LBO – Advanced LBO Model
Articles
What Is Debt Capacity in an LBO? Leverage, Covenants & Cash Flow Explained
How much debt can a company really support in an LBO? Learn the leverage, coverage, and cash flow tests that set true debt capacity. Practice the case now.
How to Answer a Debt Capacity Interview Question: Step-by-Step
How do you answer a debt capacity interview question? Follow this step-by-step framework for leverage, coverage, and DSCR tests. Practice the case now.
What Is an LBO Debt Schedule? Interest, Amortization, and the Cash Sweep Explained
What is an LBO debt schedule, and how do interest, mandatory amortization, and the cash sweep pay down acquisition debt? See the mechanics. Jetzt üben.
How to Build an LBO Debt Schedule in a Private Equity Interview (Step-by-Step)
How do you build an LBO debt schedule in a private equity interview? A five-step walkthrough of interest, amortization, and the cash sweep. Jetzt üben.
What Is a Management Equity Ratchet? Sweet Equity, Hurdle Rates, and ESOPs in PE Explained
What is a management equity ratchet in an LBO? Learn how sweet equity, hurdle rates, and ESOPs align management pay with PE sponsor returns. Practice now.
How to Answer a Management Equity Ratchet Interview Question — Step-by-Step Walkthrough
How do you answer a management equity ratchet interview question? Follow this 5-step walkthrough with a worked example and common mistakes. Practice now.
What Is Net Revenue Retention (NRR) and Why It Drives SaaS Valuations
What is net revenue retention (NRR) and why does it drive SaaS valuation and LBO debt capacity? Learn the formula, benchmarks, and pitfalls. Jetzt üben.
How to Size Debt in a SaaS LBO: ARR-Based Lending Explained
How do you size debt for a SaaS LBO when EBITDA is thin? Learn ARR-based lending, the three debt capacity tests, and why exit multiples matter more. Jetzt üben.
Tech Buyout vs. Industrials Buyout: How the LBO Playbook Changes by Sector
Why do tech and industrials LBOs use completely different leverage, growth, and exit multiple assumptions? See how sector reshapes every lever. Practice now.
How to Answer a Tech Buyout vs. Industrials Buyout Case Study in a PE Interview
Asked to compare a tech buyout and an industrials buyout in a PE interview? Get the four-part framework, worked numbers, and follow-ups. Practice now.
What Is an Add-On Acquisition in Private Equity? Buy-and-Build Strategy Explained
Add-on acquisitions drive most PE buy-and-build strategies. Learn how multiple arbitrage, synergies, and leverage work together, and practice with a full case.
How to Answer Add-On Acquisition Questions in a PE Interview (Worked Example)
How do you answer an add-on acquisition question in a PE interview? A full worked example: pricing, synergies, leverage, and multiple arbitrage explained.
What Is a Dividend Recapitalization? How PE Sponsors Take Cash Off the Table Early
What is a dividend recapitalization in private equity, and why does it raise IRR but lower MoM? Learn the mechanics and the lender view. Jetzt üben.
How to Answer a Dividend Recapitalization Question in a PE Interview (Step-by-Step)
How do you answer a dividend recapitalization interview question? A five-step framework with full worked numbers and the IRR math. Jetzt üben.
What Is a Distressed LBO? Fulcrum Security, Recovery Analysis and Debt-for-Equity Swaps Explained
What is a distressed LBO, and how does a debt-for-equity swap decide who owns the company? Recovery analysis and the fulcrum security explained. Jetzt üben.
How to Answer a Distressed LBO and Recovery Analysis Question in a PE Interview
How do you answer a distressed LBO question in a PE interview? A five-step recovery analysis framework with full worked numbers and the fulcrum. Jetzt üben.
What Is Operational Improvement in Private Equity? Working Capital, Procurement, Headcount and Pricing
What is operational improvement in private equity? Learn the four value creation levers, why three lift EBITDA and one only lifts cash. Practise the case now.
How to Quantify an Operational Improvement Plan in a PE Interview: Step-by-Step
How do you quantify an operational improvement plan in a PE interview? Size all four levers, build the EBITDA bridge, reach an IRR. Practise the case now.
What Is a Secondary Buyout? Why One Private Equity Firm Sells to Another
What is a secondary buyout? Why PE firms sell to each other, why entry multiples expand, and what the second sponsor's thesis must be. Practice it now.
How to Answer a Secondary Buyout Question in a Private Equity Interview
How do you answer a secondary buyout question in a PE interview? A five-step framework with a worked example: entry cheque, returns, bridge. Practice it now.
What Is a Private Equity Waterfall? Carried Interest, Catch-Up, and Clawback Explained
Understand how PE distribution waterfalls split profit between LPs and GPs: preferred return, GP catch-up, carried interest, and clawback, European vs. American.
PE Waterfall Interview Questions: How to Calculate Carried Interest and Clawback
Step-by-step guide to answering carried interest and waterfall interview questions, with a full worked example covering GP catch-up, catch-up math, and a clawback calculation.
What Is a Club Deal in Private Equity? Co-Investment, Governance and GP/LP Alignment Explained
What is a club deal in private equity and how does co-investment work? Governance, risk sharing and GP/LP alignment explained with worked numbers. Practise now.
PE Co-Investment Interview Questions: How to Calculate Fee and Carry Drag on Fund vs. Co-Invest Capital
How do you calculate the fee and carry drag between fund and co-investment capital? Step-by-step waterfall maths from 2.61x gross to 2.21x net. Practise now.
Maintenance vs. Incurrence Covenants: The Difference Explained
What is the difference between maintenance and incurrence covenants? Learn why IG, HY and loan packages differ and how to answer it. Practise now.
