Stress the Exit Case
Use a two-variable sensitivity to identify which assumptions drive LBO return risk.
before-after walkthrough-steps Base case: exit EBITDA is $30 million, exit multiple is 9.0x, exit debt is $80 million, and sponsor equity invested is $100 million. Test exit EBITDA at $27 million, $30 million, and $33 million; test exit multiple at 8.0x, 9.0x, and 10.0x. Sensitivity analysis changes one or two assumptions at a time to see how uncertainty in inputs changes the investment output. Teams sometimes include a sensitivity table after the decision is already made. That turns a risk tool into decoration instead of using it to direct diligence and price discipline. Base exit equity $30M EBITDA x 9.0x…
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