A company with $10 of EBITDA is bought at 5x using 3x leverage. At exit, 50% of the debt is paid down and management retains 20% of the equity through options. What exit multiple delivers a 3x MOIC to the sponsor?

Question

IBPrep · Accepted Answer

Entry: TEV = 5x x $10 = $50. Debt = 3x x $10 = $30.

A company with $10 of EBITDA is bought at 5x using 3x leverage. At exit, 50% of the debt is paid down and management retains 20% of the equity through options. What exit multiple delivers a 3x MOIC to the sponsor?

Answer

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