How could a PE firm boost returns in an LBO?
Answer
There are a couple of ways, all of which you can watch play out in a model:
- Lower entry multiple
- Raise exit multiple
- Increase debt / equity ratio
- Increase revenue growth
- Increase margins
Why this matters to bankers
Knowing where the levers to boost returns are in your LBO is key to creating an accurate LBO. Checking the accuracy and re-considering these are a key part of refining your analysis.