How to Calculate Covenant Headroom, Debt Capacity and an Equity Cure
How do you calculate covenant headroom, incremental debt capacity and an equity cure? A full worked example with every number. Practise now.
Debt Restructuring Options Explained: Out-of-Court vs. In-Court, Creditor Hierarchy and Haircuts
How does a company fix a balance sheet it cannot service? Learn the creditor waterfall, fulcrum security and out-of-court vs. in-court routes. Jetzt üben.
How to Answer a Debt Restructuring Interview Question: Creditor Waterfall, Fulcrum and Haircut Step by Step
How do you find the fulcrum security and size a debt haircut in an interview? A six-step walkthrough with a full creditor waterfall. Jetzt üben.
Restructuring Interview Questions Explained: The Creditor Waterfall, Absolute Priority Rule and Fulcrum Security
What do Houlihan Lokey, PJT and Lazard ask in a restructuring interview? Learn the creditor waterfall, absolute priority rule and fulcrum security. Jetzt üben.
How to Solve a Restructuring Case Study in an Interview: Distributable Value, Recovery by Tranche and Post-Reorg Ownership Step by Step
How to run a recovery analysis in a restructuring case study: distributable value, waterfall by tranche, fulcrum and post-reorg equity split. Jetzt üben.
What Is a CLO? Collateralized Loan Obligations, Tranching and the Cash-Flow Waterfall Explained
What is a CLO? Tranching, the interest waterfall, OC tests and why CLOs fund two-thirds of LBO term loans, with a worked $500m example. Jetzt üben.
How to Answer a CLO Interview Question: Waterfall, OC Tests and Equity Returns Step by Step
How to answer a CLO interview question: collateral yield, tranche interest, the cash-flow waterfall, OC tests and a default stress on a $500m example. Jetzt üben.
Cases
Debt Capacity
As a leveraged finance analyst, walk me through how you would determine how much debt a company can actually support in an LBO — what are the different constraints (a leverage multiple ceiling, an interest coverage covenant, and a cash flow debt service test) that cap the debt level, and which one typically ends up binding?
Management Incentivization and ESOP
As a private equity associate, walk me through how a management equity ratchet works in an LBO — how does a hurdle rate determine whether management's "sweet equity" stake increases at exit, and what happens to management's payout and money multiple once that hurdle is cleared?
SaaS / Recurring Revenue LBO
As a private equity associate evaluating a growth-stage SaaS buyout, walk me through how ARR and net revenue retention (NRR) change the way you'd size the debt package and set exit multiple assumptions compared with a standard EBITDA-based LBO — then show me how the sponsor's return changes if NRR erodes from 115% to 100% over the hold.
Tech Buyout vs. Industrials Buyout
As a private equity associate evaluating two potential buyout targets — a mature industrial manufacturer and a high-growth software company — walk me through how the investment thesis, due diligence priorities, capital structure, and exit strategy would differ between the two deals, and show me how a similar entry enterprise value can produce a similar IRR through completely different value creation levers.
Add-On Acquisitions in an LBO
As a private equity associate working on a portfolio company's buy-and-build strategy, walk me through how you would evaluate and finance an add-on acquisition — including how the price you pay for the add-on compares with the multiple the platform itself commands, how you size expected cost synergies, and how the deal changes the platform's pro forma leverage — then show me how much value the multiple gap between the add-on and the platform creates on its own.
Dividend Recapitalization
As a private equity associate three years into a portfolio company hold, walk me through how a dividend recapitalization works — when it makes sense, how it changes the capital structure and leverage, how lenders react to it, and quantify how much it pulls forward the sponsor's IRR compared with simply holding the investment to exit.
Distressed LBO and Debt-for-Equity Swap
As a private equity associate on a portfolio company that has just breached its leverage covenant, walk me through a distressed LBO restructuring — how a pre-packaged restructuring works, how to run a recovery analysis across a broken capital structure, and quantify exactly who gets what once the fulcrum creditors exchange their debt for equity.
Operational Improvement: What Aurelius Does
As a private equity associate at a value-oriented turnaround investor such as Aurelius, you have just signed the carve-out of an underperforming industrial business, and the investment committee wants the operational improvement plan quantified. Walk me through how you would size the working capital release, the procurement savings, the headcount reduction and the pricing action, then translate that plan into an EBITDA bridge and an equity return.
Secondary Buyout
As an associate at a private equity fund, you are evaluating a secondary buyout: acquiring a portfolio company from another sponsor that has already owned it for five years. Quantify what the first sponsor earned, determine what you can realistically earn as the second sponsor, and explain why a second sponsor can rationally pay a higher entry multiple than the first.
Covenant Analysis: IG vs. HY
As a leveraged finance associate, you are asked to assess the covenant package of a German industrials issuer that funds itself with both a senior secured bank facility and senior unsecured high yield notes. Test the maintenance covenants, determine how much additional debt and how large a dividend the incurrence covenants permit, and quantify the equity cure the sponsor would have to inject if EBITDA came in below plan.
Debt Restructuring Options
As a restructuring analyst advising the senior lender group of a distressed European logistics company, you are tasked with running the creditor waterfall to identify the fulcrum security, sizing the haircut needed to restore a sustainable capital structure, and recommending whether the deal should be executed out of court or through a formal in-court process.
Houlihan-Style Restructuring Case
As an analyst on a restructuring advisory team, you are advising a distressed consumer products company with $950m of debt across five tranches and LTM EBITDA of $80m. Determine what the business is worth on a distressed basis, run that value through the capital structure to show what each creditor class recovers, identify the fulcrum security, and explain who owns the company after the reorganization.
CLO Basics and Leveraged Lending
As a leveraged finance associate, you are asked to explain how a collateralized loan obligation (CLO) is structured, walk through its cash-flow waterfall and tranching using the figures below, and explain why the health of the CLO market matters for private equity financing.