Deal Lab · Buyout model 1.0
Associated British Foods plc Buyout Model
A buyout of Associated British Foods plc on its published figures for fiscal 2025, in pounds sterling: revenue flat, the margin and the shares of revenue of that period, entry and exit at 10.0x EBITDA, exit after 5 years.
Returns
Internal rate of return
−0.8%
Multiple of money
0.96x
Sponsor's equity
£13.3bn
Enterprise value
£24.7bn
Proceeds at exit
£12.8bn
Sources and Uses
| Uses | Amount |
|---|---|
| Equity price | £22.0bn |
| Borrowings refinanced | £667m |
| Transaction costs | £494m |
| Financing fees | £187m |
| Minimum cash | £389m |
| Uses | £23.7bn |
| Sources | Amount |
|---|---|
| Senior loan | £7.0bn |
| Subordinated notes | £2.3bn |
| Cash of the company | £1.1bn |
| Sponsor's equity | £13.3bn |
| Sources | £23.7bn |
Projection
| Closing | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|---|
| Revenue | £19.5bn | £19.5bn | £19.5bn | £19.5bn | £19.5bn | £19.5bn |
| EBITDA of the case | £2.5bn | £2.5bn | £2.5bn | £2.5bn | £2.5bn | £2.5bn |
| Cash cost of leases | £459m | £459m | £459m | £459m | £459m | £459m |
| Depreciation and amortisation | £988m | £988m | £988m | £988m | £988m | |
| Capital expenditure | £1.1bn | £1.1bn | £1.1bn | £1.1bn | £1.1bn | |
| Increase in working capital | £0 | £0 | £0 | £0 | £0 | |
| Interest | £735m | £733m | £731m | £728m | £726m | |
| Tax | £160m | £160m | £161m | £162m | £162m | |
| Cash available for debt service | £762m | £762m | £761m | £761m | £760m |
Debt Schedule
| Closing | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|---|
| Senior loan | £7.0bn | £6.9bn | £6.9bn | £6.8bn | £6.7bn | £6.7bn |
| Subordinated notes | £2.3bn | £2.3bn | £2.3bn | £2.3bn | £2.3bn | £2.3bn |
| Revolving facility | £0 | £42.9m | £84.1m | £124m | £161m | £197m |
| Cash | £389m | £389m | £389m | £389m | £389m | £389m |
| Debt to EBITDA | 5.00x | 4.99x | 4.98x | 4.97x | 4.95x | 4.94x |
| EBITDA to interest | 3.36x | 3.37x | 3.38x | 3.39x | 3.40x |
Covenants and the Credit View
| Closing | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|---|
| Limit of debt to EBITDA | 6.50x | |||||
| Lease-adjusted debt to EBITDA | 5.00x | 4.99x | 4.98x | 4.97x | 4.95x | 4.94x |
| Band of debt to EBITDA | Highly leveraged | Aggressive | Aggressive | Aggressive | Aggressive | Aggressive |
Return Bridge
| Amount | |
|---|---|
| Sponsor's equity | £13.3bn |
| EBITDA growth | £0 |
| Change of multiple | £0 |
| Net debt repaid | +£153m |
| Non-controlling interests | £0 |
| Costs at closing | −£681m |
| Management and limited liability | £0 |
| Proceeds at exit | £12.8bn |
Sensitivity Tables
| Entry by exit | 8.00x | 9.00x | 10.0x | 11.0x | 12.0x |
|---|---|---|---|---|---|
| 8.00x | −0.6% | 4.6% | 9.0% | 12.7% | 16.0% |
| 9.00x | −6.2% | −0.9% | 3.5% | 7.2% | 10.4% |
| 10.0x | −10.1% | −5.0% | −0.8% | 2.8% | 5.9% |
| 11.0x | −13.1% | −8.2% | −4.2% | −0.7% | 2.3% |
| 12.0x | −15.7% | −10.9% | −7.0% | −3.6% | −0.7% |
| Debt by growth | −4.0% | −2.0% | 0.0% | 2.0% | 4.0% |
|---|---|---|---|---|---|
| 4.00x | −6.0% | −2.7% | 0.4% | 3.4% | 6.3% |
| 4.50x | −7.3% | −3.6% | −0.1% | 3.1% | 6.3% |
| 5.00x | −9.1% | −4.7% | −0.8% | 2.8% | 6.3% |
| 5.50x | −11.3% | −6.2% | −1.6% | 2.5% | 6.3% |
| 6.00x | −14.4% | −8.0% | −2.7% | 2.0% | 6.3% |
Solvers
Highest entry multiple for a return of 20.0%
1.84x
The target return
Revenue growth a year for a return of 20.0%
13.0%
The target return
Debt capacity at closing, times EBITDA
6.00x
The loan to value limit
Assumptions and Their Origins
| Group | Assumption | Value | Origin |
|---|---|---|---|
| Transaction | Entry multiple | 10.0x | Convention of buyout 1.0 |
| Transaction | Years to exit | 5 years | Convention of buyout 1.0 |
| Transaction | Transaction costs | 2.0% | Convention of buyout 1.0 |
| Transaction | Financing fees | 2.0% | Convention of buyout 1.0 |
| Transaction | Minimum cash, of revenue | 2.0% | Convention of buyout 1.0 |
| Financing | Debt at closing, times EBITDA | 5.00x | Convention of buyout 1.0 |
| Financing | Debt at most, of the enterprise value | 60.0% | Convention of buyout 1.0 |
| Financing | Senior loan, of the new debt | 75.0% | Convention of buyout 1.0 |
