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A private-equity return check
The prompt
A European private-equity fund can buy a packaging maker for EUR 100 million, which is 10 times its EBITDA of EUR 10 million. It would pay with EUR 60 million of debt and EUR 40 million of the fund's own money (equity). The plan: grow EBITDA to EUR 14 million in five years, pay debt down to EUR 40 million, and sell at the same 10 times multiple. The fund targets about 20 percent a year. Does the plan meet it, and what should due diligence focus on?
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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