Simple Leveraged Buyout Model The core idea of a leveraged buyout model can be boiled down...

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Simple Leveraged Buyout Model The core idea of a leveraged buyout model can be boiled down to one page Step 1 - Buy the Company (Transaction Sources & Uses) EBITDA x Multiple Assumed Leverage Uses of Proceeds Purchase Price (Cash, Debt Free) Fees & Expenses Total Uses Revenue % Growth Step 2 - Run the Company (Operating Projections) EBITDA % Margin Less: Interest (6% Rate) Less: Capex (Assumed) Less: Taxes (30%) Free Cash Flow $ 10 Cumulative Cash Balance Net Debt 7.0x 4.0x Step 3 - Sell the Company (Exit & Returns) Exit EBITDA (Year 5) Assumed Exit Multiple Exit Enterprise Value Less: Net Debt Equity Value $mm $ 70 $3 $ 73 Year O $ 50.0 10.0 20% 16.0 7.0x $ 112 (12) $ 100 Year 1 $ 52.5 5% 11.0 21% (2.4) (3.0) (1.7) 3.9 $ 3.9 $36.1 Sources of Proceeds Debt Equity Total Sources Year 2 $ 55.1 5% 12.1 22% (2.4) (3.0) (2.0) 4.7 $ 8.6 $31.4 Money Multiple IRR Year 3 $57.9 5% 13.3 23% (2.4) (3.0) (2.4) 5.5 $ 14.2 $25.8 Year 4 $ 60.8 5% 14.6 24% (2.4) (3.0) (2.8) 6.4 $20.6 $19.4 $mm $mm $ 40 $ 33 $ 73 $mm Year 5 $ 63.8 5% 16.0 25% (2.4) (3.0) (3.2) 7.4 $ 28.0 $ 12.0 $mm 3.0x 24.7% Simple Leveraged Buyout Model The core idea of a leveraged buyout model can be boiled down to one page Step 1 - Buy the Company (Transaction Sources & Uses) EBITDA x Multiple Assumed Leverage Uses of Proceeds Purchase Price (Cash, Debt Free) Fees & Expenses Total Uses Revenue % Growth Step 2 - Run the Company (Operating Projections) EBITDA % Margin Less: Interest (6% Rate) Less: Capex (Assumed) Less: Taxes (30%) Free Cash Flow $ 10 Cumulative Cash Balance Net Debt 7.0x 4.0x Step 3 - Sell the Company (Exit & Returns) Exit EBITDA (Year 5) Assumed Exit Multiple Exit Enterprise Value Less: Net Debt Equity Value $mm $ 70 $3 $ 73 Year O $ 50.0 10.0 20% 16.0 7.0x $ 112 (12) $ 100 Year 1 $ 52.5 5% 11.0 21% (2.4) (3.0) (1.7) 3.9 $ 3.9 $36.1 Sources of Proceeds Debt Equity Total Sources Year 2 $ 55.1 5% 12.1 22% (2.4) (3.0) (2.0) 4.7 $ 8.6 $31.4 Money Multiple IRR Year 3 $57.9 5% 13.3 23% (2.4) (3.0) (2.4) 5.5 $ 14.2 $25.8 Year 4 $ 60.8 5% 14.6 24% (2.4) (3.0) (2.8) 6.4 $20.6 $19.4 $mm $mm $ 40 $ 33 $ 73 $mm Year 5 $ 63.8 5% 16.0 25% (2.4) (3.0) (3.2) 7.4 $ 28.0 $ 12.0 $mm 3.0x 24.7%

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A leveraged buyout LBO is a financial transaction where a company is acquired using a significant am... View the full answer