Dec 20, 2018

If EBITDA does not increase, does PE make money?

If EBITDA does not increase in 5 years, either EBITDA purchase/exit multiples, does a financial sponsor make money? (in LBO)

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7 Comments

MarthaStewartsAFelon

CD

5y

yes, management fees and deleveraging

Authored by: Certified Corporate Development Professional - ManagerCertified Corporate Development Pro

IB

5y

If there's 0 increase in EBITDA it's hard to see a sponsor clearing their returns threshold...

While they can still increase the equity value (as % of enterprise value) via deleveraging, the lack of growth should hurt the exit multiple.

It will be difficult to get another sponsor (or even a strategic) to buy into a 0-growth story.

In this case returns are: deleveraging - multiple compression = sad days

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HF

5y

Basically PE returns 2019-2020...

Authored by: Certified Hedge Fund Professional - Portfolio ManagerCertified Hedge Fund Pro

PE

5y

Most Helpful

Dividend recap.

O

5y

Everyone wants sexy capital gains but dividends are just as important.

IB

5y

like others have said management fees, dividend recap or just natural deleveraging

PE

5y

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