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
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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
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