Deal Lab · Buyout model 1.0
Norfolk Southern Corporation Buyout Model
A buyout of Norfolk Southern Corporation on its published figures for the last 4 quarters to Q3 FY2026, in US dollars: revenue flat, the margin and the shares of revenue of that period, entry and exit at 10.0x EBITDA, exit after 5 years.
Returns
Internal rate of return
0.1%
Multiple of money
1.01x
Sponsor's equity
$30.0bn
Enterprise value
$56.1bn
Proceeds at exit
$30.1bn
Sources and Uses
| Uses | Amount |
|---|---|
| Equity price | $40.8bn |
| Borrowings refinanced | $16.6bn |
| Transaction costs | $1.1bn |
| Financing fees | $556m |
| Minimum cash | $259m |
| Uses | $59.4bn |
| Sources | Amount |
|---|---|
| Senior loan | $20.9bn |
| Subordinated notes | $7.0bn |
| Cash of the company | $1.6bn |
| Sponsor's equity | $30.0bn |
| Sources | $59.4bn |
Projection
| Closing | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|---|
| Revenue | $13.0bn | $13.0bn | $13.0bn | $13.0bn | $13.0bn | $13.0bn |
| EBITDA of the case | $5.6bn | $5.6bn | $5.6bn | $5.6bn | $5.6bn | $5.6bn |
| Cash cost of leases | $92.0m | $92.0m | $92.0m | $92.0m | $92.0m | $92.0m |
| Depreciation and amortisation | $1.4bn | $1.4bn | $1.4bn | $1.4bn | $1.4bn | |
| Capital expenditure | $2.5bn | $2.5bn | $2.5bn | $2.5bn | $2.5bn | |
| Increase in working capital | $0 | $0 | $0 | $0 | $0 | |
| Interest | $2.2bn | $2.2bn | $2.2bn | $2.1bn | $2.1bn | |
| Tax | $476m | $482m | $488m | $495m | $503m | |
| Cash available for debt service | $2.6bn | $2.6bn | $2.5bn | $2.5bn | $2.5bn |
Debt Schedule
| Closing | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|---|
| Senior loan | $20.9bn | $20.5bn | $20.2bn | $19.8bn | $19.4bn | $19.0bn |
| Subordinated notes | $7.0bn | $7.0bn | $7.0bn | $7.0bn | $7.0bn | $7.0bn |
| Revolving facility | $0 | $0 | $0 | $0 | $0 | $0 |
| Cash | $259m | $259m | $259m | $259m | $259m | $259m |
| Debt to EBITDA | 5.00x | 4.94x | 4.88x | 4.81x | 4.74x | 4.67x |
| EBITDA to interest | 2.52x | 2.55x | 2.58x | 2.61x | 2.65x |
Covenants and the Credit View
| Closing | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|---|
| Limit of debt to EBITDA | 6.50x | |||||
| Lease-adjusted debt to EBITDA | 5.00x | 4.94x | 4.88x | 4.81x | 4.74x | 4.67x |
| Band of debt to EBITDA | Highly leveraged | Aggressive | Aggressive | Aggressive | Aggressive | Aggressive |
Return Bridge
| Amount | |
|---|---|
| Sponsor's equity | $30.0bn |
| EBITDA growth | $0 |
| Change of multiple | $0 |
| Net debt repaid | +$1.9bn |
| Non-controlling interests | $0 |
| Costs at closing | −$1.7bn |
| Management and limited liability | $0 |
| Proceeds at exit | $30.1bn |
Sensitivity Tables
| Entry by exit | 8.00x | 9.00x | 10.0x | 11.0x | 12.0x |
|---|---|---|---|---|---|
| 8.00x | 0.8% | 5.8% | 10.0% | 13.7% | 16.9% |
| 9.00x | −4.8% | 0.2% | 4.4% | 8.1% | 11.3% |
| 10.0x | −8.8% | −3.9% | 0.1% | 3.6% | 6.7% |
| 11.0x | −11.9% | −7.2% | −3.3% | 0.0% | 3.0% |
| 12.0x | −14.5% | −9.9% | −6.2% | −2.9% | 0.0% |
| Debt by growth | −4.0% | −2.0% | 0.0% | 2.0% | 4.0% |
|---|---|---|---|---|---|
| 4.00x | −6.1% | −2.3% | 1.2% | 4.5% | 7.7% |
| 4.50x | −7.5% | −3.2% | 0.7% | 4.3% | 7.8% |
| 5.00x | −9.3% | −4.3% | 0.1% | 4.2% | 7.9% |
| 5.50x | −11.6% | −5.7% | −0.6% | 3.9% | 8.1% |
| 6.00x | −14.9% | −7.5% | −1.5% | 3.6% | 8.2% |
Solvers
Highest entry multiple for a return of 20.0%
n/a
No entry multiple reaches the target
Revenue growth a year for a return of 20.0%
11.3%
The target return
Debt capacity at closing, times EBITDA
6.00x
The loan to value limit
Assumptions and Their Origins
| Group | Assumption | Value | Origin |
|---|---|---|---|
| Transaction | Entry multiple | 10.0x | Convention of buyout 1.0 |
| Transaction | Years to exit | 5 years | Convention of buyout 1.0 |
| Transaction | Transaction costs | 2.0% | Convention of buyout 1.0 |
| Transaction | Financing fees | 2.0% | Convention of buyout 1.0 |
| Transaction | Minimum cash, of revenue | 2.0% | Convention of buyout 1.0 |
| Financing | Debt at closing, times EBITDA | 5.00x | Convention of buyout 1.0 |
| Financing | Debt at most, of the enterprise value | 60.0% | Convention of buyout 1.0 |
| Financing | Senior loan, of the new debt | 75.0% | Convention of buyout 1.0 |
