Wall Street Prep

Quick Lesson: Simple LBO Model

In this video tutorial, we’ll build a leveraged buyout (LBO) model, given some operating and valuation assumptions, in Excel. The goal of this video is to show you that an LBO model is actually a very simple transaction at its core – and quite similar to the mechanics involved when purchasing a home. If after watching this video you want to take your LBO modeling to the next level, see Wall Street Prep’s advanced LBO modeling course.

Note: To download the Excel template that goes with this video, click here

Building a Simple LBO Model  – Video 1 of 3

Building a Simple LBO Model  – Video 2 of 3

Building a Simple LBO Model  – Video 3 of 3

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  1. February 4, 2017



    Why do we not take into account the opening debt (cell 42) in the debt schedule? We do appear to take into account the opening cash, so it seems inconsistent that we don’t take into account opening debt?

    Thank you for a great tutorial!

    • February 6, 2017
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      Haseeb Chowdhry

      Joe – the LBO entails that you raise all new debt facilities to replace the old debt – you have a new, highly leveraged capital structure – hope this helps!

  2. April 20, 2016


    B:16 Free cash flows after debt paydown

    net operating cash flow minus net capital expenditures minus minus debt payment plus raise debt?

  3. April 20, 2016



    B:9 Current Debt, what kind of Debt we should put here? The whole company liability (assets minus capital) or only debt from banks, bonds etc interest debt?

    If we are going to buyout a company, the price is 6 times EBITDA – 10M. 20% will be funded by our own source – $2M, and $ 8M from the bank. How I should made this adjustments?

    Thanks for a really great and usefull model!

    • April 25, 2016
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      Shannan Wilson

      Hi Sadin,
      1) Debt is normally considered to be liabilities that are interest bearing, contractual liabilities (so yes, debt from banks, bonds, etc.).
      2) This is a simple LBO model, our more advanced model to allow for such tweaks can be found in our Advanced LBO Modeling Course (https://www.wallstreetprep.com/self-study-programs/adv-lbo-modeling/).

      • April 25, 2016
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        Shannan Wilson

        Hi Sachin,
        This would typically be defined as CFO + CFI – required debt principal payments – preferred cash dividends.
        I hope this helps!

  4. May 30, 2015

    Dennis Limbo


    Does this LBO works for everyone?

    • June 1, 2015
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      Haseeb Chowdhry


      As with any LBO – you will have to make company-by-company adjustments, but overall it is a solid start.

  5. March 26, 2015


    When I calculate the exit multiple of 6.5x times the EBITDA in 2016 of 3,513.8, I get 22,840, not 22,696 as you show in this video. What did I do incorrectly?

    • March 26, 2015
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      Haseeb Chowdhry


      Check if you calculated your revenues / EBITDA correctly – ensure they match up to the completed tab. Let me know if you’ve resolved this – thanks.


  6. January 4, 2015


    After Video 2, where do we see the deduction in cash/FCF after the REQUIRED debt pay down? I say this for the formula in cash (row 41) – why isn’t cash deducted another 1,000? Where is the 1,000 required pay down coming from? Thanks!

    • January 13, 2015
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      Haseeb Chowdhry

      The 1,000 deducted per year is our assumption as stated in the beginning part of video 2. The formula in row 41 depends on the formula in row 50 which calculates the options repayment in the year AFTER the 1000 has been paid mandatorily. The deduction in cash/FCF after the required debt paydown is implicit – it’s captured in the line item in line 38 – free cash flow available after required debt paydown of 1,000 – which again is our assumption.


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