Deal Lab · Buyout model 1.0
Philip Morris International Inc. Buyout Model
A buyout of Philip Morris International Inc. on its published figures for the last 4 quarters to Q3 FY2026, 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
6.1%
Multiple of money
1.34x
Sponsor's equity
$99.9bn
Enterprise value
$191bn
Proceeds at exit
$134bn
Sources and Uses
| Uses | Amount |
|---|---|
| Equity price | $147bn |
| Borrowings refinanced | $47.6bn |
| Transaction costs | $3.8bn |
| Financing fees | $1.9bn |
| Minimum cash | $863m |
| Uses | $201bn |
| Sources | Amount |
|---|---|
| Senior loan | $70.9bn |
| Subordinated notes | $23.6bn |
| Cash of the company | $6.7bn |
| Sponsor's equity | $99.9bn |
| Sources | $201bn |
Projection
| Closing | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|---|
| Revenue | $43.1bn | $43.1bn | $43.1bn | $43.1bn | $43.1bn | $43.1bn |
| EBITDA of the case | $19.1bn | $19.1bn | $19.1bn | $19.1bn | $19.1bn | $19.1bn |
| Cash cost of leases | $343m | $343m | $343m | $343m | $343m | $343m |
| Depreciation and amortisation | $2.1bn | $2.1bn | $2.1bn | $2.1bn | $2.1bn | |
| Capital expenditure | $1.6bn | $1.6bn | $1.6bn | $1.6bn | $1.6bn | |
| Increase in working capital | $0 | $0 | $0 | $0 | $0 | |
| Interest | $7.6bn | $7.0bn | $6.5bn | $5.9bn | $5.3bn | |
| Tax | $2.3bn | $2.5bn | $2.6bn | $2.8bn | $2.9bn | |
| Cash available for debt service | $14.8bn | $14.6bn | $14.5bn | $14.3bn | $14.2bn |
Debt Schedule
| Closing | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|---|
| Senior loan | $70.9bn | $63.7bn | $56.2bn | $48.2bn | $39.7bn | $30.8bn |
| Subordinated notes | $23.6bn | $23.6bn | $23.6bn | $23.6bn | $23.6bn | $23.6bn |
| Revolving facility | $0 | $0 | $0 | $0 | $0 | $0 |
| Cash | $863m | $863m | $863m | $863m | $863m | $863m |
| Debt to EBITDA | 5.00x | 4.62x | 4.23x | 3.81x | 3.36x | 2.90x |
| EBITDA to interest | 2.52x | 2.71x | 2.94x | 3.24x | 3.62x |
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 | 4.62x | 4.23x | 3.81x | 3.36x | 2.90x |
| Band of debt to EBITDA | Highly leveraged | Aggressive | Aggressive | Significant | Significant | Intermediate |
Return Bridge
| Amount | |
|---|---|
| Sponsor's equity | $99.9bn |
| EBITDA growth | $0 |
| Change of multiple | $0 |
| Net debt repaid | +$40.1bn |
| Non-controlling interests | $0 |
| Costs at closing | −$5.7bn |
| Management and limited liability | $0 |
| Proceeds at exit | $134bn |
Sensitivity Tables
| Entry by exit | 8.00x | 9.00x | 10.0x | 11.0x | 12.0x |
|---|---|---|---|---|---|
| 8.00x | 9.4% | 13.2% | 16.6% | 19.6% | 22.4% |
| 9.00x | 3.6% | 7.5% | 10.8% | 13.8% | 16.5% |
| 10.0x | −0.8% | 2.9% | 6.1% | 9.0% | 11.5% |
| 11.0x | −4.2% | −0.7% | 2.4% | 5.1% | 7.6% |
| 12.0x | −7.1% | −3.7% | −0.7% | 2.0% | 4.4% |
| Debt by growth | −4.0% | −2.0% | 0.0% | 2.0% | 4.0% |
|---|---|---|---|---|---|
| 4.00x | 0.1% | 3.2% | 6.1% | 9.0% | 11.7% |
| 4.50x | −0.5% | 2.9% | 6.1% | 9.2% | 12.2% |
| 5.00x | −1.2% | 2.6% | 6.1% | 9.4% | 12.6% |
| 5.50x | −2.1% | 2.1% | 6.1% | 9.7% | 13.2% |
| 6.00x | −3.3% | 1.6% | 6.0% | 10.1% | 13.9% |
Solvers
Highest entry multiple for a return of 20.0%
4.39x
The target return
Revenue growth a year for a return of 20.0%
8.9%
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 | 44.2% | EBITDA over revenue, last 4 quarters to FY2026 Q3 |
| Operations | Cash cost of leases, of revenue | 0.8% | Cash cost of leases over revenue, last 4 quarters to FY2026 Q3 |
| Operations | Depreciation and amortisation, of revenue | 4.8% | Depreciation and amortisation over revenue, last 4 quarters to FY2026 Q3 |
| Operations | Capital expenditure, of revenue | 3.8% | Median capital expenditure over revenue, fiscal 2023 to 2025 |
| Operations | Working capital, of revenue | 26.5% | Working capital over revenue, end of the last 4 quarters to FY2026 Q3 |
| 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 Q3 FY2026, each with the documents it comes from.
| Input | Value | Method | Documents |
|---|---|---|---|
| Adjusted EBITDA | $19.1bn | Adjusted EBITDA of the company page | 10-K 2025-12, 10-Q 2025-09, 10-Q 2026-03, 10-Q 2026-06, 10-Q 2026-09 |
| Share-based pay | $0 | No share-based pay is reported | 10-K 2025-12, 10-Q 2025-09, 10-Q 2026-03, 10-Q 2026-06, 10-Q 2026-09 |
| EBITDA after share-based pay | $19.1bn | Adjusted EBITDA less share-based pay | 10-K 2025-12, 10-Q 2025-09, 10-Q 2026-03, 10-Q 2026-06, 10-Q 2026-09 |
| Depreciation and amortisation | $2.1bn | Depreciation and amortisation of adjusted EBITDA | 10-K 2025-12, 10-Q 2025-09, 10-Q 2026-03, 10-Q 2026-06, 10-Q 2026-09 |
| Revenue | $43.1bn | Revenue of the base period | 10-K 2025-12, 10-Q 2025-09, 10-Q 2026-03, 10-Q 2026-06, 10-Q 2026-09 |
| Operating lease cost | $343m | Operating lease cost | 10-K 2025-12, 10-Q 2025-09, 10-Q 2026-03, 10-Q 2026-06, 10-Q 2026-09 |
| Borrowings | $47.6bn | Total debt less lease liabilities | 10-K 2025-12, 10-Q 2026-09 |
| Lease liabilities | $733m est. | Lease liabilities | 10-K 2025-12 |
| Cash and short-term investments | $6.7bn | Cash and short-term investments | 10-Q 2026-09 |
| Non-controlling interests | $2.0bn | Non-controlling interests | 10-Q 2026-09 |
| Receivables | $5.2bn | Receivables | 10-Q 2026-09 |
| Payables | $4.0bn | Payables | 10-Q 2026-09 |
| Inventories | $10.3bn | Inventories | 10-Q 2026-09 |
| Capital expenditure | $1.6bn | Capital expenditure of the latest fiscal year | 10-K 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.