What truly separates a top-tier private equity candidate from the rest is the ability to think like an investor. That core idea was the driving force behind OneFinNet’s advanced LBO modelling session, designed for finance professionals and aspiring associates. Led by Onefinnet CEO Kaushik Ravi, the session offered participants an in-depth walk-through of how to build a leveraged buyout (LBO) model using a real case study.
Rather than skimming the surface like many training modules, this session delved into the intricacies of financial modelling, assumption toggles, deal structuring, and credit waterfall mechanics. It highlighted how the ability to clearly communicate assumptions, defend decisions, and navigate uncertainty is what truly distinguishes those who succeed in private equity roles.
The Real Mechanics Behind the Model
LBO modelling isn’t just about creating a perfect spreadsheet; it’s about structuring insight. Participants were guided through the components of a balance sheet build-out, with clear distinctions between ratio-based and roll-forward projections. Inventory, accounts payable, and receivables were discussed using “days” methodologies, while CapEx and depreciation followed roll-forward schedules.
The circularity of interest and cash flow was emphasized, illustrating how interconnected assumptions in debt, cash, and taxes must be iteratively resolved. This section drove home the importance of sequencing, building a model step-by-step, where operational assumptions precede financing decisions.
From SIM to Strategy: Making Sense of the Deal
The training was based on a real interview-style case involving a consumer services company with both product and services revenue streams. Participants started with the company’s historical income statement, mapping revenue, cost of goods sold (COGS), and EBITDA. Then came the projections.
The session highlighted the value of layered assumptions: a management case, a base case, an upside case, and a downside case. Notably, Ravi encouraged attendees not to blindly accept management’s bullish projections. “You’re allowed to disagree,” he reminded. “Sometimes being conservative is a strength, especially when you can justify it.”
To make the model more dynamic, toggles were introduced mechanisms that allowed users to switch between scenarios quickly. This ability to test assumptions in real time, without re-entering data line-by-line, is not just efficient but also reflects the kind of agility expected in deal teams.
Financial Projections That Tell a Story
Too often, LBO models become mechanical exercises. This session flipped that narrative by tying projections to business logic. They also debated the Growth rates.
Kaushik asked participants to justify whether a 5% revenue growth rate made more sense than a 6% one, and how industry trends or competitive positioning informed that choice. “No one’s going to argue with you over 4.5% versus 5%,” Ravi explained, “but they will care about how you defend it.”
This distinction, between mechanical modeling and business judgment, is where top performers stand out. The ability to understand macroeconomic conditions, customer concentration risks, or margin pressure turns an LBO model from a math exercise into an investment thesis.
The Balance Sheet and the Cash Flow View
Modelling the income statement is only part of the story. The balance sheet and cash flow statement were built using consistent logic, relying on historical trends to inform projections. Attendees learned how net working capital affects operating cash flow, and how movements in receivables, payables, and inventory reflect real business activity.
Ravi reinforced that cash flow is not just about magnitude, it’s about timing and stability. For instance, an increase in inventory might indicate anticipated demand, or poor sales planning. Understanding such trends, not just the numbers, is what private equity teams evaluate.
This trained the participants to think through circular relationships: for example, how interest expense affects net income, which in turn impacts cash flow available for debt service.
Sources, Uses, and Sponsors Considerations
In a real-world LBO, the financing structure is as critical as valuation. The session included a detailed walk-through of the sources and uses table, a critical component of every deal. Participants identified common uses of cash, including:
- Purchase price
- Advisory and legal fees
- Debt repayment
- Management buyouts or minority stake purchases
- Maintaining adequate cash on the balance sheet
Moreover, the discussion turned toward different types of financing, term loans, revolvers, mezzanine debt, and sponsor equity. Therefore, Kaushik emphasised the importance of managing leverage responsibly.
“Every dollar of debt must be serviceable, even in your downside case.”
This portion of the session was particularly practical. Kaushik also showed how to structure debt tranches, adjust for amortisation schedules, and account for the cost of capital. Realism was key; models should reflect what’s likely to happen, not just what fits neatly in Excel.
Waterfalls, Goodwill, and Final Adjustments
One of the more advanced sections of the training involved the debt waterfall and purchase price allocation. Participants learned to differentiate between pre-transaction book values and post-deal closing balance sheets. They were guided through calculating goodwill and accounting for various adjustments, including refinancing target debt and layering in transaction-related fees.
While the session did not delve deeply into accounting theory, Ravi cautioned participants not to overcomplicate the model. “This is not about academic perfection. It’s about making the model usable, defendable, and practical.”
In a real PE role, you often have to update and revise your model in hours, not days. The best associates are those who build flexibility without sacrificing clarity.
A Quiet Reminder: Network While You Learn
While the technical content was the star of the session, the collaborative spirit of the class served as a subtle reminder of why Onefinnet exists, bringing finance professionals together to grow, learn, and connect.
Private equity remains a field where trust, relationships, and communication drive opportunity. Whether you’re modeling your first deal or leading diligence on a complex transaction, your ability to ask the right questions, and surrounding yourself with sharp minds can make all the difference.
Final Thoughts
This OneFinNet training wasn’t just about learning how to build an LBO model; it was about learning how to think like someone who owns the model. Moreover, it reinforced the idea that good private equity professionals are not spreadsheet operators, but decision-makers. They bring a combination of analytical precision, strategic judgment, and communication finesse to every deal.
In fact, for those looking to break into or advance within the buy-side world, sessions like these offer more than education; they offer insight into how professionals think, how teams collaborate, and how careers are shaped.
Want access to more expert-led sessions like this? Join Onefinnet to stay connected with industry leaders and build your private equity edge, one connection and one insight at a time.
Leave a Reply