| Financing | Senior loan repaid each year | 1.0% | Convention of buyout 1.0 |
| Financing | Cash sweep | 100% | Convention of buyout 1.0 |
| Financing | Revolving facility, times EBITDA | 1.00x | Convention of buyout 1.0 |
| Financing | Base rate | 3.8% | Policy rate of the United Kingdom, BIS central bank policy rates, 19 October 2026 |
| Financing | Senior loan spread | 3.5% | Convention of buyout 1.0 |
| Financing | Subordinated notes spread | 6.0% | Convention of buyout 1.0 |
| Financing | Revolving facility spread | 3.0% | Convention of buyout 1.0 |
| Financing | Covenant headroom on debt to EBITDA | 30.0% | Convention of buyout 1.0 |
| Financing | Minimum EBITDA to interest | 2.00x | Convention of buyout 1.0 |
| Operations | Revenue growth a year | 0.0% | Convention of buyout 1.0 |
| Operations | EBITDA margin | 12.7% | EBITDA over revenue, fiscal 2025 |
| Operations | Cash cost of leases, of revenue | 2.4% | Cash cost of leases over revenue, fiscal 2025 |
| Operations | Depreciation and amortisation, of revenue | 5.1% | Depreciation and amortisation over revenue, fiscal 2025 |
| Operations | Capital expenditure, of revenue | 5.6% | Median capital expenditure over revenue, fiscal 2023 to 2025 |
| Operations | Working capital, of revenue | 9.2% | Working capital over revenue, end of the fiscal 2025 |
| Operations | Leases as debt | Yes | Leases as debt, the basis of the credit metrics |
| Operations | Share-based pay added back | No | Convention of buyout 1.0 |
| Taxes | Tax rate | 25.0% | Combined statutory rate of corporate income tax of the United Kingdom, OECD Corporate Tax Statistics, 2026 |
| Taxes | Interest deducted up to 30% of EBITDA | No | Convention of buyout 1.0 |
| Exit | Exit multiple | 10.0x | Convention of buyout 1.0 |
| Exit | Management share of the proceeds | 0.0% | Convention of buyout 1.0 |
| Exit | Target return | 20.0% | Convention of buyout 1.0 |
Inputs and Their Documents
Published figures of fiscal 2025, each with the documents it comes from.
| Input | Value | Method | Documents |
|---|---|---|---|
| Adjusted EBITDA | £2.5bn | Adjusted EBITDA of the company page | Annual financial report 2025-09 |
| Share-based pay | £18.0m | Share-based pay that adjusted EBITDA adds back | Annual financial report 2025-09 |
| EBITDA after share-based pay | £2.5bn | Adjusted EBITDA less share-based pay | Annual financial report 2025-09 |
| Depreciation and amortisation | £988m | Depreciation and amortisation of adjusted EBITDA | Annual financial report 2025-09 |
| Revenue | £19.5bn | Revenue of the base period | Annual financial report 2025-09 |
| Borrowings | £667m | Total debt less lease liabilities | Annual financial report 2025-09 |
| Lease liabilities | £3.0bn | Lease liabilities | Annual financial report 2025-09 |
| Cash and short-term investments | £1.1bn | Cash and short-term investments | Annual financial report 2025-09 |
| Non-controlling interests | £127m | Non-controlling interests | Annual financial report 2025-09 |
| Receivables | £1.7bn | Receivables | Annual financial report 2025-09 |
| Payables | £3.1bn | Payables | Annual financial report 2025-09 |
| Inventories | £3.2bn | Inventories | Annual financial report 2025-09 |
| Payments of lease liabilities | £351m | Payments of lease liabilities | Annual financial report 2025-09 |
| Interest on lease liabilities | £108m est. | Interest on lease liabilities at the average rate of finance costs on total debt | Annual financial report 2025-09 |
| Capital expenditure | £1.1bn | Capital expenditure of the latest fiscal year | Annual financial report 2025-09 |
Checks of the Model
- Sources equal uses
- The equity price is above nil
- The sponsor's equity is above nil
- Each balance of debt stays between nil and its amount at closing
- Cash is the cash of the year before and the cash flow of the year
- Cash stays at the minimum unless a shortfall is stated
- The 6 parts of the bridge add up to the proceeds less the sponsor's equity
- The cash flows at the internal rate of return have a present value of nil
Deal Lab computes arithmetic on published figures and on the assumptions of the user. It values no company, recommends no transaction and forecasts no result.