What is LBO Matrix?
I am looking into sample questions for PE interviews; there is a question about LBO matrix... I have zero clue what LBO MATRIX specifically is? I have never heard word matrix attached to LBO? Can someone please explain? I did not find any information on WSO or anywhere else. Danke
Been in industry 15 years, never heard of it.
Almost guarantee that this is a fudge up in the questions you're using BUT if I had to guess...this is how I'd think about it. Typically in your generic LBO model, you set up all your pro-forma operating assumptions and then goal-seek the leverage profile to achieve a target levered IRR for the equity contribution. My guess is the matrix they are referring to is playing around with the the leverage multiple and exit assumption to spread a matrix of levered returns...i.e. what does a 5x Debt/EBITDA plus a 10x exit in year 10 get you vs. a 4x Debt/EBITDA and a 11x exit in year 10...only thing I can think of.
It makes a lot more sense - what a relief, and what a great person you are. Thanks!
Follow up question. Normally, what would drive IRR more - financing mixture or the exit multiple? In the example that you’ve given of course we need to know more details like debt pay down, initial EBITDAs, FCF generation etc, but all else being equal, it must be an exit multiple…? I’ve tried some numbers and kept them all constant in both scenarios and second one with 4x leverage and 11x drove the IRR more, just seeking confirmation :)
Quis sit accusantium velit asperiores aut dignissimos. Totam ducimus et nulla dolorem placeat. Ratione animi perferendis et consequatur. Soluta perspiciatis quia sint quibusdam sunt. Eius quia commodi adipisci repudiandae.
Officia aut modi cupiditate rerum. Dolore enim accusantium perspiciatis nostrum est. Blanditiis voluptas exercitationem recusandae ut ducimus facilis.
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...