Interview: How do Dividend Recaps impact Returns?
Hi! How would a dividend recap impact returns in an LBO (both MOIC and IRR)
What would you answer in an interview setting? Esp in this market environment?
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Typically the answer is increase IRR and decrease MOIC. Increase IRR because you get the return of capital earlier; decrease MOIC slightly due to higher interest expense which reduces cash flows to paydown debt.
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