Deal Lab · Buyout model 1.0
InterContinental Hotels Group PLC Buyout Model
A buyout of InterContinental Hotels Group PLC on its published figures for fiscal 2025, in US dollars: 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
6.7%
Multiple of money
1.39x
Sponsor's equity
$6.8bn
Enterprise value
$12.7bn
Proceeds at exit
$9.4bn
Sources and Uses
| Uses | Amount |
|---|---|
| Equity price | $9.2bn |
| Borrowings refinanced | $4.2bn |
| Transaction costs | $253m |
| Financing fees | $118m |
| Minimum cash | $104m |
| Uses | $13.8bn |
| Sources | Amount |
|---|---|
| Senior loan | $4.4bn |
| Subordinated notes | $1.5bn |
| Cash of the company | $1.1bn |
| Sponsor's equity | $6.8bn |
| Sources | $13.8bn |
Projection
| Closing | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|---|
| Revenue | $5.2bn | $5.2bn | $5.2bn | $5.2bn | $5.2bn | $5.2bn |
| EBITDA of the case | $1.3bn | $1.3bn | $1.3bn | $1.3bn | $1.3bn | $1.3bn |
| Cash cost of leases | $47.8m | $47.8m | $47.8m | $47.8m | $47.8m | $47.8m |
| Depreciation and amortisation | $67.0m | $67.0m | $67.0m | $67.0m | $67.0m | |
| Capital expenditure | $30.6m | $30.6m | $30.6m | $30.6m | $30.6m | |
| Increase in working capital | $0 | $0 | $0 | $0 | $0 | |
| Interest | $474m | $434m | $392m | $348m | $302m | |
| Tax | $177m | $187m | $197m | $208m | $220m | |
| Cash available for debt service | $1.0bn | $1.0bn | $990m | $979m | $967m |
Debt Schedule
| Closing | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|---|
| Senior loan | $4.4bn | $3.9bn | $3.3bn | $2.7bn | $2.1bn | $1.4bn |
| Subordinated notes | $1.5bn | $1.5bn | $1.5bn | $1.5bn | $1.5bn | $1.5bn |
| Revolving facility | $0 | $0 | $0 | $0 | $0 | $0 |
| Cash | $104m | $104m | $104m | $104m | $104m | $104m |
| Debt to EBITDA | 5.00x | 4.58x | 4.13x | 3.66x | 3.16x | 2.63x |
| EBITDA to interest | 2.67x | 2.92x | 3.23x | 3.63x | 4.19x |
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 | 4.58x | 4.13x | 3.66x | 3.16x | 2.63x |
| Band of debt to EBITDA | Highly leveraged | Aggressive | Aggressive | Significant | Significant | Intermediate |
Return Bridge
| Amount | |
|---|---|
| Sponsor's equity | $6.8bn |
| EBITDA growth | $0 |
| Change of multiple | $0 |
| Net debt repaid | +$3.0bn |
| Non-controlling interests | $0 |
| Costs at closing | −$371m |
| Management and limited liability | $0 |
| Proceeds at exit | $9.4bn |
Sensitivity Tables
| Entry by exit | 8.00x | 9.00x | 10.0x | 11.0x | 12.0x |
|---|---|---|---|---|---|
| 8.00x | 10.1% | 13.7% | 16.9% | 19.8% | 22.5% |
| 9.00x | 4.6% | 8.2% | 11.3% | 14.2% | 16.8% |
| 10.0x | 0.3% | 3.7% | 6.7% | 9.5% | 12.0% |
| 11.0x | −3.2% | 0.2% | 3.1% | 5.7% | 8.1% |
| 12.0x | −6.0% | −2.8% | 0.1% | 2.6% | 5.0% |
| Debt by growth | −4.0% | −2.0% | 0.0% | 2.0% | 4.0% |
|---|---|---|---|---|---|
| 4.00x | 0.6% | 3.7% | 6.7% | 9.6% | 12.4% |
| 4.50x | 0.0% | 3.5% | 6.7% | 9.8% | 12.8% |
| 5.00x | −0.7% | 3.2% | 6.7% | 10.1% | 13.4% |
| 5.50x | −1.5% | 2.8% | 6.8% | 10.5% | 14.0% |
| 6.00x | −2.5% | 2.4% | 6.8% | 10.9% | 14.7% |
Solvers
Highest entry multiple for a return of 20.0%
4.46x
The target return
Revenue growth a year for a return of 20.0%
8.4%
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 | 3.9% | Policy rate of the United States, BIS central bank policy rates, 20 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 | 24.4% | EBITDA over revenue, fiscal 2025 |
| Operations | Cash cost of leases, of revenue | 0.9% | Cash cost of leases over revenue, fiscal 2025 |
| Operations | Depreciation and amortisation, of revenue | 1.3% | Depreciation and amortisation over revenue, fiscal 2025 |
| Operations | Capital expenditure, of revenue | 0.6% | Median capital expenditure over revenue, fiscal 2023 to 2025 |
| Operations | Working capital, of revenue | 3.1% | 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 | $1.3bn | Adjusted EBITDA of the company page | Annual financial report 2025-12 |
| Share-based pay | $0 | No share-based pay is reported | Annual financial report 2025-12 |
| EBITDA after share-based pay | $1.3bn | Adjusted EBITDA less share-based pay | Annual financial report 2025-12 |
| Depreciation and amortisation | $67.0m | Depreciation and amortisation of adjusted EBITDA | Annual financial report 2025-12 |
| Revenue | $5.2bn | Revenue of the base period | Annual financial report 2025-12 |
| Borrowings | $4.2bn | Total debt less lease liabilities | Annual financial report 2025-12 |
| Lease liabilities | $406m | Lease liabilities | Annual financial report 2025-12 |
| Cash and short-term investments | $1.1bn | Cash and short-term investments | Annual financial report 2025-12 |
| Non-controlling interests | $5.0m | Non-controlling interests | Annual financial report 2025-12 |
| Receivables | $833m | Receivables | Annual financial report 2025-12 |
| Payables | $676m | Payables | Annual financial report 2025-12 |
| Inventories | $5.0m | Inventories | Annual financial report 2025-12 |
| Payments of lease liabilities | $30.0m | Payments of lease liabilities | Annual financial report 2025-12 |
| Interest on lease liabilities | $17.8m est. | Interest on lease liabilities at the average rate of finance costs on total debt | Annual financial report 2025-12 |
| Capital expenditure | $28.0m | Capital expenditure of the latest fiscal year | Annual financial report 2025-12 |
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.