Leveraged buyout model
Sources and uses, a cash sweep, sponsor returns. Size a deal, run its debt schedule with a sweep, and decompose the return into EBITDA growth, multiple change and net debt reduction.
Built in: Private equity, Investment banking, Equity research and hedge funds
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: leveraged buyout model.Updated 30 September 2026
Who builds it, and for whatThe private equity model, and the one a modelling test asks for. A sponsor uses it to decide what it can pay, a leveraged finance banker to decide what the lenders will fund, and a credit analyst to decide whether they should. Its centre is the debt schedule: how much cash the business throws off, and how fast that cash pays the debt down.
Every sheet below, in your browser. Sign in free to change the inputs and watch it recalculate
Starter workbook free with an account. Worked model: one a month with Plus, every one with Pro. Downloads
| A | B | C | D | E | F | G | H | I | |
|---|---|---|---|---|---|---|---|---|---|
| 1 | Assumptions | ||||||||
| 2 | $m unless stated. Interest rates are annual. | ||||||||
| 4 | Driver | Unit | Entry | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| 5 | Scenario | ||||||||
| 6 | Scenario | # | 1 | 1 = base, 2 = downside. Sets revenue growth and EBITDA margin. | |||||
| 8 | Entry | ||||||||
| 9 | LTM revenue | $m | 500.0 | Last twelve months (LTM) before close | |||||
| 10 | LTM EBITDA margin | % | 20.0% | ||||||
| 11 | Entry multiple, EV / LTM EBITDA | x | 10.0x | ||||||
| 12 | Transaction fees, % of enterprise value | % | 2.0% | Paid at close as a use of funds; not amortised | |||||
| 13 | Financing fees, % of debt raised | % | 2.0% | Capitalised and amortised straight-line over the fee amortisation period | |||||
| 14 | Minimum cash balance | $m | 25.0 | Funded at close as a use of funds | |||||
| 15 | Management rollover, % of total equity | % | 10.0% | The sponsor funds the remaining equity | |||||
| 17 | Debt financing | ||||||||
| 18 | Revolver commitment | $m | 50.0 | ||||||
| 19 | Revolver drawn at close | $m | - | ||||||
| 20 | Revolver interest rate | % | 6.5% | On the opening drawn balance | |||||
| 21 | Term loan B, multiple of LTM EBITDA | x | 4.0x | ||||||
| 22 | Term loan B interest rate | % | 7.5% | ||||||
| 23 | Term loan B amortisation, % of original balance | % | 1.0% | Mandatory repayment each year, capped at the balance outstanding | |||||
| 24 | Cash sweep to term loan B | % | 100.0% | % of cash above the minimum after mandatory repayment and the revolver | |||||
| 25 | Senior notes, multiple of LTM EBITDA | x | 1.5x | ||||||
| 26 | Senior notes coupon | % | 8.5% | Bullet: no repayment during the hold | |||||
| 27 | Interest rate on cash | % | 2.0% | On opening cash | |||||
| 28 | Financing fee amortisation period | years | 5 | Also the IRR cross-check period. The exit is fixed at Year 5 | |||||
| 30 | Operating case | ||||||||
| 31 | Revenue growth, base case | % | 8.0% | 7.0% | 6.0% | 5.0% | 5.0% | ||
| 32 | Revenue growth, downside case | % | 3.0% | 2.0% | 2.0% | 2.0% | 2.0% | ||
| 33 | Revenue growth, selected scenario | % | 8.0% | 7.0% | 6.0% | 5.0% | 5.0% | ||
| 34 | EBITDA margin, base case | % | 21.0% | 22.0% | 22.0% | 23.0% | 23.0% | ||
| 35 | EBITDA margin, downside case | % | 19.0% | 18.0% | 18.0% | 18.0% | 18.0% | ||
| 36 | EBITDA margin, selected scenario | % | 21.0% | 22.0% | 22.0% | 23.0% | 23.0% | ||
| 37 | Depreciation and amortisation, % of revenue | % | 3.5% | ||||||
| 38 | Capital expenditure, % of revenue | % | 4.0% | ||||||
| 39 | Net working capital, % of revenue | % | 12.0% | Year-end balance; an increase uses cash | |||||
| 40 | Tax rate | % | 25.0% | ||||||
| 42 | Exit | ||||||||
| 43 | Exit multiple, EV / EBITDA | x | 10.0x | Applied to Year 5 EBITDA | |||||
Select a cell to see its row, its schedule and the type of cell. Font colours: blue for inputs, black for formulas, green for links to other sheets. Scroll sideways to see every period.
