medium · Investment Banking ma-lbo
Which of the following scenarios would result in the highest IRR for an LBO sponsor, assuming all other factors like EBITDA growth and exit multiple are held constant?
- The exit occurs in Year 7 instead of Year 5 with the same MoIC.
- The sponsor increases the initial equity contribution to 50% to reduce interest expense.
- A dividend recapitalization occurs in Year 2 of a 5-year hold.
- The company uses all excess cash to pay down debt rather than issuing a dividend.
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