LEVERAGED BUYOUT MODEL
The acquisition of another company using a significant amount of borrowed money (bonds
or loans) to meet the cost of an acquisition is referred to as a Leveraged Buyout (LBO). A
Leveraged Buyout model is used to determine an implied valuation range for a given target
in a potential LBO sale based on achieving acceptable returns.
Instructions:
Enter the required input values on "Inputs" tab and the assumptions in the "Assumptions" tab
of this workbook. Once the required inputs have been made, the results of the analysis will
be displayed on the "LBO" tab. The model assumes an exit will be made at the end of 5th
year following the sale.
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INPUTS
Acquisition Price 940,000
% Debt 60
% Equity 40
Interest Rate 6
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ASSUMPTIONS
Year 1 Year 2 Year 3 Year 4 Year 5
Revenue 1,098,000 ####### ####### ####### #######
EBITDA 158,000 175,000 188,000 195,000 204,000
Outstanding Debt 564,000 455,840 324,190 171,642 2,940
Interest Expense 33,840 27,350 19,451 10,299 176
Capex 12,000 12,000 12,000 12,000 12,000
Increase in NWC 4,000 4,000 4,000 4,000 4,000
Cash Available for Amortization 108,160 131,650 152,549 168,701 187,824
Exit EBITDA Multiple 12x
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LBO OUTPUT
Cash at End of 5th Year 184,883
Cash from Sell-Off 2,448,000
Total Return 2,632,883
ROIC 120.05 Annual Average
Credit Statistics
Year 1 Year 2 Year 3 Year 4 Year 5
Debt / EBITDA 3.57 2.60 1.72 0.88 0.01
EBITDA / Interest 4.67 6.40 9.67 18.93 1156.33
% Paydown 19.18 42.52 69.57 99.48 100.00
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