What do you think is a reasonable MOIC? Having a debate - $100m rev, 90% recurring, 25% cash flow, super long government contracts. Standard 5 year hold.
| +56 | Should I Leave ~$280K Corp Dev for PE? | 31 | 17h |
| +48 | How much is enough? | 26 | 1d |
| +38 | Does this mean I am not cut out for PE? | 8 | 1d |
| +20 | How to Secure Higher Carry Award Before Promotion | 2 | 2d |
| +19 | Carried Interest Tax Question | 3 | 2d |
| +18 | I Don't Wanna Go To PE Anymore | 4 | 3d |
| +14 | Generalist MFPE tech (KKR / BX) vs >$10B pure play tech (FP / HG) | 1 | 6d |
| +10 | US PE alpha look abysmal in L5Y | 3 | 5d |
| +9 | H.I.G GP Solutions / Secondaries Team | 1 | 2d |
| +6 | Technical Experience vs Industry Experience | 1 | 5d |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
2.5-3
Don't know much about how much debt there is but for a mature stage business you're going to be hard pressed finding a target MoC under 2.5x. probably 2.5-2.75x with a 20-23% IRR is appropriate.
As an aside, how does one develop the intuition around what MoMs and IRRs should be ?
Generally funds target 2.5x+ (20%+ IRR) over the course of five years. Infra funds are a bit less because less risky (visibility into revenue streams - long term contracts). Think like 10-15% IRR. I’m sure there are more nuances though that others can chime in on.
I never get this… there are almost no funds of size that are significantly above 2x MOIC in the long run, so how does that work when at investment stage they are all aiming for 2.5x+? Presume the gap is that some don’t play out but thay sounds like a significant amount of investments going wrong?
You're correct, real life doesn't play out like the underwriting case usually. But, you also may be comparing net vs gross returns. Most LP's report returns net of fees and carry, while the underwriting case is obviously before any fund level fees/carry are deducted, which may be the difference here.
This. Gross returns on average hit these targets
The above is the academic answer but generally I get the hunch from previous LBOs I’ve seen for similar companies. Usually seniors guide you on the necessary multiples to achieve a certain MOIC/IRR and after you do it for the same type of company you get an idea of where things should land.
Omnis rem quibusdam iusto nostrum. Explicabo eius consequatur voluptas ratione dignissimos enim voluptatum porro. Et sint quia quisquam amet omnis est officiis.
Accusantium in doloribus est quia est. Quia similique natus dolorem qui quibusdam est. Rerum a dolore nulla. Quis ad nisi necessitatibus.
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...