LBO & Paper LBO
An interviewer says: 'EBITDA grew 50% but the sponsor's MOIC was only 1.4x.' How can strong EBITDA growth produce a weak return?
Model answer
Several culprits despite operational growth
- significant multiple contraction at exit offsetting the bigger EBITDA
- low leverage / a large equity check, so the return isn't amplified
- …
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