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…
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