OpCo / LBO (Operating Company / Leveraged Buyout)

A deal structure where an operating business is acquired using a significant proportion of borrowed money, with the acquired company's own cash flow and assets used to service that debt.

OpCo/LBO underwriting differs materially from real estate underwriting: instead of a single asset's NOI and cap rate, the model tracks a full three-statement operating forecast, debt paydown schedule, and equity waterfall including any PIK toggle structure — which is why it typically runs through its own dedicated underwriting engine rather than a generic real estate template.