Let’s say you run an LBO analysis and the private equity firm’s return is too low. What drivers to the model will increase the return?

Some of the key ways to increase the PE firm’s return (in theory, at least) include:

• – reduce the purchase price that the PE firm has to pay for the company
• – increase the amount of leverage (debt) in the deal
• – increase the price for which the company sells when the PE firm exits its investment (i.e. increase the assumed exit multiple)
• – increase the company’s growth rate in order to raise operating income/cash flow/EBITDA in the projections
  decrease the company’s costs in order to raise operating income/cash flow/EBITDA in the projections