A company with $100 of EBITDA is bought at 10.0x with 5.0x leverage. At exit it has $150 of EBITDA, still trades at 10.0x, and $200 of debt has been paid down. The buyer needs a minimum 2.0x MOIC. Does the deal clear the hurdle?

Question

IBPrep · Accepted Answer

Yes. Entry: TEV = $100 x 10 = $1,000, debt = $100 x 5 = $500, equity = $500.

A company with $100 of EBITDA is bought at 10.0x with 5.0x leverage. At exit it has $150 of EBITDA, still trades at 10.0x, and $200 of debt has been paid down. The buyer needs a minimum 2.0x MOIC. Does the deal clear the hurdle?

Answer

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