LBO & Paper LBO
A sponsor buys a company at 10x and the base case assumes a flat 10x exit. The deal still pencils to a 20%+ IRR. What is doing the work, and what does that tell you about deal quality?
Model answer
With a flat exit multiple, multiple expansion contributes zero — all returns come from debt paydown and EBITDA growth (organic/inorganic growth plus margin improvement, with FCF deleveraging the…
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