How to build a paper LBO in 10 minutes
TL;DR
A paper LBO is a rough IRR you can do in your head. Buy at 10x EBITDA with 5x turns of debt, grow EBITDA modestly, pay down debt, exit at a similar multiple. If IRR is not roughly 20% or better, the deal probably does not clear a PE hurdle.
The steps
1. Sources and Uses. Purchase price = 10 × EBITDA. Debt = 5 × EBITDA. Equity = the rest.
2. Operating case. Grow EBITDA at a modest rate over 5 years.
3. Debt paydown. Assume free cash flow pays down half the debt over 5 years.
4. Exit. Exit at the same 10x EBITDA multiple.
5. Returns. Equity at exit = exit value minus remaining debt. Divide by initial equity for MOIC. Rule of 72 gives you IRR.
How this shows up on the job
The paper LBO is a standard PE interview question at every buyout firm. Doing it cleanly in ten minutes without a calculator is a filter, not a test.
How Reuben AI helps
Reuben AI includes an LBO model shell so students can move from paper to full model and then to a complete IC memo in one workspace.
Sources
Frequently asked questions
Do I need Excel for a paper LBO?
No. It is designed to be done on paper in ten minutes.
What IRR should a paper LBO show?
Roughly 20% or better to clear a typical PE hurdle.
Why 5x debt?
It is a rough industry norm for leveraged buyouts. Interviewers will accept a range.
Do I need to model taxes?
For a paper LBO you can skip. For a full LBO you do not.
How is a full LBO different?
Three statements, a debt schedule with tranches, real tax treatment and a fees layer.
Learn on the platform you will use on the job.
Start with the Free workspace to practise IC memos, LBOs, DCFs and private-capital workflows. Faculty, program leads and student investment club leaders can book a demo to discuss teaching seats and program access.