Calculator
Sources and uses of an acquisition or LBO
The calculator balances the sources and uses of an acquisition or LBO. It gives the equity required, the structure as a multiple of EBITDA and the debt service coverage over five years.
Equity required
€65.0m
Equity covers 41.94% of uses. Enterprise value represents 7.50x EBITDA, total leverage is 4.50x and senior leverage is 3.00x.
| Item | Amount | Share | x EBITDA |
|---|---|---|---|
| Share price | €120.0m | 77.42% | 6.00x |
| Refinanced debt | €30.0m | 19.35% | 1.50x |
| Transaction fees | €5.0m | 3.23% | 0.25x |
| Total | €155.0m | 100.00% |
| Item | Amount | Share | x EBITDA |
|---|---|---|---|
| Senior debt | €60.0m | 38.71% | 3.00x |
| Subordinated debt | €20.0m | 12.90% | 1.00x |
| Vendor loan | €10.0m | 6.45% | 0.50x |
| Equity | €65.0m | 41.94% | 3.25x |
| Total | €155.0m | 100.00% |
| Year | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Debt service | €15.0m | €14.5m | €14.0m | €13.5m | €13.0m |
| DSCR | 1.07x | 1.10x | 1.14x | 1.19x | 1.23x |
The initial values are a sample input to replace with the terms of your transaction. This calculation gives an order of magnitude and does not bind any lender.
Method
The calculation formulas
Equity balances the table. Senior debt amortises in equal instalments over its term. Subordinated debt and the vendor loan are repaid at maturity and bear their interest each year.
Equity
Equity = share price + refinanced debt + fees − senior debt − subordinated debt − vendor loan
Total leverage
Total leverage = (senior debt + subordinated debt + vendor loan) ÷ EBITDA
DSCR
DSCR = available cash flow ÷ (senior principal repaid + interest for the year)
Example
Worked example
An acquisition requires €155.0m: €120.0m for the shares, €30.0m of refinanced debt and €5.0m of fees. Enterprise value represents 7.50x the EBITDA of €20.0m. Senior debt provides €60.0m, subordinated debt €20.0m and the vendor loan €10.0m. The equity required comes to €65.0m (41.94% of uses). Total leverage reaches 4.50x. In the first year, the debt service of €15.0m is covered 1.07x by the available cash flow. The figures in this example are sample inputs.
Benchmarks
Observed acquisition multiples and leverage
| Acquirer | Median EV / EBITDA multiple |
|---|---|
| All acquirers (Argos Index) | 8.8x |
| Investment funds | 10.2x |
| Strategic acquirers | 7.9x |
Six-month rolling median of majority acquisitions in the mid-market.
| Indicator | At fund entry | At exit |
|---|---|---|
| Net debt / EBITDA | 3.6x | 2.7x |
| Valuation multiple (EV / EBITDA) | 8.8x | 12.1x |
Sample: 232 transactions, companies with €20m to €500m of revenue at exit, average holding period of 5.1 years.
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