The sources and uses of funds in a model must always balance, they must always be the same Let's look at what we're going to include in our uses of funds here i.e. what are we going to be spending money on Well the largest part is going to be buying the company acquisition equity value But we're also going to be using funds to refinance the existing net debt To plug a hole in the pension deficit, to pay for some extra working capital And to pay for fees Where are we going to source all of that funding from? We're going to source it from a revolving credit facility, debt and equity So let's start calculating our uses first The acquisition equity value, we've got in our acquisition valuation section near the top 165 The existing net debt we get from the same section The existing net debt is 40 The pension deficit comes from the same place and the working capital adjustment again up there as well Now the fees come from this "Other assumption" section here. The fees are given as 0.5% of EV So we take that figure, multiply that by the EV further up the page of 225 I've now got all of my uses of funds and they come to 236.1 I now need to work out, where am I going to get all of that from? It's going to come from three places, the revolving credit facility, debt and equity The revolving credit facility is used explicitly for the working capital adjustment. So what is this? This happens because between the deal dates and completion dates, we're expecting the working capital of the target to go up That means that we're going to need to pay an extra ten I need a short term amount of funding, just to pay for that extra ten and it will probably go down quite quickly afterwards So that's the revolving credit facility, we're got an assumption that that's going to be 35% of my financing I'm going to multiply that by the acquisition equity value of 165 Now the remainder of my financing is going to be from debt And I'll calculate that by taking the total uses of funds (236.1, that's what I need) I'll then subtract out the funding I've already got And thus my debt funding is a plug Let's check my total sources of funding equal my total uses, 236.1 236.1 Now you might ask with the equity funding, why did we take 30% of the acquisition? Why didn't we take 30% of total uses of funds? That would have made a bit more sense Well the reason is, imagine if we had 100% of equity funding That means that I'd pay for the company with shares But I'll also pay to refinance net debt with shares and I'd pay the pension deficit in shares And I'll pay the working capital in shares And I'd pay all of the fees in shares. There's a lot of people there who do not want to be paid in shares So that's your equity funding is always taken as a percentage of the acquisition equity value