Create leveraged buyout (LBO) models in Excel with sources & uses, debt schedules, cash flow waterfalls, and IRR calculations for private equity analysis Activates when you request "excel lbo modeler" functionality.
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assets/README.mdreferences/README.mdscripts/README.mddescription: Create leveraged buyout (LBO) models in Excel with sources & uses, debt schedules, cash flow waterfalls, and IRR calculations for private equity analysis Activates when you request "excel lbo modeler" functionality. allowed-tools:
Builds comprehensive LBO models for private equity transactions following industry-standard practices.
Automatically load this Skill when the user asks to:
This Skill creates a complete 6-sheet Excel LBO model:
Uses of Funds:
Purchase Equity Value
+ Estimated Net Debt
= Enterprise Value
+ Transaction Fees (2-3%)
+ Financing Fees (2-3%)
= Total Uses
Sources of Funds:
Revolver (typically 0% at close)
+ Term Loan A (2-3x EBITDA)
+ Term Loan B (2-3x EBITDA)
+ Subordinated Debt (1-2x EBITDA)
+ Preferred Equity (optional)
+ Sponsor Equity (remainder)
= Total Sources
Revenue
× Revenue Growth %
× EBITDA Margin %
= EBITDA
- CapEx
- Change in NWC
- Cash Taxes
= Cash Flow Available for Debt Service
For Each Debt Tranche:
Beginning Balance
+ Draws (if revolver)
- Mandatory Amortization
- Excess Cash Flow Sweep
- Optional Prepayment
= Ending Balance
Interest Expense = Avg Balance × Interest Rate
Debt Paydown Waterfall:
Exit Valuation:
Exit Year EBITDA
× Exit Multiple
= Exit Enterprise Value
- Net Debt at Exit
= Exit Equity Value
Returns Calculation:
Exit Equity Value
÷ Initial Equity Investment
= Money-on-Money Multiple (MoM)
IRR = ((Exit Value / Entry Value)^(1/Years)) - 1
Sensitivity Tables:
Leverage Covenants:
Total Debt / EBITDA (typically ≤ 6.0x at entry, step down over time)
Senior Debt / EBITDA (typically ≤ 4.0x)
Coverage Covenants:
EBITDA / Interest Expense (typically ≥ 2.0x)
(EBITDA - CapEx) / Debt Service (typically ≥ 1.2x)
Required Inputs:
Optional Inputs (use defaults):
Typical LBO Debt Structure:
Interest Rates (as of 2025):
Project 5 years of operations:
Year 0 Revenue
× (1 + Growth Rate) for each year
= Projected Revenue
Projected Revenue
× EBITDA Margin
= Projected EBITDA
EBITDA
- CapEx (Revenue × CapEx %)
- Δ NWC (Change in Revenue × NWC %)
- Cash Taxes (assume % of EBITDA)
= Cash Flow to Equity (before debt service)
For each year:
At exit (typically Year 5):
Exit EBITDA
× Exit Multiple
= Exit Enterprise Value
- Remaining Net Debt
+ Excess Cash
= Exit Equity Value
Money-on-Money = Exit Equity Value / Initial Equity
IRR = (MoM)^(1/Years) - 1
Build 3 sensitivity analyses:
// Enterprise Value
=EBITDA * Entry_Multiple
// Transaction Fees
=Enterprise_Value * 2.5%
// Term Loan A
=EBITDA * 2.0 // 2.0x EBITDA
// Sponsor Equity
=Total_Uses - Total_Debt
// Beginning Balance Year 1
=Sources_and_Uses!Term_Loan_A
// Interest Expense
=AVERAGE(Beginning_Balance, Ending_Balance) * Interest_Rate
// Mandatory Amortization
=Original_Balance / Amortization_Period
// Ending Balance
=Beginning_Balance - Mandatory_Amortization - Excess_Paydown
// Exit Enterprise Value
=Exit_EBITDA * Exit_Multiple
// Exit Equity Value
=Exit_Enterprise_Value - Exit_Net_Debt
// IRR
=IRR(Initial_Equity (negative), Year1_CF, Year2_CF, ..., Final_CF_with_Exit)
// Money-on-Money
=Exit_Equity_Value / Initial_Equity_Investment
User: "Build an LBO model for a $50M EBITDA software company"
Skill Response:
I'll create an LBO model for a software company with $50M EBITDA.
