medium · Private Equity paper-lbo
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
Sign up free to see the explanation and track your rank →
More Private Equity paper-lbo practice
- If net debt remained constant at $200M throughout the hold, what was the primary source of
- If EBITDA remains exactly the same and no debt is paid down, which lever is the sole sourc
- A practitioner is calculating the 'Envy Ratio' in an LBO. If the management team's MoIC is
- What is the approximate internal rate of return (IRR)?
- If the sponsor achieved a 2.18× MoIC, what is the approximate IRR?
- After 4 years, EBITDA has grown to $40.8M and debt has been paid down from $126M to $33.6M
- If the company is sold for 3.0× the total exit equity, what is management's MOIC?
- If EBITDA remained flat at $100M and debt was reduced by $200M, which factor was the large