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Next question. LBO multi-step problem: Step 1: A company has $1bn revenue in yr0 and 10% CAGR, calculate its revenue of yr1, yr2 and yr3. Step 2: Assume the company has 10% EBITDA margin, is the target of an LBO transaction at 10x EBITDA, is able to borrow at 4x EBITDA with no interest, cash flow is used to amortize the debt, how much equity investment does a financial sponsor have to pay upfront? How much equity does the financial sponsor have at the end of yr3? Step 3: Assume the company was sold at $1.3bn at yr3, what's the equity value? What's the IRR? What's expected IRR usually? Step 4: If we were to leverage at 7x EBITDA, what would you require of the target company?

LBO multi-step problem: Step 1: A company has $1bn revenue in yr0 and 10% CAGR, calculate its revenue of yr1, yr2 and yr3. Step 2: Assume the company has 10% EBITDA margin, is the target of an LBO transaction at 10x EBITDA, is able to borrow at 4x EBITDA with no interest, cash flow is used to amortize the debt, how much equity investment does a financial sponsor have to pay upfront? How much equity does the financial sponsor have at the end of yr3? Step 3: Assume the company was sold at $1.3bn at yr3, what's the equity value? What's the IRR? What's expected IRR usually? Step 4: If we were to leverage at 7x EBITDA, what would you require of the target company?

Start with the one-sentence answer an interviewer expects, then support it with the two or three drivers that actually move the number. Anchor every claim to a mechanism, not a memorized phrase.

Intuition

Interviewers are testing whether you can connect the concept to how the business actually earns and spends cash. Walk the logic in the order the money moves, and say what would change your answer.

Watch

The classic trap is reciting a definition and stopping. Strong candidates flag the edge cases, name the assumption they would sanity-check first, and keep units and signs consistent all the way through.

Deep Dive

Lay out the calculation step by step, state the inputs you would need, and finish by tying the result back to the original question so the interviewer hears a complete loop.