medium · Private Equity value-creation
How does multiple arbitrage affect the 'Equity Bridge' of a private equity investment?
- It provides a positive contribution to the step-up from Entry Equity to Exit Equity.
- It always equals the 'Debt Paydown' contribution dollar-for-dollar over the hold.
- It is recorded only if the company later files for bankruptcy protection.
- It reduces the Enterprise Value of the firm at the time of exit, all else equal.
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