LBO & Paper LBO
Quick math: Entry EV $1,000 = $500 debt + $500 equity. EV grows 30% to $1,300, debt unchanged. By what multiple did equity grow, and why isn't it 1.3x?
Model answer
Exit equity = 1,300 - 500 = $800. Equity MOIC = 800/500 = 1.6x, not 1.3x. The EV grew 1.3x (+$300), but that entire $300 of value accrued to a $500 equity base…
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