LBO – Basic LBO Model
Articles
What Is a Leveraged Buyout (LBO)? Why Leverage Increases Returns
What is an LBO and why does leverage boost private equity returns? See the mechanics, the three value creation levers, and a worked example. Jetzt üben.
How to Answer 'Walk Me Through an LBO' in a PE Interview
A step-by-step framework for the 'walk me through an LBO' interview question, plus a sample script, paper LBO tips, and common mistakes. Jetzt üben.
What Is a Sources and Uses Table? The Foundation of Every LBO Model
What is a Sources and Uses table in an LBO, and why must debt and equity always balance? Learn the mechanics and practice with a worked case. Jetzt üben!
How to Build a Sources and Uses Table in an LBO Interview (Step-by-Step)
How do you build a Sources and Uses table in an LBO interview? Follow this step-by-step walkthrough with formulas and a full worked example. Jetzt üben!
MoM vs. IRR: The Two Return Metrics Every Private Equity Investor Tracks
What is the difference between MoM and IRR in private equity returns? Learn how each metric works, why funds report both, and practice with a real case.
How to Calculate MoM and IRR in a Private Equity Interview (Step-by-Step)
Learn how to calculate MoM and IRR for a leveraged buyout investment step by step, including the mental-math rule of thumb every PE interviewer expects.
What Is Multiple Expansion in Private Equity? The Third LBO Value Creation Lever
What is multiple expansion in a leveraged buyout, and why is it the riskiest PE value creation lever? See the full numbers, then practice it yourself.
How to Answer an Entry and Exit Multiple Question in a Private Equity Interview
How do you answer an entry and exit multiple LBO interview question? A full step-by-step walkthrough with real numbers. Practice the answer yourself now.
LBO Debt Structures Explained: Senior, Mezzanine, and PIK Notes
What are senior, mezzanine, and PIK notes in an LBO? Learn how debt tranches rank, price, and repay in a buyout capital structure. Practice the case now.
How to Answer an LBO Debt Structure Interview Question (Step-by-Step)
How do you answer an LBO debt structure question in an interview? Follow this 5-step framework for ranking, pricing, and the cash flow sweep. Practice now.
What Is a Paper LBO? A Conceptual Guide to the PE Interview Classic
What is a paper LBO and why do PE interviews test it? Learn the mechanics, value creation levers, and mental math shortcuts to answer it fast. Jetzt üben.
How to Answer a Paper LBO Question in an Interview: Step-by-Step
A step-by-step framework for answering a paper LBO interview question, with a full worked example, mental math shortcuts, and common mistakes. Jetzt üben.
What Is an Investment Thesis in Private Equity? Market, Operational, and Financial Thesis Explained
What is a private equity investment thesis, and how do the market, operational, and financial thesis fit together? See the one-page structure. Jetzt üben.
How to Write a One-Page Investment Thesis for a PE Case Study Interview
Learn how to structure a one-page investment thesis for a PE case study interview: market, operational, and financial thesis, step by step. Jetzt üben.
High Yield vs. Investment Grade Bonds: Ratings, Covenants, Investor Base and Spreads Explained
What separates high yield from investment grade bonds? Ratings, covenants, investor base and the spread gap explained with a worked BBB vs. B+ example.
How to Answer a High Yield vs. Investment Grade Interview Question: Leverage, Spreads and Coverage Step by Step
Compare a BBB and a B+ issuer step by step: net leverage, credit spread in basis points, interest coverage and the annual cash cost of the rating gap.
Cases
What Makes a Good LBO Target?
You're in a private equity interview and the partner asks: "What makes a good LBO target?" Walk me through the key characteristics you'd screen for, and explain why each one matters specifically for a leveraged buyout — as opposed to any other kind of investment.
LBO Screening in Practice: Is MILES Car-Sharing a Good Investment?
In a real interview, you're asked: "Would MILES — the German kilometer-based car-sharing service — be a good investment?" Walk me through your assessment, purely qualitatively, without needing any specific financial figures.
What Is an LBO and Why Does Leverage Increase Returns?
Walk me through what a leveraged buyout (LBO) is, and explain why using leverage — debt — increases returns to the equity investor. Use a simple $100 million example to illustrate the mechanic.
Sources and Uses Table
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?
MoM and IRR Calculation
As a private equity associate, walk me through how to calculate the Multiple of Money (MoM) and the IRR for a leveraged buyout investment. What's the quick mental-math rule of thumb linking the two, and what returns do investors typically target?
Entry and Exit Multiple
As a private equity associate, walk me through how the entry multiple and exit multiple affect an LBO's returns — what is "multiple expansion," and why is it considered one of the three core value creation levers alongside EBITDA growth and debt paydown?
Debt Structures in an LBO
As a private equity analyst, walk me through the different layers of debt in an LBO capital structure — senior secured, mezzanine, and PIK notes — and explain who gets paid first and why that priority matters for both the lenders and the sponsor's equity returns.
Paper LBO
Let's do a paper LBO. A private equity firm is buying a company for 8.0x EBITDA of $50 million, financed with 60% debt and 40% equity. EBITDA grows 5% per year, and the firm exits after 5 years at the same 8.0x multiple, having repaid half of the entry debt from free cash flow. Walk me through this out loud — no spreadsheet, no calculator — and tell me the approximate IRR.
High Yield vs. Investment Grade
As a leveraged finance analyst, you are tasked with comparing an investment grade issuer and a high yield issuer from the same sector, and showing how the gap in their credit ratings translates into a measurable difference in what each company pays to borrow.