Practice · Paper LBO
Paper LBO practice: a worked example
Updated 2026-07-24 · Every number below is produced by the same engine as our timed paper-LBO drill — nothing is hand-computed.
A paper LBO is a leveraged-buyout exercise you solve out loud with no spreadsheet: the interviewer hands you entry EBITDA, a purchase multiple, leverage, growth, and a hold period, and you back into the sponsor's returns — MOIC and IRR — using clean mental math, typically in five to ten minutes.
The deal
Here is the prompt, exactly as an interviewer would set it up. Work it on paper before reading the solution.
- Entry EBITDA
- $150M
- Entry multiple
- 9.0x EV/EBITDA
- Leverage
- 6.0x EBITDA of debt
- EBITDA growth
- 10% / year
- Hold period
- 5 years
- Exit multiple
- 9.0x EV/EBITDA
- Free cash flow
- $60M / year (all to debt paydown)
Back into the sponsor's MOIC and IRR — no Excel.
The walkthrough, line by line
Narrate each line the way you would across the table: name the step, state the formula, then give the number.
- 1Entry enterprise value$150M EBITDA × 9.0x$1,350M
- 2Entry debt6.0x leverage × $150M EBITDA$900M
- 3Sponsor equity in$1,350M EV − $900M debt$450M
- 4Exit EBITDA (year 5)$150M × (1 + 10%)^5$242M
- 5Exit enterprise value$242M EBITDA × 9.0x$2,174M
- 6Debt paid down$60M FCF/yr × 5 yrs$300M
- 7Exit debt$900M − $300M paid down$600M
- 8Sponsor equity out$2,174M EV − $600M debt$1,574M
- 9MOIC$1,574M out ÷ $450M in3.50x
- 10IRR3.50x ^ (1/5) − 128.5%
Two lines carry the whole exercise: sponsor equity in (entry EV minus entry debt) and sponsor equity out (exit EV minus remaining debt). Everything in between — growing EBITDA, marking the exit, sweeping free cash flow to debt — exists to move you from one to the other. If your MOIC or IRR is off, the mistake is almost always in the debt paydown or the exit equity.
Figures are rounded to the nearest million for display, but every line is computed at full precision — so re-deriving a later line from an earlier rounded figure can look a few million off. The engine's numbers are the exact ones.
Practice with fresh numbers
One worked example teaches the shape; reps make it automatic. The free paper-LBO generator produces a new clean-number scenario every click with the full worked solution — no signup. When the mechanics feel automatic, the timed drill grades your MOIC and IRR against the clock and throws multiple-expansion, high-leverage, and solve-the-exit variants at you.
The paper LBO is one station of the interview, not the whole loop — see every LBO interview question in the bank and the superday guide for how it fits into the full day.
10 real questions a day, picked for you — free.
Paper LBO: what candidates ask
What is a paper LBO?+
A paper LBO is a leveraged-buyout exercise solved on paper or a whiteboard with no spreadsheet. The interviewer gives you entry EBITDA, a purchase multiple, leverage, growth, a hold period, and free cash flow; you compute entry equity, roll the deal forward, and back into the sponsor's MOIC and IRR out loud.
How long should a paper LBO take?+
Most interviewers walk through it in roughly five to ten minutes. In practice, aim to finish a clean-number scenario like the one on this page in about five minutes while narrating every step — the talking is graded as much as the arithmetic.
What do interviewers look for in a paper LBO?+
Structure and narration: state each step before you compute it, keep the arithmetic clean, and show you understand the three drivers of returns — debt paydown, EBITDA growth, and the exit multiple. Knowing rough MOIC-to-IRR conversions (a 2.0x over five years is roughly 15%, a 3.0x roughly 25%) signals real fluency.
Do I need Excel for a paper LBO?+
No — that is the point of the exercise. Paper LBOs use deliberately clean numbers so the whole deal can be solved with mental math on paper. If you reach for a spreadsheet or a calculator, you are practicing the wrong skill.
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