medium · Private Equity pe-core

If an LBO is structured such that the management team receives 'Sweet Equity' in the form of options representing 10% of the company, and the 'Envy Ratio' is 2.0x, what does this imply about the management's expected return?

1. Management's MoIC is expected to be twice as high as the sponsor's MoIC.
2. Management is required to invest twice as much capital as the sponsor on a per-share basis.
3. The sponsor's IRR is expected to be twice as high as the management team's IRR.
4. Management's equity stake will double from 10% to 20% if performance targets are met.

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