medium · Investment Banking ma-lbo
SteelBridge Manufacturing is acquired in an LBO at 6.0x EBITDA. 40% of the deal is funded with equity.
If the company performs exactly as projected and is sold after 5 years at the same 6.0x multiple, what is a primary driver of the IRR being above 0%?
- A gradual decrease in the corporate tax rate applied over the holding period.
- Distributing annual dividends to the common equity holders each year.
- Deleveraging through the use of free cash flow to pay down debt principal.
- Multiple expansion from the 6.0x entry multiple up to a higher exit multiple at sale.
Sign up free to see the explanation and track your rank →
More Investment Banking ma-lbo practice
- During the sell-side process, a 'stapled financing' package… — What is the primary strateg
- Which of the following is a 'Material Adverse Effect' (MAE) carve-out typically found in a
- A strategic acquirer is calculating the Present Value of syn… — What is the Terminal Value
- In the context of a virtual data room (VDR), why does a sell-side advisor often 'stage' th
- During Phase I of a sell-side process, the advisor performs… — What is the primary purpose
- In the 'Sources and Uses' for an LBO, where does the 'Management Rollover' appear, and how
- Which document is the 'teaser' designed to lead to?
- Which component of the LBO 'Capital Stack' typically has the lowest cost of capital and th