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 how to build the type of complex LBO model used in leveraged finance at bulge-bracket investment banks. If you can follow this model, you can easily handle more basic ones. Throughout this section, we will assume that you have exposure to most of the accounting concepts we model here, or have read the other relevant sections on this site.


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Good LBO models necessarily involve circular references arising from the calculation of interest expense. For example, interest expense figures into the calculation of net income, which figures into the calculation of cash flow available for debt repayment, which figures into the debt levels upon which interest expense is calculated, and so on. Although there are many different ways to approach an LBO model, we have sequenced our steps to group (to the maximum extent possible) related calculations and delay the introduction of the circular reference until the last possible moment. Even with this sequencing, it may seem like we are jumping around quite a bit to different parts of the model. This is necessary, as many of the sections in our model will be interconnected.

Also, we will build our LBO model on a single worksheet rather than spreading it out across multiple tabs. Consolidating the model in this manner makes the model more intuitive, easier to build, and easier to check. If you need to format data in the model in a specific way for presentation in a pitch book, for example, you should create separate output tabs that link to the model and are formatted according to your specific needs.

At each step, you can download the spreadsheet in Excel format. To do so, just click on the gear icon in the upper right corner of the spreadsheet. Of course, you can also download the finished product as well.

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