LBO & Paper LBO
Total equity in an LBO is $400. Management rolls $40 and the sponsor funds $360. Walk through the ownership and what each party earns if exit equity is $1,000.
Model answer
Rollover is normally pari passu common equity, so ownership follows contribution: sponsor 360/400 = 90%, management 40/400 = 10%. At a $1,000 exit: sponsor receives 900 (2.5x MOIC on 360) and…
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.