Case 77 / 183 Entry
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Sources and Uses Table

LBO & Private Equity

The prompt

“Walk me through how you'd build a Sources and Uses table for a leveraged buyout. What goes on each side, and why must the two sides always balance?”

📋 What you're given

Walk me through how you'd build a Sources and Uses table for a leveraged buyout. What goes on each side, and why must the two sides always balance?

1. Task Overview

Task: lay out both sides of a Sources and Uses table for a leveraged buyout and demonstrate that Total Sources equals Total Uses using the figures below.

Step 1: Given Data — Deal Assumptions

The following terms have already been agreed for this leveraged buyout.

Line ItemValue
Purchase Enterprise Value$500m
Existing Net Debt to Refinance$50m
Transaction Fees (advisory, financing, legal)$15m
New Senior Secured Debt$250m
New Subordinated Debt$75m
Management Rollover Equity$20m

Step 2: Total Uses of Funds

Show Total Uses Formula

Total Uses = Purchase Enterprise Value + Refinancing of Existing Net Debt + Transaction Fees

Using this formula, compute Total Uses of Funds.

Step 3: Total Known Sources of Funds

Show Known Sources Formula

Known Sources = New Senior Secured Debt + New Subordinated Debt + Management Rollover Equity

Using this formula, compute the portion of Sources that is already determined, before solving for the sponsor's own equity check.

Step 4: Sponsor Equity (the Plug)

Show Sponsor Equity Formula

Sponsor Equity = Total Uses − Known Sources

Assume:

  • No additional debt tranches beyond the two listed above are raised
  • The sponsor's equity check is sized purely as the balancing plug, not chosen independently

Using these inputs, compute the sponsor equity investment required to make Total Sources equal Total Uses.

💡 Model answer

Try answering out loud first — then reveal the model answer and compare.

⚠️ Common mistakes

  • Treating Purchase Enterprise Value as the only line on the Uses side and forgetting to include refinancing of existing debt and transaction fees, which understates how much capital the deal actually requires.
  • Solving for Sponsor Equity directly instead of treating it as the plug that forces Total Sources to equal Total Uses.
  • Confusing Enterprise Value and Equity Value when sizing the Uses side of the schedule.
  • Forgetting that transaction fees are a genuine use of cash and must be funded alongside the purchase price, not treated as a rounding error.
  • Assuming Sources and Uses balance by coincidence rather than by construction — the sponsor equity line exists specifically to force the two sides to tie out.

🔁 Follow-up questions

➡️ Related cases

Case 75 What Is an LBO and Why Does Leverage Increase Returns? Case 76 What Makes a Good LBO Target?
← Previous Case 76: What Makes a Good LBO Target?

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