Do you need all three statements to make an LBO model?

No, you do not need all 3 statements to make an LBO model. You only have to calculate cash flow available for debt repayment, which shows you the cash surplus with which you can pay back debt. If it’s a cash deficit, then you will have to borrow more from the revolver to stay afloat.

Cash flow available for debt repayment (sometimes referred to as levered free cash flow) can be calculated as cash flow from operations + cash flow from investing.

Alternatively, this is usually equivalent to net income + D&A – increase in net working capital – capex. You may also have to add back other non-cash items like PIK interest, and subtract any cash flows used for add-on acquisitions.

Effectively, we really need just the income statement and the first 2 sections of the cash flow statement.

The reason we usually use all 3 statements is because the balance sheet acts as a useful check to show if your model is right or wrong. The balance sheet is also useful for investors to see how the value of the company’s assets changes over time. For example, asset values can be helpful for lenders who need to assess the value of the company’s collateral in case of default.