medium · Investment Banking ma-lbo
What is the 'Revolver' in an LBO model, and why is it referred to as the 'Plug'?
- It is a line of credit that balances the cash flows, drawing if cash is negative and repaying if cash is positive.
- It is a special cash dividend paid to the management team once EBITDA growth targets are hit each year.
- It is a mandatory term loan amortization repayment scheduled to occur at the end of every single fiscal year of the deal.
- It is simply the sponsor's equity check, sized to whatever amount is needed to make the Sources and Uses table balance exactly.
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