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What is PE Returns Analysis?

Returns analysis is how PE professionals determine whether a deal will make money — and how much. The two primary metrics are IRR (Internal Rate of Return), which measures the annualized percentage return accounting for the timing of cash flows, and MOIC (Multiple on Invested Capital), which measures total return as a simple multiple of equity invested. PE returns are driven by three levers: (1) EBITDA growth — growing the company’s earnings, (2) multiple expansion — selling at a higher valuation multiple than you paid, and (3) debt paydown — using the company’s cash flow to pay down acquisition debt, which accrues to equity holders. Understanding which lever drives returns in a given deal is critical to assessing its risk profile.

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Command

/returns [company or deal parameters]
Loads the returns-analysis skill and models PE returns with sensitivity across entry multiple, leverage, exit multiple, and growth scenarios. 
/returns Acme Industrial — $10M EBITDA, 8x entry, 4x leverage, 5-year hold

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What It Produces

Base Case Returns Table — entry EV, equity invested, exit EBITDA, exit EV, net debt at exit, exit equity value, MOIC, IRR, cash-on-cash, with a returns attribution waterfall. 2-Way Sensitivity Tables:
  • Entry Multiple vs. Exit Multiple
  • EBITDA Growth vs. Exit Multiple (at fixed entry)
  • Leverage vs. Exit Multiple (at fixed entry and growth)
  • Hold Period vs. Exit Multiple
Scenario Analysis — Bull / Base / Bear with revenue CAGR, exit EBITDA margin, exit multiple, MOIC, and IRR for each.
Each sensitivity table cell shows IRR / MOIC format. Results can be formatted with conditional coloring in Excel.

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How to Customize

Edit the returns-analysis skill to adjust default leverage assumptions, add management rollover treatment, or include fee/carry netting calculations. See the Returns Analysis skill for the full modeling framework, key formulas, and notes on fees, management rollover, and tax considerations.