An LBO model is built to evaluate a leveraged buyout transaction, which is a business acquisition funded with a significant amount of debt. The assets of the target company and the acquirer are used as collateral for the loans. Companies get involved in an LBO deal when they wish to invest the minimal amount of equity and use debt financing for the rest of the purchase price, for the cost of debt is typically lower than the cost of equity. This basic leveraged buyout (LBO) model template is great tool for the acquirer in a leveraged buyout transaction deal to determine the capital stack (use of equity and various types of debt) of the target company, its leverage ratios, and the equity funding gap. This model contains the following sections:
  • Assumptions - current performance, forecast finance performance, transaction valuation, exit analysis
  • Capital Structure - target debt ratios, financial structure (senior debt, mezzanine debt, vendor note, equity funding gap)
  • Valuation - valuation analysis, equity investment details
  • Senior Debt - debt balance, exit terms
  • Mezzanine Debt - debt balance, exit terms
  • Vendor Loan Note - debt balance, exit terms
  • Interest and Coverage Ratios - Cash EBIT interest coverage ratio, cash EBITDA interest coverage ratio, (EBITDA - capex)/total interest, and other coverage ratios
  Leveraged Buyout Model Template   Thank you for downloading this basic LBO model template, we hope you find the tool useful!
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