LBO & Paper LBO
Name the three primary value-creation (returns) drivers in an LBO.
Model answer
1) Debt paydown / deleveraging — using the company's free cash flow to repay debt grows the equity stub as enterprise value shifts from creditors to the sponsor. 2) EBITDA growth — increasing EBITDA…
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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?
- Of the three returns drivers, which is considered the highest quality and which is the lowest quality, and why?
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