LBO & Paper LBO
In a value-creation bridge, why is the EBITDA-growth contribution typically valued at the ENTRY multiple while the multiple-expansion contribution is valued at the EXIT EBITDA?
Model answer
It's a convention to avoid double-counting the cross term (ΔEBITDA × Δmultiple). Exit EV − Entry EV = (ΔEBITDA × entry multiple) + (Δmultiple × exit EBITDA). The growth bucket holds the multiple…
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.