What is the primary metric used by sponsors to gauge the attractiveness of a potential LBO as well as the performance of their existing investments?

Question

Quizplus · Accepted Answer

The primary metric used by sponsors to gauge the attractiveness of a potential LBO as well as the performance of their existing investments is IRR (Internal Rate of Return). IRR measures the profitability of an investment and takes into account the time value of money. It is a widely used metric in the private equity industry and helps sponsors evaluate the returns generated by their investments. Additionally, sponsors also consider other metrics such as DCF, precedent transactions analysis, and comparable companies analysis, but IRR remains the primary metric.

What Is the Primary Metric Used by Sponsors to Gauge