Merger Model - Macabacus

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Get StartedContact Sales Share this article 3 minutes read Last updated: November 26, 2025 Download the template Merger Model The Macabacus merger model implements advanced M&A, accounting, and tax concepts, and is intended for use in modeling live transactions (with some modification, of course). Advanced functionality includes multiple financing and capitalization scenarios, third-party financing, target debt repayment, asset or stock deal structure, IRC Section 338 elections, net operating losses and their limitation under IRC Section 382, and more. Given the complexity of this template, be sure you are comfortable with how to build an operating model and an M&A model.

What is a LBO (Leveraged Buyout) Model

An LBO (Leveraged Buyout) model is an Excel-based type of M@A model used to evaluate the potential outcomes of acquiring a company through significant debt financing. Its purpose is to help private equity firms or investment analysts understand both the risks and the potential returns associated with a leveraged acquisition. By analyzing factors like cash flow, debt repayment, and the company’s financial performance, the model guides decision-makers in choosing the right companies for acquisition.

Key components of a LBO Model

LBO models typically consist of a the following key components:

  • Financial Statements for the Target Company

A typical LBO model starts with the financial statements of the target company, which include the income statement, balance sheet, and cash flow statement. These provide a historical record of the company’s financial performance and are the foundation for future projections. Analysts use these statements to assess the company’s profitability, liquidity, and capital structure, helping to determine if the company can handle the debt used in the buyout.

  • Assumptions and Projections

This component includes making critical assumptions about the target company’s future financial performance. It involves projecting revenue growth, operating costs, capital expenditures, and working capital needs. Additionally, assumptions about interest rates on the debt, tax rates, and the company’s ability to repay debt over time are essential. Accurate projections are crucial in evaluating whether the company can generate enough cash flow to meet its debt obligations.

  • Acquisition Structure

The acquisition structure in an LBO model outlines how the deal will be financed, typically involving a mix of debt and equity. This section identifies the amount of leverage (debt) that will be used to purchase the company, the interest rate on that debt, and how much equity the buyers are putting in. A well-structured deal balances risk and return, aiming to maximize returns to equity investors while ensuring the company can service its debt.

  • Key Financial Metrics

Key financial metrics such as Internal Rate of Return (IRR), Return on Equity (ROE), and Debt Service Coverage Ratio (DSCR) are essential for evaluating the viability of the LBO. These metrics help investors assess whether the deal will generate adequate returns relative to the risk. 

  • Sensitivity Analysis

Sensitivity analysis tests how changes in key variables like revenue growth, interest rates, or exit multiples impact the outcome of the deal. By running different scenarios, analysts can assess the risks associated with varying economic conditions or company performance. This helps in understanding how sensitive the projected returns are to assumptions, allowing for more informed decision-making under uncertainty.

  • Exit Strategy

The exit strategy in an LBO model outlines how the investors plan to exit the deal, typically within 3-7 years. Common exit strategies include selling the company to another firm, taking it public through an IPO, or selling shares back to the market. The goal is to sell at a higher valuation than the purchase price, and the exit assumptions (like valuation multiples) play a major role in determining the overall return on investment.

The Macabacus Excel Merger Model Template Preview

The Macabacus Merger (M&A) Model is a type of  LBO model  available as a  part of the Macabacus Excel suite. Our  M&A model is designed to show how a deal might affect the acquiring company’s earnings, balance sheet, and overall financial health.

To access this free merger model template, see the instructions below the preview.

Merger Model Template

What can you do with the Macabacus Merger Model Template?

Our LBO template can be used for the following: 

  • Accretion/Dilution Analysis: One of the main things the model helps with is figuring out whether the deal will increase (accretion) or decrease (dilution) earnings per share. This is crucial for determining if the merger will make shareholders better off.
  • Pro Forma Financials: The model lets you create pro forma financial statements that combine both companies’ financials. This helps show what the new, merged entity would look like in terms of revenue, costs, and profitability.
  • Synergies & Costs: It factors in potential synergies, like cost savings or increased revenue, as well as the costs of the deal itself (legal fees, advisory costs, etc.).
  • Financing Options: The model also allows you to experiment with different ways to finance the acquisition (using debt, equity, or a combination) and see how that affects things like the company’s debt load and financial ratios.
  • What-If Scenarios: You can run different scenarios to see how changing key factors—like the purchase price or the amount of debt taken on—affects the overall outcome of the deal.