Download
Leveraged buyout model: the workbook
Excel workbook with working formulas, no macros and no external links. Work with it above first; it is the same model as the preview.
Have your build graded
Build the starter, save it, and upload it here. It is marked the way a reviewer would mark the leveraged buyout model, on five things:
- Correct outputsyour figures against the model’s, line by line, and the headline outputs
- Correct linkageseach formula checked against the cells it reads, so a mistake counts once, where it starts
- Built with formulasno hardcoded numbers where a formula belongs
- Holds when assumptions changeyour workbook recalculated with assumptions changed, and every line checked again
- Workbook integritythe checks close, the status reads OK, and the rest of the model is as given
Checking your account…
What the base case says
- Total debt at close / LTM EBITDA
- 5.5x
- Total equity, % of sources
- 47.9%
- Net debt / EBITDA, Year 5
- 1.7x
- MOIC, total equity
- 2.5x
- IRR, total equity
- 20.6%
- Share of gain from net debt reduction
- 33.3%
Read from the workbook as served, every input at its default. Periods: Entry, Year 1, Year 2, Year 3, Year 4, Year 5. The figures are invented and move with whatever you type in.
What this model is
A five-year leveraged buyout model: sources and uses at close, an operating case with a downside scenario, a debt schedule with a revolver, term loan B and senior notes, equity returns and a value creation bridge.
Free cash flow after mandatory amortisation repays the revolver first and is then swept to term loan B. The senior notes are a bullet and are outstanding at exit. Leverage and interest coverage are shown for each year.
Uses: practising an LBO modelling test, seeing how leverage, operating performance and the exit multiple drive MOIC and IRR, and reading their sensitivity to entry and exit multiples.
Seats: Private equity, Investment banking, Equity research and hedge funds.
Careers that do this work: investment banking, private equity, growth equity, corp dev / m&a, venture capital.
How the schedules connect
Every row in the workbook is tagged with the schedule it belongs to; the inspector above shows the tag when you click a row. These are the schedules this model is made of and where each one lives.
Sources and uses
What the deal costs and who funds it
Assumptions, rows 9–15 · Sources & Uses, rows 5–10 · Sources & Uses, rows 13–20 · Sources & Uses, rows 23–26
Revenue build
Where the top line comes from
Assumptions, rows 31–36 · Operating Model, rows 6–11 · Operating Model, rows 15–17
Capex and depreciation (PP&E roll-forward)
Opening, plus capex, less depreciation, closing
Assumptions, rows 37–38 · Operating Model, row 10 · Operating Model, row 22
Working capital schedule
Receivables, inventory and payables in days
Assumptions, row 39 · Operating Model, rows 23–24
Tax
Tax on profit, and tax on operating profit
Assumptions, row 40 · Operating Model, row 16
Cash flow statement
Indirect method, closing on balance-sheet cash
Operating Model, rows 20–21 · Operating Model, rows 25–26
Debt schedule
Tranches, interest, amortisation and the sweep
Assumptions, rows 18–28 · Operating Model, rows 12–14 · Debt, rows 6–10 · Debt, rows 13–16 · Debt, rows 19–23 · Debt, rows 26–28 · Debt, rows 31–38
Returns analysis
Exit value, MOIC, IRR and the bridge
Assumptions, row 43 · Returns, rows 6–9 · Returns, rows 12–18 · Returns, rows 21–27
Sensitivity tables
Two assumptions at once, without a data table
Sensitivity, row 5 · Sensitivity, rows 8–13 · Sensitivity, rows 16–21 · Sensitivity, rows 24–31
What you should be able to explain
- Why total equity is the balancing item in sources and uses, and what that does to returns when the price moves.
- The order of a cash sweep: mandatory amortisation, revolver, then the term loan with what is left above minimum cash.
- Why financing fees are capitalised and what their amortisation does to tax and cash.
- How an IRR relates to a multiple of money over a hold period.
- Where a return comes from: EBITDA growth, multiple expansion or net debt reduction, and why the third is the one lenders care about.
What a reviewer looks for
- Sweeping cash before paying mandatory amortisation, so the same dollar is used twice.
- Letting the revolver draw to fund the sweep, which is the same circularity by another name.
- Forgetting minimum cash, so the company runs at zero and the sweep is overstated.
- Quoting an IRR without the multiple beside it, or the multiple without the hold period.
