Deal Lab · Buyout model 1.0
National Grid plc Buyout Model
A buyout of National Grid plc on its published figures for fiscal 2026, 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
−18.5%
Multiple of money
0.36x
Sponsor's equity
£41.0bn
Enterprise value
£76.8bn
Proceeds at exit
£14.7bn
Sources and Uses
| Uses | Amount |
|---|---|
| Equity price | £30.4bn |
| Borrowings refinanced | £46.8bn |
| Transaction costs | £1.5bn |
| Financing fees | £768m |
| Minimum cash | £354m |
| Uses | £79.8bn |
| Sources | Amount |
|---|---|
| Senior loan | £28.8bn |
| Subordinated notes | £9.6bn |
| Cash of the company | £375m |
| Sponsor's equity | £41.0bn |
| Sources | £79.8bn |
Projection
| Closing | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|---|
| Revenue | £17.7bn | £17.7bn | £17.7bn | £17.7bn | £17.7bn | £17.7bn |
| EBITDA of the case | £7.7bn | £7.7bn | £7.7bn | £7.7bn | £7.7bn | £7.7bn |
| Cash cost of leases | £145m | £145m | £145m | £145m | £145m | £145m |
| Depreciation and amortisation | £2.2bn | £2.2bn | £2.2bn | £2.2bn | £2.2bn | |
| Capital expenditure | £8.4bn | £8.4bn | £8.4bn | £8.4bn | £8.4bn | |
| Increase in working capital | £0 | £0 | £0 | £0 | £0 | |
| Interest | £3.0bn | £3.3bn | £3.5bn | £3.5bn | £3.5bn | |
| Tax | £602m | £526m | £483m | £488m | £493m | |
| Cash available for debt service | −£1.5bn | −£1.4bn | −£1.4bn | −£1.4bn | −£1.4bn |
Debt Schedule
| Closing | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|---|
| Senior loan | £28.8bn | £28.5bn | £28.2bn | £27.9bn | £27.6bn | £27.4bn |
| Subordinated notes | £9.6bn | £9.6bn | £9.6bn | £9.6bn | £9.6bn | £9.6bn |
| Revolving facility | £0 | £4.8bn | £7.7bn | £7.7bn | £7.7bn | £7.7bn |
| Cash | £354m | £354m | −£1.9bn | −£7.0bn | −£12.2bn | −£17.4bn |
| Debt to EBITDA | 5.00x | 5.59x | 5.92x | 5.89x | 5.85x | 5.81x |
| EBITDA to interest | 2.54x | 2.31x | 2.19x | 2.21x | 2.22x |
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 | 5.59x | 5.92x | 5.89x | 5.85x | 5.81x |
| Band of debt to EBITDA | Highly leveraged | Highly leveraged | Highly leveraged | Highly leveraged | Highly leveraged | Highly leveraged |
Return Bridge
| Amount | |
|---|---|
| Sponsor's equity | £41.0bn |
| EBITDA growth | £0 |
| Change of multiple | £0 |
| Net debt repaid | −£24.0bn |
| Non-controlling interests | £0 |
| Costs at closing | −£2.3bn |
| Management and limited liability | £0 |
| Proceeds at exit | £14.7bn |
Sensitivity Tables
| Entry by exit | 8.00x | 9.00x | 10.0x | 11.0x | 12.0x |
|---|---|---|---|---|---|
| 8.00x | −44.8% | −19.5% | −9.0% | −1.9% | 3.6% |
| 9.00x | −100% | −26.6% | −15.0% | −7.5% | −1.9% |
| 10.0x | −100% | −29.6% | −18.5% | −11.4% | −6.0% |
| 11.0x | −100% | −32.1% | −21.3% | −14.4% | −9.2% |
| 12.0x | −100% | −34.1% | −23.6% | −16.9% | −11.9% |
| Debt by growth | −4.0% | −2.0% | 0.0% | 2.0% | 4.0% |
|---|---|---|---|---|---|
| 4.00x | −24.8% | −18.1% | −12.6% | −8.0% | −3.8% |
| 4.50x | −31.5% | −22.0% | −15.1% | −9.6% | −4.8% |
| 5.00x | −46.7% | −27.9% | −18.5% | −11.6% | −6.0% |
| 5.50x | −100% | −39.5% | −23.5% | −14.4% | −7.6% |
| 6.00x | −100% | −100% | −32.2% | −18.3% | −9.7% |
Solvers
Highest entry multiple for a return of 20.0%
n/a
No entry multiple reaches the target
Revenue growth a year for a return of 20.0%
17.3%
The target return
Debt capacity at closing, times EBITDA
n/a
The covenants fail without new debt
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 | 43.4% | EBITDA over revenue, fiscal 2026 |
| Operations | Cash cost of leases, of revenue | 0.8% | Cash cost of leases over revenue, fiscal 2026 |
| Operations | Depreciation and amortisation, of revenue | 12.7% | Depreciation and amortisation over revenue, fiscal 2026 |
| Operations | Capital expenditure, of revenue | 47.8% | Median capital expenditure over revenue, fiscal 2024 to 2026 |
| Operations | Working capital, of revenue | −3.5% | Working capital over revenue, end of the fiscal 2026 |
| 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 2026, each with the documents it comes from.
| Input | Value | Method | Documents |
|---|---|---|---|
| Adjusted EBITDA | £7.7bn | Adjusted EBITDA of the company page | Annual financial report 2026-03 |
| Share-based pay | £45.0m | Share-based pay that adjusted EBITDA adds back | Annual financial report 2026-03 |
| EBITDA after share-based pay | £7.7bn | Adjusted EBITDA less share-based pay | Annual financial report 2026-03 |
| Depreciation and amortisation | £2.2bn | Depreciation and amortisation of adjusted EBITDA | n/a |
| Revenue | £17.7bn | Revenue of the base period | Annual financial report 2026-03 |
| Borrowings | £46.8bn | Total debt less lease liabilities | Annual financial report 2026-03 |
| Lease liabilities | £0 | Lease liabilities | Annual financial report 2026-03 |
| Cash and short-term investments | £375m | Cash and short-term investments | Annual financial report 2026-03 |
| Non-controlling interests | £31.0m | Non-controlling interests | Annual financial report 2026-03 |
| Receivables | £3.9bn | Receivables | Annual financial report 2026-03 |
| Payables | £5.0bn | Payables | Annual financial report 2026-03 |
| Inventories | £559m | Inventories | Annual financial report 2026-03 |
| Payments of lease liabilities | £145m | Payments of lease liabilities | Annual financial report 2026-03 |
| Interest on lease liabilities | £0 est. | Interest on lease liabilities at the average rate of finance costs on total debt | Annual financial report 2026-03 |
| Capital expenditure | £10.0bn | Capital expenditure of the latest fiscal year | Annual financial report 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.