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Key functionalities of the Macabacus Merger Model Template

Mergers and acquisitions are transformative events in a company’s lifecycle, and a comprehensive, accurate model is a pivotal part of these transactions. It helps in determining the deal’s feasibility, estimating the financial impact, and planning the post-merger integration. The Macabacus merger model offers a highly detailed and flexible framework for these analyses.

A few key functionalities in this M&A Excel template include:

  • Multiple Financing and Capitalization Scenarios: This enables the user to simulate various scenarios based on different financing options and capital structures, aiding in the decision-making process.
  • Third-Party Financing: The model can simulate scenarios where external financing is used for the transaction, providing a more accurate picture of the deal’s financial implications.
  • Asset or Stock Deal Structure: This function allows the user to evaluate the financial impact of the deal, whether it’s structured as an asset purchase or a stock purchase.
  • IRC Section 338 Elections: IRC Section 338 allows for a “step-up” in the basis of assets in a stock acquisition, which can result in future tax deductions. The model takes this into account in its calculations.
  • Net Operating Losses (NOLs) and Limitation under IRC Section 382: The model includes functionality to model NOLs and their usage, limited under IRC Section 382 following an ownership change.

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How to use the Macabacus M&A Model Template – Example

Consider a hypothetical example where Company A is planning to acquire Company B. With the Macabacus merger model, the financial analysts at Company A can run multiple financing and capitalization scenarios, such as using internal cash reserves, raising debt, or issuing new equity. They can also simulate the impact of third-party financing on the company’s financials.

If Company B has substantial NOLs, the analysts can model the limitations on their usage under IRC Section 382 due to the ownership change. If the deal is structured as a stock acquisition, the analysts can model the impact of IRC Section 338 elections and estimate future tax savings due to the step-up in the basis of assets.

How to perform  Multiple Scenario Analysis with the Macabacus Merger Model Template

One of the standout features of this M&A model template is its ability to handle multiple scenarios side by side. This feature is a powerful analytical tool, allowing you to compare the implications of different financial, operational, or strategic decisions within the context of the proposed merger or acquisition.

For instance, you can input varying financing strategies, capital structures, or deal structures, and the model will present the financial outcomes of each scenario in a comparative format. This might include differences in earnings per share, debt ratios, return on investment, or any other financial metrics that are crucial to your decision-making process. This ability to compare ‘what if’ scenarios side by side not only saves considerable time but also offers clarity, making it easier to evaluate the relative merits and potential risks associated with each option.

The side-by-side comparison feature enables strategic planning with a data-driven approach. It ensures that decisions aren’t based on single-point estimates but rather consider a range of possible outcomes. By exploring multiple scenarios, you can better anticipate potential challenges, adjust your strategies proactively, and thereby increase the likelihood of a successful transaction.

Unlock M&A Insights with the Merger Model Template

Despite its advanced functionalities, this merger template should be adapted to the specific transaction at hand. It is an invaluable tool for financial analysts and investment bankers in the complex, high-stakes world of M&A transactions. Its effective utilization requires a strong understanding of operating and M&A models, as well as the intricate dynamics of the merger process. However, with this knowledge and the right model at their disposal, professionals can unlock new levels of insight and precision in their analysis.

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Webinar: The AI Edge in Investment Banking Join experts from Macabacus & LSEG to learn practical insights about AI’s influence on the future of banking. Read more DCF Excel Template Elevate your investment analysis with our free DCF model template. Understand discounted cash flow principles and perform accurate valuations in Excel. Read more Operating Model Excel Template Download our free operating model Excel template. Forecast revenue, expenses, and key financial metrics for better decision-making. Read more LBO Excel Model Try LBO modeling with our comprehensive Excel template. Understand key concepts, calculate returns, and gain actionable insights. Read more
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