easy · Investment Banking
In an LBO, a sponsor's 'Entry Multiple' is 9.0x EBITDA and the 'Exit Multiple' is also 9.0x EBITDA. Despite no multiple expansion, the sponsor achieves a 25% IRR.
What are the two primary drivers of this return?
- Synergies and cost of debt
- Dividend recaps and IPO proceeds
- EBITDA growth and debt repayment
- Working capital extraction and tax shields
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