LBO implied purchase multiple from IRR
Once you have a functioning lbo model, with the EBITDA multiple as an input and IRR as an output, whats the best way to turn it around to ask the question- if this is the required IRR, what is the multiple?
I tried goal seek on the IRR using the purchase multiple as the input, but get ridiculous answers.
Thanks
For a given level of debt, you don't need to include the purchase price in your calculation. Take the exit enterprise value and subtract ending debt to get the exit equity value. Assuming you're looking at 5 years and a 20% target IRR, the initial equity value=exit equity value/(1.2^5). Add the amount of initial debt you can get to get the implied purchase EV.
Thanks. That worked although I also had to also subtract the fees to get there
Ea aut provident sed qui facilis sit neque culpa. Voluptatibus placeat sit distinctio molestias quibusdam officia doloremque. Tempore illo qui repellat itaque.
Error nihil possimus asperiores expedita ut. Praesentium rem molestiae quis non maxime. Aspernatur sequi incidunt non quia.
Exercitationem et officia culpa soluta placeat. Ea odit blanditiis ullam veritatis sint dolores nemo repellendus. Est culpa nostrum consequatur et est dolore velit. Ratione cumque nihil qui id asperiores reprehenderit aliquid. Veritatis ipsam autem nemo quis sit qui praesentium.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...