LBO & Paper LBO
Quick math: a sponsor invests $200 of equity and sells the stake for $288 two years later. MOIC and IRR?
Model answer
MOIC = 288 / 200 = 1.44x. For a 2-year hold, IRR = MOIC^(1/2) - 1 = sqrt(1.44) - 1 = 1.20 - 1 = 20% exactly. Worth noticing: short holds can produce strong IRRs from modest multiples — a 1.44x looks…
The full, human-reviewed answer is in the bank.
Sign up free and Daily 10 serves you 10 questions a day from all 2,300+ — or go Pro for unlimited reps.
Pro unlocks every model answer — $19.99/mo.
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.
Try the real thing
1 / 3M&A & Merger Models
What makes an acquisition accretive or dilutive to EPS?
Superday coming up? Take the cheat sheet.
The technicals and stories to have cold before you walk in — free, one email, no mailing list.
Free tier: 20 cards + 10 daily reps + ALL drills — no credit card required.