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Erudite AfricaCenter of Excellence
← Leveraged Buyout (LBO) Modeling

LBO logic, targets and the capital stack

Module 01 / 5 · 60 min · Free preview

Why sponsors buy companies with borrowed money, what makes a good target, how the layers of debt and equity are arranged, and which Ethiopian rules limit how much leverage a deal can carry.

In this module you will learn to

  • Explain how a leveraged buyout creates equity value through EBITDA growth, multiple expansion and deleveraging
  • Screen an Ethiopian company against the cash flow, asset and management tests of a good LBO target
  • Describe senior debt, mezzanine, vendor notes and equity, their ranking and typical terms
  • Apply the large exposure limit of SBB/87/2024 and the investment limits of SBB/92/2024 to an acquisition financing

Built on

  • Erudite Africa training module: Ethiopian Context, topic 3.b Leveraged Buyout (LBO) Modeling, Levels 1 and 2 (October 2026)
  • NBE Directives SBB/87/2024, SBB/92/2024, SBB/95/2025, NBE/INT/13/2026, FXD/01/2024 and FXD/04/2026, and NBE Monetary Policy Committee release No. 7 (July 2026)
  • Investment Proclamation No. 1180/2020, Investment Regulation No. 474/2020 and Ethiopian Investment Board Directive No. 1082/2025
  • Income Tax Proclamation No. 979/2016 as amended by No. 1395/2025, and Ministry of Finance Transfer Pricing Directive No. 981/2024
  • Ethiopia's Commercial Code and trade competition law, described without article references pending confirmation of the official texts

Examples and companies are fictional. Bank practices are shown as typical Ethiopian practice, not as any one bank's policy. Always apply your own institution's approved policy and the current NBE directives.