LBO & Paper LBO
Show how a 1-turn of multiple expansion changes a paper LBO. Exit EBITDA $130; entry multiple 10x; compare exiting at 10x vs 11x with $400 of net debt and $400 entry equity, 5-year hold.
Model answer
At 10x: exit EV = 1,300; exit equity = 1,300 - 400 = $900; MOIC = 900/400 = 2.25x; IRR ≈ 2.25^(1/5)-1 ≈ 17.6%. At 11x: exit EV = 1,430; exit equity = 1,430 - 400 =…
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