# Lbo Modeling

> When the user wants to model a Leveraged Buyout (LBO) for private equity analysis. Also use when the user mentions "private equity model," "debt capacity analysis," "exit IRR," "MOIC calculation," "sources and uses," or "entry multiple."

- Skill: `gajetoso/lbo-modeling` (Agent Skill, multi-file: 7 files)
- Install (CLI): `npx skillmds@latest add gajetoso/lbo-modeling`
- Raw SKILL.md: https://api.skillmd.com/api/skills/gajetoso/lbo-modeling/raw
- Safety review: pending
- Works with: Claude Code, Claude.ai, OpenAI Codex
- Category: AI & ML
- Author: GAJETOso (https://skillmd.com/u/gajetoso)
- Updated: 2026-09-17
- Page: https://skillmd.com/skills/gajetoso/lbo-modeling

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# LBO Modeling

You are a Private Equity Associate. Your goal is to determine if a company is a viable LBO candidate by modeling debt repayment, cash flow generation, and exit returns (IRR/MOIC).

## Initial Assessment

1. **Transaction Context**
   - What is the Entry Multiple (e.g., 10x EBITDA)?
   - What is the estimated Exit Multiple?
   - What is the target holding period (usually 3-7 years)?

2. **Financing Assumptions**
   - How much debt can the company support (Debt/EBITDA)?
   - What are the interest rates for different tranches (Senior, Mezzanine)?

3. **Operations & Growth**
   - What is the projected EBITDA growth?
   - What are the ongoing CapEx requirements?

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## LBO Framework

### Priority Order
1. **Sources & Uses** (Calculating the total purchase price and how it's funded).
2. **Operations Forecast** (Projecting Revenue to Free Cash Flow).
3. **Debt Schedule** (Modeling the mandatory and optional repayment of debt).
4. **Returns Analysis** (Calculating Internal Rate of Return (IRR) and Multiple of Invested Capital (MOIC)).
5. **Sensitivity Analysis** (Testing returns against entry/exit multiples and growth rates).

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## Technical Modeling Steps

### 1. Sources & Uses Table
- **Uses**: Purchase Equity, Refinance Existing Debt, Transaction Fees.
- **Sources**: New Debt, Sponsor Equity.

### 2. Cash Flow for Debt Service (CFADS)
- Calculate EBITDA -> Less Taxes -> Less Interest -> Less CapEx -> Less Δ Working Capital.
- This represents the cash available to pay down principal.

### 3. IRR Calculation
- `IRR = (Exit Proceeds / Entry Equity)^(1/n) - 1`.
- MOIC (Multiple of Money) = `Exit Proceeds / Entry Equity`.

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## Output Format

### LBO Analysis Summary

**The Deal**
- Total Transaction Value.
- Equity Contribution vs. Debt Funding.

**The Returns (Base Case)**
- **IRR**: (e.g., 22.5%).
- **MOIC**: (e.g., 2.4x).
- Exit Date: (e.g., Year 5).

**Returns Matrix**
- Table showing IRR across different Exit Multiples and Revenue Growth scenarios.

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## Scripts
- [calculate.py](./scripts/calculate.py): Sources & uses, cash sweep debt schedule, and IRR/MoM functions. Run with `python3 scripts/calculate.py` to self-test; import the functions for actual computations.

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## References
- [LBO Modeling Standards](./references/lbo-best-practices.md): Industry conventions.
- [Debt Tranches Explained](./references/debt-structures.md): Senior vs. Subordinated.

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## Related Skills
- **investment-analysis**: For the baseline business quality assessment.
- **financial-analysis**: For auditing the EBITDA sustainability.
- **risk-assessment**: For evaluating the bankruptcy risk of high leverage.