Question of the day
2026-10-08
What IRR do PE sponsors typically target, and how does that frame a paper LBO answer?
Answer it out loud first — like you would in the room. Then check yourself:
Reveal the model answer
Model answer
The conventional target is roughly a ~20-25% IRR and ~2.0-3.0x MOIC over a ~5-year hold (varies by fund, vintage, and market). Use this to frame conclusions: after computing returns, say whether the deal clears the hurdle. If your paper LBO yields ~12% IRR, note it falls short of a typical PE return bar, so the sponsor would need more leverage, a lower entry price, faster growth, or a shorter hold to make it work. Tying math back to the investment decision is what interviewers reward.
Want 10 of these a day, scheduled so they stick?
A free account gets you Daily 10 — ten questions a day from the full 2,300+ bank, spaced-repetition scheduled. No credit card.
Tomorrow's question, in your inbox.
One real IB interview question every morning — free, one-click unsubscribe, nothing else ever.