Buy And Build Model
Private Equity Financial Model (Free Excel Download)
Model platform acquisitions, purchase multiples, synergies, integration costs, financing, and exit value to test whether a roll-up creates durable returns.
professionals from Deloitte
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About this model
A five-year private equity buy-and-build model built at the sponsor level rather than the operator level: a platform is bought expensive, sixteen add-ons are bought cheap, and the model's whole job is to show what that arithmetic is worth once the cost and the delay of actually integrating them are charged against it. The signature mechanic is the blended multiple paid across the entire programme, computed cumulatively each year as platform enterprise value plus capital deployed over platform EBITDA plus acquired EBITDA. It walks down from the 10.50x paid for the platform to 8.87x by exit - 1.63 turns of compression - even though every successive vintage is bought dearer than the last, at 5.75x rising to 6.75x, because the platform price is being averaged against ever more cheaply bought earnings. The second mechanic is a timing lag: synergies are tracked by acquisition cohort and phase in at 25%, 70% and 100% of run-rate over three years, while the cost to achieve them, 0.85x of the run-rate prize, is spent 60/40 across the first two years, so the bill always arrives before the benefit. Cumulative run-rate synergies reach 6,574 but only 5,423 are realised by exit, the last vintage still ramping, and 5,252 of integration cost has been expensed to get there. That lag is what pushes the reported EBITDA margin down from 13.5% at entry to 12.9% in Year 2 before it recovers to 13.7%, and it opens a 2,120 gap between reported and run-rate earnings that a buyer will argue about. The third mechanic is an exit bridge that separates arbitrage from operations rather than reporting a single value-creation number: 72,635 of purchase multiple arbitrage - what 15,570 of acquired EBITDA is worth at the 11.00x exit against the 6.33x blended price paid for it - against 228,711 of operating value from platform organic growth, realised synergies, integration cost and free cash flow, plus 16,825 of exit re-rating and 3,345 of follow-on equity, which is 23% arbitrage and 71% operations. Earnings are built additively so those sources stay separable, the platform's own margin walk is earned from four semi-variable cost lines rather than asserted, and the programme is funded through an explicit waterfall - cash, then a 0.75x delayed-draw basket carrying a ticking fee on the undrawn balance, then an 8,000 revolver, then a sponsor follow-on cheque - which is exhausted in that order and forces 3,345 of extra equity in Years 3 and 4. Four reconciliation rows tie the enterprise value bridge, the equity bridge, the net debt movement and the turns attribution to zero, and the deal returns 2.84x in aggregate and 2.61x to the sponsor at a 21.4% IRR over the five-year hold.
What every model includes
Live formulas, no hardcoded values
Outputs are driven by live formulas, so the workbook updates from its assumptions instead of relying on hardcoded results.
All assumptions in one tab
Inputs are clearly marked in the Assumptions tab and separated from calculations, making it clear what to change and what to leave intact.
Statements always balancing
For integrated-statement models, the balance sheet, cash flow, and supporting schedules tie through properly.
Distinct schedules for clarity
Debt, working capital, taxes, and cash flow can get messy quickly. We group calculations in clear schedules, not across disconnected tabs.
No hidden macros or external links
There are no unexplained external workbook links or macros to undermine auditability or portability.
Changes flow through the model
Update a key driver and see the impact carry through the forecast, financing, and return outputs. We never use hardcoded numbers in formulas.
What's inside the Buy And Build Model
- Platform entry: LTM revenue and gross margin, platform entry multiple, transaction and financing fees, minimum cash, management rollover
- Platform cost base: personnel, facilities and IT, sales and marketing, and overhead as shares of LTM revenue
- Platform plan: a per-year organic growth row, an annual gross margin gain, cost inflation and four line-specific revenue flex factors
- Add-on programme: per-year deals closed, average target revenue and target entry multiple, plus the target EBITDA margin and add-on transaction fees
- Synergies and integration: synergy run-rate as a share of acquired revenue, a five-year phase-in profile, the cost to achieve and its own spend profile
- Capital and working capital: opening net fixed assets, asset life, capex as a share of revenue, receivable and payable days
- Debt facilities: Term Loan B leverage, rate and amortisation, a delayed-draw acquisition basket with a ticking fee, a revolver, the cash sweep share, a leverage covenant and the tax rate
- Exit and incentives: exit EBITDA multiple and the management incentive pool
Buy And Build Model: How Blended Multiples, Synergies And Exit Bridge Work
A buy and build model tests whether a platform-and-add-on programme is a genuine business or just a financing trade. This template captures how the blended multiple compresses as cheap add-ons are averaged against an expensive platform, how integration costs and synergy phase-ins create a margin J-curve, and how an exit bridge separates arbitrage from operating value.
Rates and financial results described here reflect illustrative model settings, not industry benchmarks.
Operating Drivers: Deal Pricing, Cohort Synergies And Cost Timing
The programme buys one platform at a high entry multiple and add-ons at progressively higher but still much lower multiples. The key operating driver is not the exit multiple but the cumulative blended multiple actually paid across all transactions.
- That multiple averages the platform's expensive EBITDA against ever more cheaply acquired earnings, so it compresses even as each successive vintage is bought dearer than the last. Capital deployed includes add-on transaction fees, so the measure reflects what the sponsor truly spent.
- Synergies are tracked by acquisition cohort, not as a single group line. Each vintage brings its own run-rate prize and its own cost to achieve it.
The prize phases in at 25%, 70% and 100% across the close year and the two after it, while the cost is spent at 60% and 40% across the close year and the one after. This timing lag means cost always arrives before benefit, pushing reported margin down before it recovers and leaving unrealised synergy visible at exit.
