LBO Returns Calculator

Size a paper LBO and get MOIC and IRR from entry and exit assumptions.

Equity returns

23.9%

IRR over 5 years · 2.9x MOIC

Entry

Entry EBITDA ($M)

Entry multiple (EV / EBITDA)

Leverage (Debt / EBITDA)

Hold

EBITDA growth (per year)

Hold period (years)

1 to 15

Debt paid down over hold

0 to 100%

Exit

Exit multiple (EV / EBITDA)

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.

\text{Entry Equity} = \text{Entry EV} - \text{Entry Debt}

\text{Exit Equity} = \text{Exit EV} - \text{Exit Debt}

With a single equity outlay at entry and a single exit, the money-on-money multiple and IRR collapse to a closed form:

\text{MOIC} = \frac{\text{Exit Equity}}{\text{Entry Equity}} \qquad \text{IRR} = \text{MOIC}^{1/n} - 1

where $n$ is the hold period in years.

Or browse the LBO question bank.

Frequently Asked Questions

How do you calculate IRR in a paper LBO?

What drives returns in an LBO?

Why does more leverage increase IRR?

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The formula

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