Module IV· Sources & UsesBasic
Question
Which items typically belong to the 'Uses' side in an LBO?
Answer
Standard Uses-side items
- Equity purchase price: the largest item (EV − net debt)
- Refi existing debt: change-of-control clauses trigger acceleration
- Transaction costs: M&A advisory (1–2% of EV), legal, DD
- Financing fees: OID (original issue discount), underwriting (2–3% of debt volume)
- Minimum cash: operating liquidity (~1–2% of revenue)
Rule of thumb
transaction + financing fees together ~3–5% of the equity purchase price.