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A simple leveraged buyout of a European services company
The prompt
A PE fund buys a business services company in Europe with EBITDA of EUR 100 million, paying 10 times EBITDA. It funds the deal with EUR 500 million of debt and the rest in equity. Over 5 years EBITDA grows to EUR 130 million and the company uses its cash to repay EUR 200 million of debt. The fund sells at the same 10 times multiple. What are the MOIC and roughly the IRR, and where did the return come from?
Your interviewer will share data as you ask for it. Ask clarifying questions, state a hypothesis, then lay out your structure out loud before you calculate.
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