Level 5: Analysis · Exercise 57 of 60 · Pro

Leveraged buyout sources and uses

A financial modeling exercise from Modeldrill. Solve it with a live spreadsheet grid in your browser, with Fill right and Fill down, and it is checked the moment you submit.

The task

Set up the funding of a buyout. Uses: the purchase enterprise value (B10: EBITDA times the entry multiple), the equity purchase price (B11: enterprise value less the net debt being refinanced), the refinanced net debt (B12), transaction fees (B13: the percentage in B6 of enterprise value), cash funded to the balance sheet (B14) and total uses (B15). Sources: new debt (B17: EBITDA times the leverage multiple in B4), sponsor equity as the balancing amount (B18), total sources (B19) and the equity share of the funding (B20).

What this exercise teaches

The sponsor pays for the equity, refinances the old debt, covers fees and leaves cash in the company, all funded by new debt plus its own check. Taking enterprise value less debt as the equity check ignores fees and cash funding and understates the equity needed.

A hint if you get stuck

Sources must equal uses, so equity is whatever the debt does not cover: total uses less new debt. Fees and cash to the balance sheet are real uses even though they do not buy any part of the business.

Functions used: SUM