Core8 sheets~60 minPEIBER/HF
Leveraged buyout model
Size a deal, run its debt schedule with a sweep, and decompose the return into growth, multiple and paydown.
M&A and private equity models
M&A and private equity modelling answers three questions about one transaction: what the buyer can pay, how the price is funded, and who receives what it returns. A leveraged buyout funds the price mostly with debt and judges it on the sponsor’s equity return. A merger is judged by the buyer’s shareholders, on whether earnings per share rise or fall once the deal closes. Purchase price allocation is the accounting that follows either one, marking the target’s assets to fair value and leaving goodwill as the balance. A cap table and exit waterfall settles the last question for a venture-backed company, dividing the sale proceeds among founders and every class of investor in order of preference.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: m&a and private equity.Updated 3 October 2026
The models
Core8 sheets~40 minIBPEER/HF
Merger model: accretion and dilution
Price an offer, fund it, and say whether it is accretive, by how much, and how much synergy it would take to break even.
Advanced7 sheets~40 minIBPEER/HF
Purchase price allocation model
Allocate a purchase price across book assets, fair value write-ups and new intangibles, compute the deferred tax liability and goodwill in a stock deal and an asset deal, build the closing balance sheet, and say what the write-ups cost earnings and what a step-up is worth in cash.
Foundation6 sheets~30 minVCPE
Cap table and exit waterfall model
Price a seed round with a converting SAFE and a pool top-up, say who paid for the pool, and run the exit waterfall for a non-participating preferred.
Other areas: Core modelling · Credit and restructuring · Real estate · Infrastructure and project finance · Healthcare · Technology · All 19 models
How to work through it
Start with the paper LBO lab, which sizes a deal and its return by hand in a few minutes. Then open the LBO model to see the same deal with a three-tranche debt schedule, a cash sweep and the return decomposed into growth, multiple and paydown. The merger model takes the strategic buyer’s side: change the share of stock in the consideration and watch accretion turn to dilution. Purchase price allocation shows what the buyer’s balance sheet looks like the day after, and the cap table model shows how a sale is shared when the company was funded by venture rounds. Each model has a starter workbook that leaves one schedule for you to build.
The mechanics they share
Each schedule is one reusable calculation, explained on its own page with the rows it occupies in every model that uses it.
Transaction schedules
Sources and uses
What the deal costs and who funds it
The statements
Revenue build
Where the top line comes from
Operating schedules
Capex and depreciation (PP&E roll-forward)
Opening, plus capex, less depreciation, closing
Operating schedules
Working capital schedule
Receivables, inventory and payables in days
The statements
Tax
Tax on profit, and tax on operating profit
The statements
Cash flow statement
Indirect method, closing on balance-sheet cash
Financing schedules
Debt schedule
Tranches, interest, amortisation and the sweep
Valuation and returns
Returns analysis
Exit value, MOIC, IRR and the bridge
Valuation and returns
Sensitivity tables
Two assumptions at once, without a data table
Transaction schedules
Purchase price and consideration
Offer, premium, mix, new shares, exchange ratio
Transaction schedules
Synergies
Run-rate, phase-in, after tax
Transaction schedules
Purchase accounting
The write-up that amortises
Transaction schedules
Pro forma EPS: accretion and dilution
Standalone to pro forma, per share
Transaction schedules
Contribution analysis
What each side brings against what it owns
Transaction schedules
Goodwill calculation
From the price to goodwill, through every write-up
Transaction schedules
Deferred taxes in an acquisition
The DTL on write-ups, its unwind, and the step-up
Transaction schedules
Closing balance sheet
Acquirer plus target plus adjustments, balanced
Venture schedules
Priced round and option pool
Pre-money to price per share, with the pool shuffle
Venture schedules
SAFE conversion
What a post-money SAFE turns into at the round
Venture schedules
Exit waterfall
Preference or conversion, then what reaches the common
Practise first
LBO Modelling Test · 60 min
Sit the one-hour test under a clock, in the browser or in your own workbook, and get every line of the build marked.
Paper LBO Trainer · 8 min
Solve MOIC and IRR in your head from a deal you have never seen, in under ten minutes.
Napkin LBO · 12 min
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.
IRR by Eye · 3 min
Say the IRR for any multiple and hold before the interviewer finishes the sentence, and the multiple for any IRR.
Capital Stack Challenge · 15 min
Finance a real buyout from revolver to equity, hold it through a shock, and explain every layer against the deal the sponsor actually did.
Accretion / Dilution Animator · 8 min
Call a deal accretive or dilutive from P/E, premium and financing mix before you open a model.
Cap Table Builder · 15 min
Convert a post-money SAFE, price a seed round and size an option pool by hand, and say who paid for the pool.
Exit Waterfall Lab · 12 min
Run a liquidation waterfall at any exit value, say where a preferred holder chooses to convert, and explain what a 1x non-participating preference actually costs the founders.
Three-Statement Linker · 8 min
Walk any event through all three statements in the right order, with the right signs, and prove the balance sheet balances rather than asserting it.
Depreciation Waterfall · 10 min
Forecast depreciation from a capex plan rather than a ratio, read a capex-to-depreciation multiple, and say which part of the spend is buying growth and which is only standing still.
Optimal Capital Structure · 15 min
Explain why more debt stops helping: watch coverage, rating and spread move as leverage rises until WACC turns.
