Definitions by Finance101

Model Magic

The practice of manipulating a financial model to maintain a 2.0x return despite discovering negative information during diligence. This is often achieved by increasing exit multiples, reducing Capex, manipulating working capital assumptions, increasing revenue growth rates and increasing gross margin assumptions among other tactics. This is also sometimes referred to as goal seek modeling where every factor other than purchase price is adjusted to arrive at the desired outcome.

Associate 1: I have some bad news, the Target's recent results are well below the banker model and suggest that the declining revenue and margins are continuing vs turning around.
Associate 2: No problem, I'll just apply a little Model Magic and the return will still be 2.0x

Model Magic by Finance101 August 11, 2024

worlihuntchen 

A massive decapitation of a financial model

Oh man, you totally Worlihuntchen my deal!

worlihuntchen by Finance101 August 9, 2024