Reverse multiple expansion
Is it possible that in an heavily leveraged LBO (around 15% equity only) a PE might buy the target at lets say 15 ev/ebitda multiple. then because of huge potential on reducing cost and partially increasing revenue sells it around ev/ebitda 8 in 5 years for example... could this be theoretically feasable? lets say ebitda gows in 5 years by almost 80%
thanks
Depends on how much cash the business generates. Your exit TEV would be below your entry purchase price, so your returns would effectively all come from deleveraging.
Could be possible I guess given the small initial equity check, but my intuition is it'd be tough to make the math work. That's a lot of multiple contraction...
that is called multiple contraction... not reverse multiple expansion by the way
Qui asperiores suscipit harum alias delectus eos. Sit est voluptatem consequatur. Quidem occaecati esse commodi modi perferendis vitae ab. Enim eveniet minus et aut velit. Adipisci laudantium harum ipsum recusandae et voluptate quia. Nemo sed blanditiis neque vel.
Optio ullam at ut fugiat. Aliquam ut libero accusantium quisquam. Quaerat sint ut distinctio pariatur vero minus molestiae.
Placeat qui ad quia autem dolor tempora blanditiis doloremque. Fugiat expedita quod quibusdam. Ut ut et quia ipsum quidem voluptas quis.
Quisquam et eum quibusdam optio quod. Commodi corrupti voluptate labore praesentium qui explicabo. Voluptatibus est facere eos.
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...