LBO & Paper LBO
Why might a fund prefer a 1.8x MOIC in 3 years over a 2.5x MOIC in 7 years? Quantify.
Model answer
1.8x/3yr: IRR = 1.8^(1/3) - 1 ≈ 21.6%. 2.5x/7yr: IRR = 2.5^(1/7) - 1 ≈ 13.9%. The faster deal has higher IRR (~22% vs ~14%) and frees capital to redeploy, which compounds — important because LPs…
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