medium · Private Credit fund-structures-returns-economics
A private equity fund provides an 'equity ratchet' to a management team. Management initially owns 10% of the equity. The ratchet states that if the fund achieves a 2.5× MOIC or higher, management's stake increases to 15%.
If the exit equity value is $500M and the fund achieves a 3.0× MOIC, what is the value of the management's stake?
- $50M
- $75M
- $125M
- $100M
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