Safeguarding buyout-investment IRR levels through operational change
AlixPartners' Matthew Katz and Sebastian Bretschneider discuss why changing times require more than financial engineering when it comes to buyouts and turnarounds
The prime levers for achieving the above-market (30% and more) internal rates of returns (IRR) against which hedge fund and private equity firms are benchmarked have evolved.
In the past, investing was mostly a play of multiples, combined with strong leverage of the balance sheet. Investors enforced only 'low-hanging-fruit' performance improvements to impact EBITDA, while separating high-value assets from lower-value ones. Basically, high levels of leverage ensured a great internal rate of return
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