LBO Calculator
A quick paper LBO: buy a company at a multiple of EBITDA, fund part of it with debt, grow EBITDA, pay down some debt, and sell at an exit multiple. The sponsor's return is the equity it gets back over the equity it put in.
Inputs
Results
- Purchase price
- $500,000,000
- Debt raised
- $250,000,000
- Sponsor equity
- $265,000,000
- Exit enterprise value
- $669,112,789
- Exit equity
- $519,112,789
- MOIC
- 1.96x
- IRR
- 14.39%
How it's calculated
| Result | Formula |
|---|---|
| Purchase price | =EBITDA × entry multiple |
| Debt raised | =EBITDA × debt multiple |
| Sponsor equity | =Price + fees − debt |
| Exit enterprise value | =EBITDA × (1 + growth)^years × exit multiple |
| Exit equity | =Exit EV − debt × (1 − paydown) |
| MOIC | =Exit equity / sponsor equity |
| IRR | =MOIC^(1 / years) − 1 |
Returns in an LBO come from three places: EBITDA growth, paying down debt with the company's cash, and selling at a higher multiple than you paid. Set the exit multiple equal to the entry multiple to see the return without multiple expansion.
More debt means less equity in, so the same exit produces a bigger multiple, until the interest and the risk catch up. A real LBO models the debt year by year; this one assumes a share of it is repaid by exit.
Build it yourself
Run the full buyout with a debt schedule and cash sweep in the free Academy course, graded line by line.
Try the Paper LBO courseQuestions
What is a paper LBO?
A quick LBO done by hand in an interview: purchase price, debt, equity, EBITDA at exit, exit value and the resulting MOIC and IRR, using simple assumptions instead of a full model.
How do you estimate IRR from a MOIC?
IRR ≈ MOIC^(1/years) − 1 when all the money goes in at the start and comes out at the end. A 2.0x over 5 years is about 15%; a 2.5x is about 20%.
What drives LBO returns?
EBITDA growth, debt paydown, and multiple expansion. Interviewers often ask you to split a return into those three pieces.
What are sources and uses?
Uses are what the money pays for (the purchase price and fees); sources are where it comes from (debt and sponsor equity). The two always balance.