LBO Model

Introduction
In this tutorial, we will walk you through building an LBO model in Excel. Most other tutorials focus on building simple LBO models, but we will demonstrate...
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Basic Inputs
We begin our LBO model by creating the target's P&L as described in the section on M&A modeling. We won't bother to retrace those steps here. We...
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Operating Assumptions
We want our LBO model to have the flexibility to consider multiple operating scenarios (i.e. different levels of operating performance that are reflected...
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Synergies & EBITDA
Our next step is to begin re-creating the income statement on the LBO tab. Why would we do this? Since we're putting the entire LBO model on a single worksheet,...
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LTM Income Statement
Now, let's calculate the target's last-twelve-month ("LTM") income statement. To do so, we simply take the last fiscal year results, add the most recent...
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Stub Period
In many cases, there will be a period of time between the transaction closing date and the date of the next fiscal year-end. In our case, this is 2 months....
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Balance Sheet Set-Up
Now that we've begun to build our income statement let's switch gears and set up our balance sheet. For now, we are going to simply plug in historical...
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Fully-Diluted Shares Outstanding
Now, let's calculate the target's fully-diluted shares outstanding ("FDSO"), as we will need this figure to calculate enterprise value in the next step....
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Enterprise Value
Now that we have calculated the target's fully-diluted shares outstanding ("FDSO"), let's compute enterprise value at the assumed purchase premium. The...
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Financing Assumptions
It is now time to start thinking about capital structure. Therefore, let's make some financing assumptions near the top of our model. We will add current...
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Transaction Fees & Expenses
Let's make some assumptions about the fees the target will pay to complete the LBO transaction. Typically, there is an advisory fee measured as a percentage...
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Sources & Uses of Funds
In building our model, we want the flexibility to consider a number of possible financing scenarios. As you can see below, we have set up six such scenarios...
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