LBO Model: Build a Leveraged Buyout Model in Minutes

Learn how to build a professional LBO (Leveraged Buyout) model in Excel and Google Sheets. Step-by-step guide with templates, formulas, and AI automation to speed up the process.

What is an LBO Model?

A Leveraged Buyout (LBO) model is a financial model used to evaluate the acquisition of a company using a significant amount of borrowed money (debt) to meet the cost of acquisition. The model projects the company's financial performance, debt repayment schedule, and returns to equity investors.

Key Components

  • Sources & Uses: How the deal is financed and where the money goes
  • Operating Model: Revenue, expenses, and cash flow projections
  • Debt Schedule: Interest calculations and debt repayment
  • Returns Analysis: IRR, MOIC, and equity returns

Why Use SheetXAI?

  • Generate complex formulas automatically with natural language
  • Build debt schedules and interest calculations in seconds
  • Automate data linking between multiple sheets
  • Create sensitivity analysis tables automatically

How to Build an LBO Model: Step-by-Step Guide

Follow these steps to build a professional LBO model in Excel or Google Sheets.

1

Set Up Sources & Uses

Create a sources and uses table showing how the acquisition is financed (equity, debt) and where the money is used (purchase price, fees, working capital).

Key Formulas Needed:

  • SUM formulas for totals
  • Percentage calculations
  • Basic arithmetic

💡 SheetXAI Tip:

Use SheetXAI to generate these formulas automatically. Just describe what you need: "Calculate interest expense for senior debt" or "Link operating cash flow to debt repayment."

2

Build Operating Model

Project the company's revenue, expenses, EBITDA, and cash flow. Include assumptions for growth rates, margins, and working capital changes.

Key Formulas Needed:

  • Growth rate formulas
  • Margin calculations
  • Working capital formulas
  • Depreciation schedules

💡 SheetXAI Tip:

Use SheetXAI to generate these formulas automatically. Just describe what you need: "Calculate interest expense for senior debt" or "Link operating cash flow to debt repayment."

3

Create Debt Schedule

Model the debt structure including senior debt, mezzanine debt, and payment schedules. Calculate interest expense and principal repayments.

Key Formulas Needed:

  • Interest calculations (IPMT, PPMT)
  • Cumulative debt formulas
  • Debt capacity ratios

💡 SheetXAI Tip:

Use SheetXAI to generate these formulas automatically. Just describe what you need: "Calculate interest expense for senior debt" or "Link operating cash flow to debt repayment."

4

Link Cash Flow to Debt

Connect the operating cash flow to the debt schedule, showing how available cash is used to pay down debt.

Key Formulas Needed:

  • MIN/MAX functions
  • IF statements
  • Circular reference handling

💡 SheetXAI Tip:

Use SheetXAI to generate these formulas automatically. Just describe what you need: "Calculate interest expense for senior debt" or "Link operating cash flow to debt repayment."

5

Calculate Returns

Calculate key return metrics including IRR (Internal Rate of Return), MOIC (Multiple on Invested Capital), and equity returns.

Key Formulas Needed:

  • IRR function
  • NPV calculations
  • MOIC formulas
  • Equity value calculations

💡 SheetXAI Tip:

Use SheetXAI to generate these formulas automatically. Just describe what you need: "Calculate interest expense for senior debt" or "Link operating cash flow to debt repayment."

6

Build Sensitivity Analysis

Create data tables showing how returns change with different assumptions (purchase price, growth rates, exit multiples).

Key Formulas Needed:

  • Data tables
  • Scenario analysis
  • Goal seek functionality

💡 SheetXAI Tip:

Use SheetXAI to generate these formulas automatically. Just describe what you need: "Calculate interest expense for senior debt" or "Link operating cash flow to debt repayment."

Common LBO Model Mistakes to Avoid

Learn from common errors to build more accurate and reliable LBO models.

Circular References

Creating circular references between cash flow and debt schedules. Use iterative calculation or break the circularity with proper logic.

Solution: SheetXAI can help identify and fix circular references automatically.

Incorrect Debt Repayment Logic

Not properly modeling how cash flow is used to pay down debt. Ensure you're using MIN/MAX functions correctly.

Solution: SheetXAI can generate the correct debt repayment formulas with natural language.

Missing Working Capital

Forgetting to account for changes in working capital, which affects cash flow and debt capacity.

Solution: SheetXAI can help build comprehensive working capital schedules.

Incorrect IRR Calculation

Using wrong cash flow periods or including/excluding the wrong cash flows in IRR calculations.

Solution: SheetXAI can generate accurate IRR formulas with proper cash flow references.

Automate LBO Model Creation with SheetXAI

SheetXAI can automate many of the complex tasks involved in building an LBO model, saving you hours of work.

Generate Formulas

Create complex formulas for debt schedules, interest calculations, and returns analysis using natural language.

Link Data Automatically

Automatically link data between multiple sheets, ensuring consistency across your model.

Build Sensitivity Tables

Create data tables and scenario analysis automatically with AI-powered formula generation.

FAQ's

Everything you need to
know about SheetXAI

When you use our credits, you're accessing AI models through our API keys. Credits are consumed based on this simple formula:

Base cost × Model cost = Total credits used

Different operations have different base costs:

  • - Chatbot operations have a base cost of 5 credits per operation the agent performs
  • - Cell-by-cell operations (SAI commands) have a base cost of 1 credit
  • - Deep analysis operations (typically when you need an analysis report on something) have a base cost of 2 credits + 0.1 credits per row analyzed (with bulk discounts after 1000 rows)

The model cost varies depending on which AI model you choose. Lighter models like GPT-4o mini are cheaper (this one is exactly 2 credits), while more powerful models like Claude Sonnet cost more.

Examples:

  • - Chatbot operation with GPT-4o mini: 5 × 2 = 10 credits per operation
  • - SAI command with GPT-4o mini: 1 × 2 = 2 credits per row
  • - Deep analysis of 100 rows with GPT-4o mini: (2 + 10) × 2 = 24 credits
  • - Chatbot operation with Claude Sonnet: 5 × 5 = 25 credits per operation

Important notes about credits:

  • - Operations like creating pivot tables or marking many rows count as ONE operation, not per row
  • - If you have a sheet with 1 million rows and ask the AI to delete all rows that are blank, that still counts as 1 operation
  • - Deep analysis operations get bulk discounts for large datasets (over 1000 rows)

Boost your productivity today.
Start automating your spreadsheets.

Join thousands of professionals saving hours every week. No credit card required to start.

Learn more