hard · Private Equity & LBOs

In a 'Paper LBO' interview context, if you are told there is a $10.0M cash shortfall at close, what is the fastest way to account for it when estimating the Year 5 Exit Equity value?

1. Add $10.0M to the entry debt and estimate Year 5 debt paydown starting from that higher base
2. Subtract $10.0M from the exit enterprise value
3. Ignore it, as $10.0M is typically immaterial in large deals
4. Reduce the entry multiple by 0.1x

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