Deal Lab · Buyout model 1.0
McKesson Corporation Buyout Model
A buyout of McKesson Corporation on its published figures for the last 4 quarters to Q1 FY2027, 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
5.1%
Multiple of money
1.28x
Sponsor's equity
$48.6bn
Enterprise value
$77.0bn
Proceeds at exit
$62.3bn
Sources and Uses
| Uses | Amount |
|---|---|
| Equity price | $70.0bn |
| Borrowings refinanced | $9.7bn |
| Transaction costs | $1.5bn |
| Financing fees | $730m |
| Minimum cash | $8.2bn |
| Uses | $90.3bn |
| Sources | Amount |
|---|---|
| Senior loan | $27.4bn |
| Subordinated notes | $9.1bn |
| Cash of the company | $5.2bn |
| Sponsor's equity | $48.6bn |
| Sources | $90.3bn |
Projection
| Closing | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|---|
| Revenue | $411bn | $411bn | $411bn | $411bn | $411bn | $411bn |
| EBITDA of the case | $7.7bn | $7.7bn | $7.7bn | $7.7bn | $7.7bn | $7.7bn |
| Cash cost of leases | $433m | $433m | $433m | $433m | $433m | $433m |
| Depreciation and amortisation | $767m | $767m | $767m | $767m | $767m | |
| Capital expenditure | $573m | $573m | $573m | $573m | $573m | |
| Increase in working capital | $0 | $0 | $0 | $0 | $0 | |
| Interest | $2.9bn | $2.7bn | $2.5bn | $2.3bn | $2.0bn | |
| Tax | $913m | $966m | $1.0bn | $1.1bn | $1.1bn | |
| Cash available for debt service | $5.8bn | $5.7bn | $5.7bn | $5.6bn | $5.5bn |
Debt Schedule
| Closing | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|---|
| Senior loan | $27.4bn | $24.5bn | $21.5bn | $18.3bn | $15.0bn | $11.4bn |
| Subordinated notes | $9.1bn | $9.1bn | $9.1bn | $9.1bn | $9.1bn | $9.1bn |
| Revolving facility | $0 | $0 | $0 | $0 | $0 | $0 |
| Cash | $8.2bn | $8.2bn | $8.2bn | $8.2bn | $8.2bn | $8.2bn |
| Debt to EBITDA | 5.00x | 4.63x | 4.24x | 3.82x | 3.39x | 2.93x |
| EBITDA to interest | 2.64x | 2.84x | 3.09x | 3.42x | 3.84x |
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 | 4.63x | 4.24x | 3.82x | 3.39x | 2.93x |
| Band of debt to EBITDA | Highly leveraged | Aggressive | Aggressive | Significant | Significant | Intermediate |
Return Bridge
| Amount | |
|---|---|
| Sponsor's equity | $48.6bn |
| EBITDA growth | $0 |
| Change of multiple | $0 |
| Net debt repaid | +$15.9bn |
| Non-controlling interests | $0 |
| Costs at closing | −$2.3bn |
| Management and limited liability | $0 |
| Proceeds at exit | $62.3bn |
Sensitivity Tables
| Entry by exit | 8.00x | 9.00x | 10.0x | 11.0x | 12.0x |
|---|---|---|---|---|---|
| 8.00x | 7.3% | 10.5% | 13.3% | 15.9% | 18.3% |
| 9.00x | 2.8% | 6.0% | 8.9% | 11.4% | 13.8% |
| 10.0x | −0.7% | 2.3% | 5.1% | 7.6% | 9.8% |
| 11.0x | −3.6% | −0.7% | 2.0% | 4.4% | 6.6% |
| 12.0x | −6.1% | −3.2% | −0.6% | 1.7% | 3.8% |
| Debt by growth | −4.0% | −2.0% | 0.0% | 2.0% | 4.0% |
|---|---|---|---|---|---|
| 4.00x | −0.8% | 2.3% | 5.3% | 8.1% | 10.9% |
| 4.50x | −1.4% | 2.0% | 5.2% | 8.2% | 11.2% |
| 5.00x | −2.1% | 1.6% | 5.1% | 8.4% | 11.5% |
| 5.50x | −2.9% | 1.2% | 5.0% | 8.5% | 11.9% |
| 6.00x | −4.0% | 0.6% | 4.8% | 8.7% | 12.4% |
Solvers
Highest entry multiple for a return of 20.0%
2.36x
The target return
Revenue growth a year for a return of 20.0%
9.8%
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 | 1.9% | EBITDA over revenue, last 4 quarters to FY2027 Q1 |
| Operations | Cash cost of leases, of revenue | 0.1% | Cash cost of leases over revenue, last 4 quarters to FY2027 Q1 |
| Operations | Depreciation and amortisation, of revenue | 0.2% | Depreciation and amortisation over revenue, last 4 quarters to FY2027 Q1 |
| Operations | Capital expenditure, of revenue | 0.1% | Median capital expenditure over revenue, fiscal 2024 to 2026 |
| Operations | Working capital, of revenue | −1.7% | Working capital over revenue, end of the last 4 quarters to FY2027 Q1 |
| 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 | 25.5% | Combined statutory rate of corporate income tax of the United States, 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 the last 4 quarters to Q1 FY2027, each with the documents it comes from.
| Input | Value | Method | Documents |
|---|---|---|---|
| Adjusted EBITDA | $7.7bn est. | Adjusted EBITDA of the company page | 10-Q 2025-09, 10-Q 2025-06, 10-Q 2025-12, 10-K 2026-03, 10-Q 2026-06 |
| Share-based pay | $0 | No share-based pay is reported | 10-Q 2025-06, 10-Q 2025-09, 10-Q 2025-12, 10-K 2026-03, 10-Q 2026-06 |
| EBITDA after share-based pay | $7.7bn est. | Adjusted EBITDA less share-based pay | 10-Q 2025-09, 10-Q 2025-06, 10-Q 2025-12, 10-K 2026-03, 10-Q 2026-06 |
| Depreciation and amortisation | $767m | Depreciation and amortisation of adjusted EBITDA | 10-Q 2025-09, 10-Q 2025-12, 10-K 2026-03, 10-Q 2026-06 |
| Revenue | $411bn | Revenue of the base period | 10-Q 2025-09, 10-Q 2025-12, 10-K 2026-03, 10-Q 2026-06 |
| Operating lease cost | $433m est. | Operating lease cost | 10-K 2026-03 |
| Borrowings | $9.7bn | Total debt less lease liabilities | 10-Q 2026-06 |
| Lease liabilities | $2.0bn | Lease liabilities | 10-Q 2026-06 |
| Cash and short-term investments | $5.2bn | Cash and short-term investments | 10-Q 2026-06 |
| Non-controlling interests | $376m | Non-controlling interests | 10-Q 2026-06 |
| Receivables | $30.3bn | Receivables | 10-Q 2026-06 |
| Payables | $63.7bn | Payables | 10-Q 2026-06 |
| Inventories | $26.3bn | Inventories | 10-Q 2026-06 |
| Capital expenditure | $436m | Capital expenditure of the latest fiscal year | 10-K 2026-03 |
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.