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 growth, multiple and paydown.
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.
| A | B | C | D | E | F | G | H | I | |
|---|---|---|---|---|---|---|---|---|---|
| 1 | Assumptions | ||||||||
| 2 | Blue cells only. The company is invented; every figure was chosen so the case has somewhere to begin. | ||||||||
| 4 | Driver | Unit | Entry | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| 5 | Scenario | ||||||||
| 6 | Operating case (1 base, 2 downside) | # | 1 | ||||||
| 8 | Entry | ||||||||
| 9 | LTM revenue | $m | 500.0 | ||||||
| 10 | LTM EBITDA margin | % | 20.0% | ||||||
| 11 | Entry multiple, EV / LTM EBITDA | x | 10.0x | ||||||
| 12 | Transaction fees, % of enterprise value | % | 2.0% | ||||||
| 13 | Financing fees, % of debt raised | % | 2.0% | ||||||
| 14 | Minimum cash, funded at close | $m | 25.0 | ||||||
| 15 | Management rollover, % of total equity | % | 10.0% | ||||||
| 17 | Debt stack | ||||||||
| 18 | Revolver commitment | $m | 50.0 | ||||||
| 19 | Revolver drawn at close | $m | - | ||||||
| 20 | Revolver interest rate | % | 6.5% | ||||||
| 21 | Term loan B, multiple of LTM EBITDA | x | 4.0x | ||||||
| 22 | Term loan B interest rate | % | 7.5% | ||||||
| 23 | Term loan B mandatory amortisation, % of original per year | % | 1.0% | ||||||
| 24 | Cash sweep, % of excess cash to term loan B | % | 100.0% | ||||||
| 25 | Senior notes, multiple of LTM EBITDA | x | 1.5x | ||||||
| 26 | Senior notes coupon | % | 8.5% | ||||||
| 27 | Interest earned on cash | % | 2.0% | ||||||
| 28 | Hold period for fee amortisation | years | 5 | ||||||
| 30 | Operating case | ||||||||
| 31 | Revenue growth, base | % | 8.0% | 7.0% | 6.0% | 5.0% | 5.0% | ||
| 32 | Revenue growth, downside | % | 3.0% | 2.0% | 2.0% | 2.0% | 2.0% | ||
| 33 | Revenue growth (live) | % | 8.0% | 7.0% | 6.0% | 5.0% | 5.0% | ||
| 34 | EBITDA margin, base | % | 21.0% | 22.0% | 22.0% | 23.0% | 23.0% | ||
| 35 | EBITDA margin, downside | % | 19.0% | 18.0% | 18.0% | 18.0% | 18.0% | ||
| 36 | EBITDA margin (live) | % | 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% | ||||||
| 40 | Tax rate | % | 25.0% | ||||||
| 42 | Exit | ||||||||
| 43 | Exit multiple, EV / EBITDA | x | 10.0x |
Click any cell. The inspector names the line, the schedule it belongs to and what kind of cell it is; blue on cream is an input, black a calculation, green a value from another sheet. Scroll sideways to see every year.
Download
Leveraged buyout model: the workbook
Native Excel, formulas live, no macros, no external links. Inspect it above first; the file is the same model with the formulas in it.
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What the base case says
- Total debt at close / LTM EBITDA
- 5.5x
- Equity, % of sources
- 47.9%
- Net debt / EBITDA, Year 5
- 1.7x
- MOIC
- 2.5x
- IRR
- 20.6%
- Share of gain from debt paydown
- 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 of an invented company: sources and uses at close, an operating case with a downside switch, a three-tranche debt schedule with a cash sweep, sponsor returns and a value-creation bridge.
The debt schedule is the engine. Free cash flow after mandatory amortisation repays the revolver first, then sweeps the term loan; the senior notes are a bullet. Leverage and coverage are shown every year.
Two sensitivity grids re-price the exit against multiple and year, and against entry and exit multiple, each cell as a live formula.
Seats: Private equity, Investment banking, Equity research and hedge funds.
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, rows 5–6 · Sensitivity, rows 9–13 · Sensitivity, rows 16–20 · Sensitivity, rows 23–30
What you should be able to explain
- Why the equity cheque is the balancing item 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 debt paydown, 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. The sweep can then be written in one pass with no iteration; the price is that a mid-year repayment saves no interest until the following year.
- Debt is sized as a multiple of LTM EBITDA and the equity cheque is the balancing item in sources and uses. Entry price therefore moves equity, not leverage.
- Financing fees are capitalised and amortised straight-line over the hold. The amortisation is a tax-deductible non-cash expense, added back in the cash flow.
- The exit is at the end of Year 5 at the exit multiple, cash-free and debt-free: exit equity is enterprise value less net debt on that date. No dividends are paid during the hold.
- Management rollover shares pro rata with the sponsor, so the sponsor’s MOIC and IRR equal the deal’s.
Build it yourself
The starter workbook
The Debt sheet has been cleared, and with it the interest and fee-amortisation lines on the Operating Model. Rebuild the cash available block, the revolver, the term loan with its mandatory amortisation and sweep, the notes and the totals. The Returns sheet and the Checks sheet come back to life as you do.
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 lenders size debt on earnings, not on price. The term loan and the notes are multiples of LTM EBITDA; a higher price means a bigger equity cheque, not more debt. The entry-versus-exit multiple grid on the Sensitivity sheet shows exactly that.
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. Switch the operating case to 2 on the Assumptions sheet and read the Debt sheet again.
Why is there no full balance sheet?
A modelling test does not ask for one, and the returns do not need one. The cash flow available for debt service, 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 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, which is a useful thing to know in an interview.
What does it cost?
Nothing to inspect: the whole workbook is on this page. A free account chooses one worked model to keep, and downloads every starter workbook. L3VLUP Pro ($25/month) downloads the whole library and opens every model’s formulas in the inspector.