Conventions this workbook uses
Stated on the cover sheet too. A model is only as trustworthy as the decisions it tells you it made.
- Interest is charged on opening balances. This avoids a circular reference between interest and the cash sweep; a repayment during the year reduces interest from the following year.
- Debt is sized as a multiple of LTM EBITDA and total equity funding is the balancing item in sources and uses, so a higher entry price increases equity, not debt.
- Transaction fees are paid at close and not amortised. Financing fees are capitalised and amortised straight-line over the fee amortisation period; the amortisation is tax-deductible and added back as a non-cash expense.
- The exit is at the end of Year 5 at the exit multiple of Year 5 EBITDA. Exit equity value is enterprise value less net debt at that date. No dividends are paid during the hold.
- MOIC and IRR are calculated on total equity (sponsor plus management rollover). The rollover shares pro rata with the sponsor, so the sponsor MOIC and IRR are the same.
Build it yourself
The starter workbook
The Debt sheet has been cleared, together with the interest and financing fee amortisation lines on the Operating Model. Rebuild the cash available block, the revolver, term loan B with its mandatory amortisation and cash sweep, the senior notes and the totals. The Returns sheet recalculates as you do, and the Checks sheet shows when every check reads zero.
Blanks: Debt schedule. Free with any account. Compare with the worked model when you are done: download above.
The path around this model
Understand it, drill it, read the build, then apply it to a real company.
Understand · Primer
LBO Mechanics & Returns
Intermediate · a curated reel with a quiz
Build · Lab · ~60 min
LBO Modelling Test
Sit the one-hour test under a clock, in the browser or in your own workbook, and get every line of the build marked.
Build · Lab · ~8 min
Paper LBO Trainer
Solve MOIC and IRR in your head from a deal you have never seen, in under ten minutes.
Build · Lab · ~12 min
Napkin LBO
Sketch a full buyout by hand, from sources and uses through the debt paydown to the return, and say which bucket the return depends on.
Build · Lab · ~3 min
IRR by Eye
Say the IRR for any multiple and hold before the interviewer finishes the sentence, and the multiple for any IRR.
Build · Lab · ~15 min
Capital Stack Challenge
Finance a real buyout from revolver to equity, hold it through a shock, and explain every layer against the deal the sponsor actually did.
Read · Guide · 13 min
How to Build an LBO Model: The Build Order That Survives a Modelling Test
Read · Guide · 9 min
The Private Equity Modelling Test: What to Expect and How to Prepare
Read · Guide · 9 min
Paper LBO Example: A Full Walkthrough, Step by Step
Read · Guide · 8 min
LBO Interview Questions: The Conceptual Ones Behind the Maths
Read · Guide · 11 min
Credit and Covenant Modelling: What a Lender Actually Tests
Apply · Skill
Leveraged Buyout, Ability to Pay
Work out what a sponsor could pay and still earn its return.
Apply · Skill
LBO Sanity Check
Review an LBO’s returns drivers and catch the assumptions doing the heavy lifting.
Apply · Skill
Model Audit
Find the errors in a financial model before someone senior does.
Vocabulary: Leverage Model, PIK Interest, IRR, Covenant, Modelling Test.
Questions about this model
Why does the entry multiple not change the debt?
Because the model sizes debt on earnings, not on price. The term loan and the notes are multiples of LTM EBITDA, so a higher price means more equity, not more debt. The entry-versus-exit multiple grid on the Sensitivity sheet shows the effect on MOIC.
What does the downside case test?
Whether the structure survives slower growth and thinner margins: whether the revolver stays inside its commitment, whether cash stays above minimum, and what happens to leverage and coverage. Set Scenario to 2 on the Assumptions sheet and read the Debt sheet again.
Why is there no full balance sheet?
A typical modelling test does not ask for one, and the returns do not need one. The cash flow available for debt repayment, the debt schedule and the cash balance are the parts of the balance sheet that matter to the sponsor. The three-statement model on this site carries the full set.
How is the IRR checked?
Two ways. The Returns sheet calls IRR on the total equity cash flows, and beside it computes the multiple raised to one over the hold period, less one. With no interim dividends the two agree. Both are on total equity; management rollover shares pro rata, so the sponsor figures are the same.
What does it cost?
Nothing to preview: the whole workbook is on this page, and a free account works with it online, every formula included. Every starter workbook downloads with a free account. L3VLUP Plus ($4.99/month) keeps one worked model each billing month, yours for good, and L3VLUP Pro ($25/month) keeps every one.