Private Equity & Exit Opps
Buy-and-build math: platform has $100 EBITDA, bought at 10.0x with $600 debt / $400 equity. It buys an add-on with $20 EBITDA at 6.0x, funded entirely with new debt. Assume no growth, no synergies, no paydown, and a 10.0x exit on the combined business. What did the add-on do to returns?
Model answer
Add-on cost = 20 × 6 = $120, all new debt → pro forma debt = 600 + 120 = $720; sponsor equity still $400. Exit: combined EBITDA = 120 at 10x → EV = $1,200; exit equity = 1,200 − 720 = $480. Versus…
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