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Industry study 14 of 22 · Private Equity Research Companion

LBO Modeling and Valuation

~9,000 words · 4 technical exhibits

Purpose. How private equity actually prices companies: the valuation toolkit (trading comps, precedent transactions, DCF, LBO), the mechanics that turn a headline enterprise value into the cheque the seller receives, and the return math (IRR, MOIC, attribution) that investment committees argue about. Written for practitioners — deal teams, IC members, LPs underwriting GPs, and lenders reading sponsor models.

What the study covers

  1. 1The core idea: price is set by what the marginal buyer can pay
  2. 2The valuation toolkit
  3. 3The EV-to-equity bridge
  4. 4Building the LBO model
  5. 5Return metrics: IRR vs MOIC
  6. 6Returns attribution — what actually created the value
  7. 7Common pitfalls
  8. 8How an expert thinks about it

Technical exhibits

Worked examples, checklists and case studies included with this study.

Worked LBO Example

A fully tied, five-year LBO: sources & uses, debt schedule, projections, exit, MOIC/IRR, returns attribution

Sensitivity Tables

IRR and MOIC grids (exit multiple × growth, entry × exit), leverage/structure variants, how to read them

Paper LBO Mental Math

The 10-minute "paper LBO" and mental-math shortcuts used in interviews and first-pass screening

Purchase Price Mechanics

Cash-free/debt-free, debt-like items, NWC peg, locked box vs completion accounts, earn-outs