How The Calculation Flows: From Deal Flow To Earnings Build
The model flows from deal assumptions through acquisition, integration and consolidation. It computes the blended multiple each year as platform enterprise value plus cumulative capital deployed, divided by platform last-twelve-months EBITDA plus cumulative acquired EBITDA.
- It then builds reported EBITDA additively: platform EBITDA with its own margin walk, plus acquired EBITDA at the target's standalone margin, plus realised synergies, minus integration costs. Keeping these sources separate lets the model calculate arbitrage exactly rather than infer it.
- The platform's own margin is earned, not asserted. Gross margin walks up by 30 basis points a year, and four operating cost lines escalate with inflation plus platform revenue growth multiplied by line-specific flex factors.
- The resulting cost ratio shows mild operating leverage. Acquired revenue is held at the run-rate it was bought at and does not grow organically; only the platform compounds.
Exit is struck on reported EBITDA, with unrealised synergy disclosed as a memo rather than capitalised.
Outputs: Blended Multiple Compression, Run-Rate Gap And Exit Attribution
The headline output is the cumulative blended multiple, which walks down from the platform price to a lower blended figure by exit, delivering multiple compression even though each vintage is bought dearer. A second output is the run-rate gap: the difference between run-rate EBITDA, which assumes full synergies and no integration cost, and reported EBITDA.
- This number quantifies the timing lag a buyer will question.
- The exit bridge splits the movement in equity value into four components: purchase multiple arbitrage, operating value, exit re-rating and follow-on equity funded. Arbitrage is the acquired EBITDA valued at the exit multiple less what was paid for it; operations covers platform organic growth, realised synergies, integration costs and free cash flow.
The share of arbitrage versus operations reveals whether the programme is primarily a financing trade or a business.
Practical Use: Funding The Programme And Interpreting The Split
The programme is funded through an explicit waterfall: cash before facilities, then delayed-draw drawdown, revolver drawdown, sponsor follow-on equity as the uncapped backstop, then cash available for sweep. Each step is guarded so facilities cannot be over-drawn or over-repaid.
- The delayed-draw tranche carries a ticking fee on undrawn commitment and amortises on cumulative drawn amounts. Interest is struck on opening balances, keeping the schedule acyclic.
- This structure is designed to show a programme outrunning its debt basket, with follow-on equity funding the gap. Ownership is struck on cumulative equity contributed, so management rollover dilutes when sponsor follow-on is added.
Use the model to test whether blended multiple compression survives higher add-on pricing, how much synergy remains unrealised at exit, and what proportion of value creation comes from arbitrage versus operations. Net debt may rise over the hold because cash flow is spent buying earnings rather than deleveraging.
Formatted to IB standards
Named theme colors repaint the whole workbook in one click, on top of an investment-banking structure with clear input, output, and cross-sheet reference styling - brand-ready, institutional-grade, and fully auditable.
Created by ex-finance professionals
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Frequently asked
What is a buy-and-build model?+
A buy-and-build model plans a private equity programme in which a platform business is acquired first and then a series of smaller add-ons are bought and folded into it. The economics come from three places: the platform's own growth, the difference between the multiple paid for the add-ons and the multiple the combined group is worth, and the synergies extracted from consolidating them. This model builds all three explicitly and keeps them separable through to the exit attribution.
Why does the blended multiple compress even though each add-on costs more?+
Because the blend is cumulative and the platform price is fixed. The platform is bought at 10.50x; the add-ons are bought at 5.75x rising to 6.75x. Every deal that closes below the running blend pulls it down, so even a programme paying steadily more for each successive deal keeps averaging down against the anchor price. Across the shipped case the blend falls to 8.87x, 1.63 turns of compression.
Why do synergies phase in rather than land at close?+
Because they do not land at close. Systems migrations, supplier renegotiations, branch consolidations and back-office rationalisation take one to three years, and the cost of doing them is incurred first. This model tracks synergies by acquisition cohort so each vintage ramps on its own clock, which means the last deals bought are still ramping when the sponsor sells: 5,423 of 6,574 run-rate synergies are realised at exit, and 5,252 of integration cost has been spent getting there.
Why is exit struck on reported EBITDA rather than run-rate?+
Because a buyer pays for what the business earns, and pretending otherwise flatters the return by about 23,000 of exit enterprise value on this case. The 2,120 gap between reported and run-rate earnings is disclosed as its own line so the negotiation is visible rather than assumed away. If you want to underwrite on run-rate, point the exit valuation at that row and the difference is immediate.
How is arbitrage separated from operating value?+
Arbitrage is what the cumulative acquired EBITDA is worth at the exit multiple less what was actually paid for it, including deal fees. Operating value is platform organic growth, realised synergies, integration cost and free cash flow generated. The two, plus the platform re-rating and any follow-on equity, sum exactly to the movement in equity value, and a check row proves it. On the shipped case that is 72,635 of arbitrage against 228,711 of operating value.
Why does net debt rise over the hold?+
Because a buy-and-build does not deleverage in absolute terms; it spends its cash flow buying earnings. Net debt goes from 97,275 to 111,020 while net leverage falls from 4.00x to 2.07x, which is entirely a denominator effect. The model makes this explicit by opening the movement in net debt into free cash flow generated, add-on capital deployed and follow-on equity funded, each as its own line.
Can I use this for my own programme?+
Yes. Every driver is a labelled input on the Assumptions sheet wired through named ranges, so you can replace the platform revenue, margin and entry multiple, the organic growth path, the deals closed and average target size by vintage, the target multiples and margin, the synergy run-rate and phase-in, the cost to achieve, the debt facilities and sweep, the exit multiple and the incentive pool with your own. Six validation rows tell you immediately whether the bridges still foot.
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