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Paper LBO calculator

Change any input. The return splits into growth, multiple and debt paydown, and the hurdle turns into a price.

Starts on the worked question's invented case: Quillfield at the seller's $400m. No fees, dividends or management equity.

Multiple of money
2.50x
IRR
20.1%
Target IRR
20.1%
Where the equity gain comes from
Equity at entry$200m
EBITDA growth × entry multiple$100m
Change in multiple × exit EBITDA$100m
Debt repaid$100m
Equity at exit$500m
Most you could pay at this exit multiple
$400m
Most you could pay if it exits at the multiple you pay
$320m at 8.0x
IRR by exit multiple and exit EBITDA · at or above target is marked
$40m$45m$50m$55m$60m
10.0x8.4%11.8%14.9%17.6%20.1%
11.0x11.2%14.6%17.6%20.4%22.9%
12.0x13.7%17.1%20.1%22.9%25.4%
13.0x16.0%19.4%22.4%25.2%27.7%
14.0x18.1%21.5%24.6%27.4%29.9%

How a paper LBO works

  1. Equity in. Entry value = entry EBITDA × entry multiple. Equity = entry value − debt.
  2. Equity out. Exit value = exit EBITDA × exit multiple. Equity = exit value − (debt − debt repaid).
  3. Returns. Multiple of money = equity out ÷ equity in. IRR = multiple1/years − 1.
  4. Sources of the gain. (Exit EBITDA − entry EBITDA) × entry multiple, plus (exit multiple − entry multiple) × exit EBITDA, plus debt repaid. The three always add up to the gain.
  5. Price for a hurdle. At a given exit, the most you can pay is debt + equity out ÷ target multiple. If the business exits at the multiple you pay, solve for that multiple instead.

On Quillfield's case, $200m becomes $500m: 2.50x and 20.1% a year over five years. Each source adds $100m, so a third of the return rests on selling at 12.0x a business bought at 10.0x. At a flat multiple, 2.5x needs an 8.0x entry, or $320m.

Practice a paper LBO aloud with an AI interviewer on Socratify.

Last reviewed Nov 9, 2026