| Financing | Senior loan repaid each year | 1.0% | Convention of buyout 1.0 |
| Financing | Cash sweep | 100% | Convention of buyout 1.0 |
| Financing | Revolving facility, times EBITDA | 1.00x | Convention of buyout 1.0 |
| Financing | Base rate | 3.9% | Policy rate of the United States, BIS central bank policy rates, 27 October 2026 |
| Financing | Senior loan spread | 3.5% | Convention of buyout 1.0 |
| Financing | Subordinated notes spread | 6.0% | Convention of buyout 1.0 |
| Financing | Revolving facility spread | 3.0% | Convention of buyout 1.0 |
| Financing | Covenant headroom on debt to EBITDA | 30.0% | Convention of buyout 1.0 |
| Financing | Minimum EBITDA to interest | 2.00x | Convention of buyout 1.0 |
| Operations | Revenue growth a year | 0.0% | Convention of buyout 1.0 |
| Operations | EBITDA margin | 43.2% | EBITDA over revenue, last 4 quarters to FY2026 Q3 |
| Operations | Cash cost of leases, of revenue | 0.7% | Cash cost of leases over revenue, last 4 quarters to FY2026 Q3 |
| Operations | Depreciation and amortisation, of revenue | 11.0% | Depreciation and amortisation over revenue, last 4 quarters to FY2026 Q3 |
| Operations | Capital expenditure, of revenue | 19.1% | Median capital expenditure over revenue, fiscal 2023 to 2025 |
| Operations | Working capital, of revenue | −6.4% | Working capital over revenue, end of the last 4 quarters to FY2026 Q3 |
| Operations | Leases as debt | Yes | Leases as debt, the basis of the credit metrics |
| Operations | Share-based pay added back | No | Convention of buyout 1.0 |
| Taxes | Tax rate | 25.5% | Combined statutory rate of corporate income tax of the United States, OECD Corporate Tax Statistics, 2026 |
| Taxes | Interest deducted up to 30% of EBITDA | No | Convention of buyout 1.0 |
| Exit | Exit multiple | 10.0x | Convention of buyout 1.0 |
| Exit | Management share of the proceeds | 0.0% | Convention of buyout 1.0 |
| Exit | Target return | 20.0% | Convention of buyout 1.0 |
Inputs and Their Documents
Published figures of the last 4 quarters to Q3 FY2026, each with the documents it comes from.
| Input | Value | Method | Documents |
|---|---|---|---|
| Adjusted EBITDA | $5.7bn est. | Adjusted EBITDA of the company page | 10-K 2025-12, 10-Q 2025-09, 10-Q 2026-03, 10-Q 2026-06, 10-Q 2026-09 |
| Share-based pay | $83.0m | Share-based pay that adjusted EBITDA adds back | 10-K 2025-12, 10-Q 2025-09, 10-Q 2026-03, 10-Q 2026-06, 10-Q 2026-09 |
| EBITDA after share-based pay | $5.6bn est. | Adjusted EBITDA less share-based pay | 10-K 2025-12, 10-Q 2025-09, 10-Q 2026-03, 10-Q 2026-06, 10-Q 2026-09 |
| Depreciation and amortisation | $1.4bn | Depreciation and amortisation of adjusted EBITDA | 10-K 2025-12, 10-Q 2025-09, 10-Q 2026-03, 10-Q 2026-06, 10-Q 2026-09 |
| Revenue | $13.0bn | Revenue of the base period | 10-K 2025-12, 10-Q 2025-09, 10-Q 2026-03, 10-Q 2026-06, 10-Q 2026-09 |
| Operating lease cost | $92.0m est. | Operating lease cost | 10-K 2025-12 |
| Borrowings | $16.6bn | Total debt less lease liabilities | 10-K 2025-12, 10-Q 2026-09 |
| Lease liabilities | $218m est. | Lease liabilities | 10-K 2025-12 |
| Cash and short-term investments | $1.6bn | Cash and short-term investments | 10-Q 2026-09 |
| Non-controlling interests | $0 | The balance sheet reports none | n/a |
| Receivables | $1.2bn | Receivables | 10-Q 2026-09 |
| Payables | $2.1bn | Payables | 10-Q 2026-09 |
| Inventories | $0 | The balance sheet reports none | n/a |
| Capital expenditure | $2.2bn | Capital expenditure of the latest fiscal year | 10-K 2025-12 |
Checks of the Model
- Sources equal uses
- The equity price is above nil
- The sponsor's equity is above nil
- Each balance of debt stays between nil and its amount at closing
- Cash is the cash of the year before and the cash flow of the year
- Cash stays at the minimum unless a shortfall is stated
- The 6 parts of the bridge add up to the proceeds less the sponsor's equity
- The cash flows at the internal rate of return have a present value of nil
Deal Lab computes arithmetic on published figures and on the assumptions of the user. It values no company, recommends no transaction and forecasts no result.