Internal Rate of Return — the discount rate that sets NPV of sponsor cash flows to zero. For a simple no-interim-distribution LBO: IRR = (MOIC)^1/n - 1, where n is the holding period in years. PE sponsors typically target 20-30% IRR (and 2.0-3.0× MOIC) over a 5-year hold. IRR is sensitive to timing — interim distributions (dividend recaps) accelerate IRR even if MOIC is unchanged.