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LBO Returns Calculator
Size a paper LBO and get MOIC and IRR from entry and exit assumptions.
The paper LBO is the single most common private equity and banking interview exercise: size the debt, grow EBITDA, sell at an exit multiple, pay down some debt, and back out the sponsor's return. This calculator runs that math instantly so you can build intuition for how each lever moves IRR.
Change one input at a time and watch the return. More leverage lifts IRR but shrinks the equity check; a higher exit multiple than entry (multiple expansion) is pure upside; faster EBITDA growth and more debt paydown both compound into equity value.
Entry
Hold
Exit
Equity returns
23.9%
IRR over 5 years · 2.9x MOIC
With your numbers
MOIC
$1,169.3M ÷ $400M = 2.92x
IRR
2.92x^(1/5) − 1 = 23.9%
Entry enterprise value
$1,000M
Less: entry debt
$600M
Entry equity (sponsor check)
$400M
Exit EBITDA (yr 5)
$146.9M
Exit enterprise value
$1,469.3M
Less: exit debt
$300M
Exit equity
$1,169.3M
MOIC
2.9x
IRR
23.9%
The formula
The sponsor's return falls out of four moves — size the equity check, grow EBITDA, sell at an exit multiple, and annualize the gain.
With a single equity outlay at entry and a single exit, the money-on-money multiple and IRR collapse to a closed form:
where is the hold period in years.
How it works
- Set the entry. Entry enterprise value is EBITDA times the entry multiple. Subtract entry debt (leverage times EBITDA) to get the sponsor's equity check.
- Grow EBITDA. Compound entry EBITDA at the annual growth rate over the hold period to get exit EBITDA.
- Set the exit. Exit enterprise value is exit EBITDA times the exit multiple. Subtract the debt still outstanding after paydown to get exit equity.
- Back out returns. MOIC is exit equity divided by entry equity. IRR is MOIC to the power of one over the hold period, minus one.
Or drill LBO interview questions.