DCF Builder · 15 min
Build a DCF by hand from revenue to a share price, know how much of it sits in the terminal value, and name the one assumption the answer hinges on.
Where this work is done
Investment Banking
Advise on M&A and capital raising. The training ground the rest of the map feeds off.
How to get in and preparePrivate Equity
Buy control of established companies using debt, improve them, sell them.
How to get in and prepareGrowth Equity
Minority stakes in companies that already work and need capital to scale. Between PE and VC.
Corp Dev / M&A
Buy companies for an operator. The modelling is banking; the judgement is not.
How to get in and prepareVenture Capital
Early-stage minority investing. Judgement about people and markets, far less modelling.
How to get in and prepareRead
- How to Build an LBO Model: The Build Order That Survives a Modelling Test · Building an LBO under time pressure: sources and uses, the operating build, the debt schedule and cash sweep, returns waterfall and value creation bridge.
- The Private Equity Modelling Test: What to Expect and How to Prepare · What PE modelling tests look like: the one to three hour LBO formats, what graders check first, standard assumptions, and a two-week preparation plan.
- Paper LBO Example: A Full Walkthrough, Step by Step · A paper LBO worked step by step: entry, debt paydown, exit, MOIC and IRR, with the mental-maths shortcuts interviewers expect you to use.
- LBO Interview Questions: The Conceptual Ones Behind the Maths · The conceptual LBO questions PE interviews test: what makes a good candidate company, where returns come from, leverage limits, and the follow-up traps.
- Credit and Covenant Modelling: What a Lender Actually Tests · Modelling from the lender side: sizing debt against leverage and coverage tests, building the covenant schedule, and the downside case that sets headroom.
- How to Build a Merger Model: Purchase Accounting, Financing and Accretion · Building a merger model end to end: consideration mix, sources and uses, purchase accounting and goodwill, and the accretion/dilution output.
- M&A Interview Questions: Accretion/Dilution and Beyond · The M&A questions asked in investment banking interviews: accretion/dilution rules, cash against stock, synergies, purchase accounting and the traps.
- Enterprise Value vs. Equity Value, Once and For All · Enterprise value against equity value: the bridge between them, which multiples pair with which, and the interview follow-ups that catch most candidates.
- Top Investment Banking Technical Questions (With Answer Frameworks) · The investment banking technical questions that actually get asked: accounting flow-throughs, valuation, DCF and accretion/dilution, with the common traps.
- Cap Tables, Dilution and the Option Pool · How a startup cap table is built and redrawn: founding, a post-money SAFE, a priced seed round, the option pool shuffle, and what each holder owns afterwards.
- Liquidation Preferences and Preferred Stock, Explained · What a liquidation preference is, how non-participating, participating and capped preferred pay out at each exit, and what seniority does when rounds stack.
- SAFEs, Convertible Notes and Their Equivalents · How money arrives before a startup has a price: the SAFE, the convertible note and the UK advance subscription agreement, and what each converts into.
- How to Build a Three-Statement Model That Actually Balances · The build order for a three-statement model: revenue drivers, working capital, fixed assets, the debt schedule, and making the balance sheet balance.
- Scenario and Sensitivity Architecture: Building a Model That Can Be Stress-Tested · How to build scenario switching into a model properly: the INDEX and CHOOSE toggle, a scenario input block, and why base case minus ten percent says nothing.
- "Walk Me Through the Three Statements" — And Every Follow-Up · How to answer walk me through the three financial statements, and the classic 10 dollars of depreciation follow-up, with the linkage logic being tested.
- How to Build a DCF Model: Build Order, Terminal Value and the Sanity Checks · Building a DCF end to end: unlevered free cash flow, WACC, both terminal value methods cross-checked, the equity bridge, and the sensitivity table.
The vocabulary
Paper LBOMoICIRRPIK InterestCase Study (PE Interview)LBO (Leveraged Buyout)Entry MultipleExit MultipleLeverage Ratio (Debt/EBITDA)SponsorDry PowderAdd-On AcquisitionRecapitalisation (Recap)Vintage YearCarried Interest (Carry)Preferred Return (Hurdle Rate)LP / GPLetter of Intent (LOI)ExclusivityDue DiligenceQuality of Earnings (QoE)SPA (Sale & Purchase Agreement)Signing vs. ClosingEarnoutWorking Capital AdjustmentMAC / MAE ClauseBreak FeeSources and Uses
Questions
What is the difference between an LBO model and a merger model?
They are judged by different owners. An LBO is judged by a financial sponsor on its equity return, so the model ends in an IRR and a multiple of money, and debt does most of the funding. A merger is judged by the buyer’s existing shareholders, so the model ends in earnings per share against the standalone case, and whether the deal is paid in cash or shares decides most of the answer.
Why does purchase price allocation sit with these models?
Because every acquisition ends in one. Once a buyer pays, the target’s assets and liabilities are restated at fair value, new intangible assets are recognised, deferred taxes follow, and goodwill takes up what is left of the price. The amortisation of those intangibles is what the merger model’s accretion test is often most sensitive to.
Which of these do interviews test?
Private equity interviews test the LBO: a paper LBO by hand and a modelling test at a desk. Banking interviews test accretion and dilution and the mechanics of a purchase price allocation. Venture interviews test liquidation preferences and the waterfall. The labs drill each one, and every model page lists the mistakes a reviewer looks for.