LBO Modeling
Buy with debt, pay it down, and measure the sponsor's return - the private-equity core skill
5
modules
10
lessons
~1h
to complete
Learn how a leveraged buyout actually makes money: sources and uses, the debt schedule, exit returns, and the three levers of value creation. Then build the returns in the simulator.
Your progress
10 lessons
12
What an LBO Is
Buying a company with borrowed money - and why leverage turns a modest gain into a big one.
- ✓7m1.1Buying with Borrowed MoneyA leveraged buyout funds an acquisition mostly with debt and a smaller slice of equity. The target's own cash flows repay the debt.
- ✓5m1.2The Players and the LogicA sponsor, lenders, and management each play a role. The deal works when stable cash flows can carry the debt.
- ?Module checkpointquiz →
22
Sources & Uses
Where the money comes from, where it goes, and why the sponsor's equity is the plug.
32
The Debt Schedule
How free cash flow pays down debt over the hold - and why that paydown quietly builds equity.
- ✓7m3.1Paying Down DebtCash the business throws off after interest and reinvestment sweeps against the debt, lowering the balance each year.
- ✓5m3.2Why Deleveraging Builds EquityEven if enterprise value never moves, paying down debt transfers value from lenders to equity holders.
- ?Module checkpointquiz →
42
Exit & Returns
Value the business at exit, bridge to equity, and judge the deal on MOIC and IRR.
52
Value Creation
Where the returns actually come from: EBITDA growth, multiple expansion, and debt paydown.
- ✓7m5.1The Three LeversEvery dollar of LBO equity return traces to one of three sources - growing EBITDA, exiting at a higher multiple, or paying down debt.
- ✓6m5.2Which Lever Matters MostMultiple expansion is the most powerful but least controllable; EBITDA growth is durable; debt paydown is reliable but smaller.
- ?Module checkpointquiz →