Need to Improve the Traditional 5-Year LBO Models

Questioning the effectiveness of the traditional five-year LBO models, Michael Che advocates for a fresh approach to risk management. He emphasizes the limitations of fixating on precise five-year growth rates and IRRs, which lead to overlooking a wider range of outcomes such as capital impairment or runaway success. By shifting the focus to two-year modeling time horizons and specific upside and downside drivers, teams can engage in more precise discussions about probabilities and scenarios, ultimately enhancing risk management strategies.