A full Leveraged Buyout model simulating a Private Equity acquisition — from entry price and debt financing through 5 years of cash flow-driven debt paydown, to exit and IRR/MoIC returns calculation.
An LBO is how Private Equity firms buy companies: using mostly borrowed money, letting the company's own cash flows pay off the debt, then selling it 5 years later for a large profit.
This model simulates that entire process end-to-end — the same architecture used by analysts at KKR, Blackstone, and Apollo.
Buy company with debt → Company pays off debt with its own cash → Sell company → Profit
lbo-model/
│
├── model/
│ └── lbo_model.xlsx # Full LBO model (5 tabs)
│
├── docs/
│ ├── assumptions.md # Entry/exit multiples, debt terms, growth rates
│ └── returns_analysis.md # IRR sensitivity table walkthrough
│
├── data/
│ └── target_company_10k.pdf # Source annual report
│
├── screenshots/
│ ├── sources_uses.png
│ ├── debt_schedule.png
│ └── returns_summary.png
│
├── .gitignore
├── LICENSE
└── README.md
The PE firm buys the company using an EBITDA Multiple:
Enterprise Value = EBITDA × Entry Multiple
Example: $100M EBITDA × 10.0x = $1,000M Purchase Price
| Input | Value |
|---|---|
| LTM EBITDA | $100M |
| Entry Multiple | 10.0x |
| Enterprise Value | $1,000M |
| Less: Existing Debt | ($200M) |
| Equity Purchase Price | $800M |
Uses (what we're paying for):
| Item | Amount |
|---|---|
| Equity Purchase Price | $800M |
| Refinanced Debt | $200M |
| Transaction Fees | $25M |
| Total Uses | $1,025M |
Sources (where the money comes from):
| Tranche | Amount | % of Total |
|---|---|---|
| Senior Term Loan | $500M | 49% |
| Subordinated Debt | $200M | 20% |
| PE Sponsor Equity | $325M | 32% |
| Total Sources | $1,025M | 100% |
The integrated Income Statement / Balance Sheet / Cash Flow model projects 5 years of Free Cash Flow — the fuel that pays down the debt.
(This model is built on top of the standalone 3-Statement Model — see that repo.)
Every dollar of Free Cash Flow is swept into a Debt Waterfall — paid off in strict seniority order:
Free Cash Flow
│
├─► 1. Mandatory Interest (paid first, always)
├─► 2. Revolver Paydown
├─► 3. Senior Term Loan Amortisation
└─► 4. Subordinated / Mezzanine Debt
| Year | FCF | Debt Repaid | Remaining Debt |
|---|---|---|---|
| 1 | $85M | $85M | $615M |
| 2 | $92M | $92M | $523M |
| 3 | $101M | $101M | $422M |
| 4 | $110M | $110M | $312M |
| 5 | $120M | $120M | $192M |
The faster the paydown, the higher the returns.
At Year 5, the PE firm sells the company (assuming the same EBITDA multiple):
Exit Enterprise Value = Year-5 EBITDA × Exit Multiple
Equity to PE Firm = Exit EV − Remaining Debt
IRR = Annualised return on invested capital (target: 20–25%)
MoIC = Total cash returned / cash invested (target: 2.5x–3.5x)
| 8.0x Exit | 9.0x Exit | 10.0x Exit | 11.0x Exit | |
|---|---|---|---|---|
| 3% growth | XX% IRR | XX% IRR | XX% IRR | XX% IRR |
| 5% growth | XX% IRR | XX% IRR | XX% IRR | XX% IRR |
| 7% growth | XX% IRR | XX% IRR | XX% IRR | XX% IRR |
(Populated in model — IRR is highly sensitive to exit multiple and growth rate)
- Download
model/lbo_model.xlsx - Navigate the 5 tabs: Cover → Sources & Uses → 3-Statement → Debt Schedule → Returns
- Adjust blue cells only: entry multiple, debt tranches, growth rate, exit multiple
- Watch the IRR and MoIC update in the Returns tab automatically
- Run scenarios: change exit multiple from 8x → 12x and see how returns shift
| Convention | Rule |
|---|---|
| 🔵 Blue font | Hard-coded inputs (entry multiple, debt terms) |
| ⚫ Black font | Formula outputs (all calculated cells) |
| Negatives | In parentheses (500) — never minus signs |
| Units | $ in millions stated in every tab header |
| Tool | Purpose |
|---|---|
| Microsoft Excel | Full model build |
| SEC EDGAR | 10-K source financials |
| Yahoo Finance | Market comps for entry/exit multiple |
MIT — see LICENSE