Calculator
LBO calculator: the leveraged buyout from entry to exit
Enter the target's EBITDA, the entry multiple and the debt the cash flow might carry, and the calculator builds the sources and uses, projects the hold year by year with senior amortisation, cash sweep and mezzanine PIK, then values the equity at exit and reports the money multiple and IRR.
| Year | EBITDA | Free cash flow | Senior interest | Senior repaid | Mezz cash | Mezz PIK | Senior closing | Mezz closing | Leverage | DSCR |
|---|---|---|---|---|---|---|---|---|---|---|
| 1 | £2,100,000 | £1,646,250 | £425,000 | £887,768 | £160,000 | £120,000 | £4,112,232 | £2,120,000 | 3.0x | 1.27x |
| 2 | £2,205,000 | £1,705,085 | £349,540 | £950,115 | £169,600 | £127,200 | £3,162,117 | £2,247,200 | 2.5x | 1.38x |
| 3 | £2,315,250 | £1,766,522 | £268,780 | £1,016,126 | £179,776 | £134,832 | £2,145,991 | £2,382,032 | 2.0x | 1.52x |
| 4 | £2,431,013 | £1,830,682 | £182,409 | £1,085,998 | £190,563 | £142,922 | £1,059,993 | £2,524,954 | 1.5x | 1.68x |
| 5 | £2,552,563 | £1,897,692 | £90,099 | £1,059,993 | £201,996 | £151,497 | £0 | £2,676,451 | 1.0x | 1.89x |
Free cash flow is EBITDA less 25% tax on profit after interest and 5% maintenance capex. Senior debt amortises on a straight line with a 50% excess cash sweep; mezzanine PIK accrues to the balance and is repaid at exit. IRR is the annualised money multiple over the hold. Illustrative only.
Leverage, pricing and amortisation vary by lender and sector. We will run the structure across banks and debt funds for your target.
How to read the result
Watch three things. The equity required tells you how much the sponsor or management team has to find after the debt: on a healthy structure it is 40 to 50 percent of total uses. The year-one debt service cover ratio tells you whether the debt is sized to the business: below 1.25x, a lender will cut the senior multiple or lengthen the amortisation. And the leverage column shows deleveraging over the hold: a deal that starts at 4.0x and exits at 1.5x has done the work that produces the return. If the IRR only appears with an exit multiple higher than the entry multiple, the return depends on the market, not the plan.
What the calculator does not know
It cannot see the quality of the EBITDA, working capital swings, customer concentration, or the sector cycle, all of which move a real lender's leverage and price. Indicative pricing bands as of September 2026 sit at 7% to 10% all-in for bank senior debt, 10% to 13% all-in for unitranche and 12% to 18% including PIK for mezzanine. For how each layer works read the leveraged buyout structure guide, and test the constraint that binds most deals in the leverage ratio calculator.
LBO model questions, answered
What is an LBO model?+
A projection of a leveraged buyout from entry to exit: the price and how it is funded, the cash flows over the hold, how the debt is repaid, and the equity value at exit compared with the equity invested. Its outputs are the money multiple and the internal rate of return. This calculator is a simplified LBO model with the mechanics that matter for a UK mid-market deal.
Where do LBO returns come from?+
Three sources. Debt paydown: every pound of senior debt repaid from cash flow is a pound of enterprise value transferred to equity. EBITDA growth: a larger business is worth more at the same multiple. Multiple expansion: selling at a higher multiple than you paid. Disciplined buyers underwrite the first two and treat the third as upside.
How much debt does a leveraged buyout use?+
In the UK mid-market, senior debt of 2.5x to 3.5x EBITDA from banks, or 4.0x to 5.5x in a single unitranche from a debt fund, sometimes with a mezzanine layer of 1.0x to 1.5x on top. Equity typically funds 40 to 50 percent of enterprise value on sponsor deals and more on smaller sponsor-less buyouts. Indicative as of September 2026.
What is a cash sweep?+
A covenant requiring a share of excess cash flow, often 50 percent, to be applied to prepaying senior debt on top of the scheduled repayments. It accelerates deleveraging in good years and is standard in leveraged facility agreements. The calculator applies a 50 percent sweep to surplus cash after scheduled service.
Why does PIK interest matter at exit?+
Payment-in-kind interest is not paid in cash; it accrues to the mezzanine balance and is repaid at exit, so the mezzanine debt grows every year. It protects cash flow during the hold but takes a larger slice of the exit proceeds, which is why the calculator shows the mezzanine closing balance alongside the senior debt.