What drives LBO returns most?

Purchase price, leverage, and EBITDA growth are the biggest levers.

How long should the answer be?

Keep a 90-second summary and drill into details if prompted.

Walk Me Through an LBO: Fast 8-Step Template (2025)

A fast LBO template with sources and uses, debt paydown, returns math, and the 90-second answer plus pitfalls to avoid under time pressure in interviews.

Quick LBO answer structure

An LBO asks whether a sponsor can buy a company with leverage and still hit return targets. Keep it tight and numeric.

8-step LBO walkthrough

State entry multiple and purchase price.
Lay out sources and uses (equity, debt, fees).
Project operating performance with key drivers.
Model debt amortization and optional paydown.
Set exit year and exit multiple.
Calculate exit equity value and MOIC.
Compute IRR and identify key drivers.
Check downside sensitivity (exit multiple, growth, leverage).

90-second answer

"I buy at an entry multiple, fund it with debt and equity, project cash flows, pay down debt, exit at a reasonable multiple, and compute MOIC and IRR. The biggest drivers are purchase price, leverage, and EBITDA growth."

Common pitfalls

Forgetting fees or debt amortization.
Mixing enterprise and equity value in the bridge.
Using an unrealistic exit multiple.

Practice with the Paper LBO template and review Sources and Uses.