Sources and uses
What the deal costs and who funds it.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: sources and uses.Updated 30 September 2026
Part of m&a and private equity models, with the models, labs and guides around it.
What it does
The opening balance sheet of a transaction. Uses are what has to be paid: the purchase price, fees, financing costs, any cash funded to the balance sheet or debt refinanced. Sources are where the money comes from: each debt tranche, rollover, and the equity cheque that balances the two. Leverage at close and the equity share of the deal are read straight off it.
Where it lives
The same schedule in each model that carries it, with the rows to open. Open a model in the browser, go to the sheet, and click the lines.
- Assumptions, rows 9–15: LTM revenue, LTM EBITDA margin, Entry multiple, EV / LTM EBITDA, Transaction fees, % of enterprise value…
- Sources & Uses, rows 5–10: LTM EBITDA, Purchase enterprise value, Transaction fees, Financing fees…
- Sources & Uses, rows 13–20: Revolver drawn, Term loan B, Senior notes, Total debt…
- Sources & Uses, rows 23–26: Total debt / LTM EBITDA, Total equity, % of total sources, Net debt at close, Check: total sources - total uses
- Assumptions, rows 23–30: Offer premium to unaffected price, Stock consideration, % of equity purchase price, New debt, % of cash consideration, Interest rate on new debt…
- Sources & Uses, rows 5–8: Equity purchase price, Transaction fees, Financing fees, Total uses
- Sources & Uses, rows 11–15: Acquirer shares issued to target shareholders, New debt raised, Acquirer cash used, Total sources…
- Sources & Uses, rows 18–19: Pro forma net debt, Pro forma net debt / combined Year 1E EBITDA
- Assumptions, rows 8–19: Offer price per target share, Target diluted shares, Equity purchase price, Transaction costs…
What a reviewer looks for
- Fees left out of uses, so the equity cheque is understated.
- A refinanced debt shown on one side but not the other.
- Sources hardcoded to equal uses rather than one line being the balancing item.
Learn it, then build it
Understand · Primer
LBO Mechanics & Returns
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 · ~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 · ~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
Paper LBO Example: A Full Walkthrough, Step by Step
Read · Guide · 12 min
How to Build a Merger Model: Purchase Accounting, Financing and Accretion
Vocabulary: Leverage Model, Merger Model.