Tool · 14

LBO Quick Model

Sources and uses, a simplified debt paydown schedule, and a returns bridge that splits the gain across deleveraging, growth, multiple change, and fees.

Assumptions

Entry EBITDA

Entry multiple

Leverage

Turns of entry EBITDA

Interest rate

Fees, % of EV

EBITDA growth

Cash conversion

EBITDA available after capex and working capital, before interest and tax.

Tax rate

Hold period

Exit multiple

Convention: cash available to repay debt is EBITDA times cash conversion, less interest, taxed at the rate above. That is a simplification of a real debt schedule, and naming it means you can reproduce every number here by hand.

Sources and uses

At close$ millions

	Amount	% of total
Debt raised	1,000	54.2%
Sponsor equity	845	45.8%
Total sources	1,845	100.0%
Purchase enterprise value	1,800
Fees	45
Total uses	1,845

Debt paydown

Simplified schedule$ millions

	Y1	Y2	Y3	Y4	Y5
EBITDA	212	225	238	252	268
Interest	negative 90	negative 88	negative 86	negative 83	negative 79
Cash for paydown	20	27	34	42	51
Debt repaid	20	27	34	42	51
Ending debt	980	954	920	878	826

Returns

Returns bridge

Where the money came from. Three of these four are the story, and only two of them are within a sponsor's control.

DeleveragingDebt repaid with the company's own cash flow

$174M

EBITDA growthExtra profit valued at the entry multiple

$609M

Multiple changeExit EBITDA revalued at the change in multiple

$0M

FeesTransaction costs the sponsor funded at close

-$45M

Equity createdExit equity less the check written at close

$737M

The four buckets sum to $737M against a total of $737M. They add up exactly because the attribution is derived algebraically rather than plugged, and there is a test that runs 200 randomized assumptions through it to keep it that way.

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