Sources and Uses
AdvancedSources and uses is a summary table in a transaction, such as an acquisition or leveraged buyout, showing where the money to fund the deal comes from and how it will be spent.
The table has two sides that must always balance. Sources list the funding: new debt, equity from investors, cash on the target's or acquirer's balance sheet, and sometimes seller financing or rollover equity from existing owners. Uses list the payments: the purchase price for the equity, repayment of the target's existing debt, transaction fees and financing fees.
For example, a buyer acquiring a company might need 600,000,000 in total: 500,000,000 for the shares, 80,000,000 to repay the target's existing debt and 20,000,000 for fees. It might fund this with 350,000,000 of new debt and 250,000,000 of equity.
The sources and uses table is one of the first things built in a transaction model. It determines how much debt and equity are needed, which drives the analysis of returns, leverage and earnings per share.
It also provides a clear summary for lenders, investors and boards of how the deal will be financed.
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