Paper LBO Model

This is a Paper LBO practice: You’ll be given a simplified set of assumptions about the deal structure and company performance—things like purchase price, debt/equity mix, revenue growth, EBITDA margin, and exit multiple. Here are high-impact tips (now including quick IRR estimation you can do without the formula): ⏱️ Use a timer. Limit yourself to 25–30 minutes, just like an interview. It trains pacing — when to move on instead of perfecting decimals. 🗣️ Talk through your logic. Say your assumptions out loud — “I’m assuming 10% revenue growth, 50% EBITDA margin, 2x leverage…” — it builds the communication muscle you’ll need in interviews. 📉 Focus on drivers, not details. Don’t get lost in formatting. Build only what matters: entry value, debt schedule, cash flow, exit value, IRR. Clean logic > complex tabs. 🔁 Rerun with variations. Change one variable each time — e.g., higher leverage, slower growth — and observe how IRR reacts. This internalizes sensitivities. 📊 Quick IRR estimation (no formula needed) 💡 Cash-on-cash shortcut: IRR ≈ (equity multiple)^(1/years) − 1 Memorize anchors for fast sanity checks: 2.0x in 5 years → ~15% IRR 2.5x in 5 years → ~20% IRR 3.0x in 5 years → ~25% IRR 1.5x in 5 years → ~8.5% IRR 💵 Equal annual cash flows: treat returns as an annuity + residual. Example: invest $100 → receive $20/year for 5 years + $50 at exit → IRR ≈ 12% (higher than the lump-sum 1.5x case because cash arrives earlier). 🎯 Practical habit: when pressed, give a defendable range (e.g., “~12–14%”) and explain which assumption would push it up or down. 🧩 Build without lookup formulas. Do basic math yourself. Avoid VLOOKUPs or fancy automation — it’s about thinking through the flow, not building a perfect template. 📋 Debrief each run. Did your logic flow make sense? Were your assumptions realistic? Could you explain this deal in 2 minutes to an interviewer? 📈 Gradually reduce Excel “crutches.” Once comfortable, move to rough calculations on paper. The goal: replicate Excel-level reasoning without Excel.

Practice Paper LBO Model with interactive Excel modeling exercises in our LBO Modeling module.

This hands-on modeling exercise helps you master Paper LBO Model through real-world Excel practice and financial modeling techniques.