LBO & Paper LBO
Define multiple expansion in an LBO and explain why sponsors rarely underwrite to it.
Model answer
Multiple expansion means exiting at a higher EV/EBITDA (or EV/EBIT) multiple than the entry multiple — e.g., buy at 9x, sell at 11x. It boosts EV and equity even with flat EBITDA. Sponsors rarely…
The full, human-reviewed answer is in the bank.
Sign up free and Daily 10 serves you 10 questions a day from all 1,500+ — or go Pro for unlimited reps.
More from LBO & Paper LBO
- What is a leveraged buyout?
- What makes a company a good LBO candidate?
- What drives returns in an LBO?
- Why does using more leverage increase equity returns (when it works)?
- At a high level, how do you calculate the IRR or money multiple on an LBO?
- Name the three primary value-creation (returns) drivers in an LBO.