easy · Private Equity & LBOs

In LBO returns analysis, 'deleveraging' is a return driver. How does a dividend recap interact with this driver?

1. It increases the impact of deleveraging because the interest is tax-deductible.
2. It removes deleveraging as a return driver entirely.
3. It effectively 'resets' the deleveraging process to a higher starting point.
4. It accelerates deleveraging by forcing the company to pay down debt faster.

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