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Paper LBO Model

A rapid back-of-the-envelope leveraged buyout calculator to determine base returns on a 5-year hold.

JavaScript Required: This interactive calculator requires JavaScript to function. Below is the static mathematical framework.

Entry Assumptions

Entry EBITDA ($M)

Entry Multiple (x)

Leverage (Debt/EBITDA x)

Exit Assumptions (Year 5)

Exit EBITDA ($M)

Exit Multiple (x)

Cumulative Debt Paydown ($M)

Entry Enterprise Value

Equity Needed:

Exit Enterprise Value

Debt Remaining:

Sponsor MOIC

5-Yr Sponsor IRR

The Math

The Core Logic: An LBO attempts to use as much debt (leverage) as the cash flows can support to buy a business, minimizing the initial equity check. Over the hold period (usually 5 years), the company's cash flow pays down that debt, transferring value from debt holders to equity holders.

Initial Equity Check:
Entry EV - Initial Debt

Exit Equity Value:
Exit EV - (Initial Debt - Cumulative Paydown)

Toggle the "Exit Multiple" to see how reliant the return is on multiple expansion vs operational improvement.