medium · Private Equity & LBOs
A sponsor acquires a company with $100M LTM EBITDA at 10.0x EV/EBITDA, funded with $600M of net debt and the remainder in equity. Over a 5-year hold, EBITDA grows to $150M, the business generates $250M of cumulative free cash flow that is entirely swept to repay debt, and the company is exited at 11.0x.
What is the equity MOIC at exit?
- 3.25x — exit EV of $1,650M less $350M of remaining net debt, over the $400M equity check
- 2.625x — exit EV of $1,650M less the original $600M of net debt, over the $400M equity check
- 2.875x — exit at the entry 10.0x multiple ($1,500M EV) less $350M net debt, over $400M equity
- 3.875x — exit equity of $1,300M plus the $250M of swept cash, over the $400M equity check
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