Why does an LBO usually produce the lowest valuation?

Question

IBPrep · Accepted Answer

An LBO solves for the highest price a financial sponsor can pay while still hitting its target returns (IRR and MOIC), given its exit assumptions on timing, exit multiple, and debt paydown.

Because the sponsor is constrained by a required return and, unlike a strategic buyer, does not pay for synergies, the price it can justify tends to come in below the other methods.

Why does an LBO usually produce the lowest valuation?

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Why does an LBO usually