hard · Private Equity paper-lbo
A portfolio company management team is granted 'Sweet Equity' in an LBO. The sponsor invests $180M for 90% and management $20M for 10%. An equity ratchet specifies that if the fund achieves a 2.5x MOIC, management’s stake increases to 20%.
If the exit equity is $600M, what is management's MOIC with the ratchet?
- 2.67x
- 6.0x
- 3.0x
- 5.0x
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