounts + current Q3 YTD − prior-year Q3 YTD.

Why it matters

Lenders set leverage multiples on LTM (e.g. 5x LTM Senior Debt)
Equity purchase price is often a multiple of LTM EBITDA
LTM is the most honest basis — no forward-looking optimism

Pitch tip

'LTM or forward?' → LTM for pricing/leverage, forward only for sensitivity. Mixing them up = junior-level.

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