Let me gather a few inputs:
What entry multiple should we assume (EV/EBITDA)?
(Software companies typically trade at 10-15x EBITDA)
User: 12x
Great! What revenue growth should we assume for Years 1-5?
(Software companies often grow 15-25% annually)
User: 20%, 18%, 15%, 12%, 10%
What EBITDA margin should we assume?
(Current or target margin)
User: Start at 25%, expand to 30% by Year 5
Perfect! I'll use these assumptions:
📊 Transaction:
- Entry EBITDA: $50M
- Entry Multiple: 12.0x EV/EBITDA
- Enterprise Value: $600M
- Equity Check: ~$240M (40%)
💰 Financing Structure:
- Revolver: $50M (undrawn)
- Term Loan A: $100M @ 8.5%
- Term Loan B: $150M @ 9.5%
- Subordinated: $50M @ 13.0%
- Total Debt: $350M (7.0x EBITDA)
- Sponsor Equity: $265M
📈 Operating Assumptions:
- Revenue growth: 20% → 10% (tapering)
- EBITDA margin: 25% → 30% (expansion)
- CapEx: 3% of revenue
- NWC: 15% of revenue (working capital heavy)
Building LBO model...
✅ LBO Model Complete!
📊 Base Case Returns (5-year hold, 12x exit):
- Exit EBITDA: $97.8M
- Exit Enterprise Value: $1,174M
- Debt Paydown: $350M → $89M
- Exit Equity Value: $1,124M
- Money-on-Money: 4.2x
- IRR: 34.2%
🎯 Key Insights:
- Strong returns driven by EBITDA growth (95% increase)
- Significant deleveraging (7.0x → 0.9x)
- Margin expansion adds $24M in exit EBITDA
- Multiple arbitrage: None (flat entry/exit multiple)
📁 Model saved to: Software_LBO_Model.xlsx
⚠️ Sensitivity Check:
- At 10x exit: IRR = 26.8% (still attractive)
- At 14x exit: IRR = 41.1% (exceptional)
- Downside protected by strong cash generation
Would you like me to adjust any assumptions or run additional scenarios?
Response:
Let me build a reverse sensitivity to find the required exit conditions.
With current assumptions (12x entry, 5-year hold):
To achieve 25% IRR, you need:
1. 10.5x exit multiple (13% discount to entry), OR
2. 15% EBITDA CAGR (vs current 14%), OR
3. 4.2 year hold period (vs 5 years)
The deal has multiple paths to your hurdle rate.
Would you like me to add a scenario analysis showing these paths?
Response:
I'll add a dividend recapitalization to the model.
In Year 3, after debt paydown, we could refinance and distribute a dividend.
Assumptions:
- Refi to 5.0x EBITDA (from current 3.8x)
- Distribute ~$150M to equity sponsors
- Reset debt maturity clocks
This would:
- Boost IRR by ~300bps (partial liquidity in Year 3)
- Reduce final exit proceeds
- De-risk investment with early cash return
Should I add this to the model?
⚠️ Warning: Total debt of 8.5x EBITDA exceeds typical LBO leverage (5-7x).
This financing structure may:
- Not be achievable in current market
- Violate debt covenants
- Leave insufficient cash flow for operations
Recommended: Reduce debt to 6.0x EBITDA maximum.
Would you like me to adjust the capital structure?
⚠️ Issue: Model shows negative cash flow in Year 2.
Causes:
- Interest expense ($62M) + Debt amortization ($25M) > Cash Flow ($78M)
- Insufficient EBITDA growth to service debt
Solutions:
1. Reduce entry leverage (currently 7.0x)
2. Increase revenue growth assumptions
3. Extend amortization schedule
4. Add PIK interest option
Would you like me to adjust the model?
This Skill follows PE industry standards:
See the resources folder for:
lbo-template.xlsx: Pre-built LBO templateREFERENCE.md: Private equity modeling best practicesdebt-structures.txt: Common debt structures by industryThis Skill creates a standard LBO model suitable for:
For detailed IC memos or final investment decisions, add: