How could a private equity firm boost its return in an LBO?

How to answer

The five primary IRR levers: (1) Lower the purchase price — less equity in for the same exit value. (2) Raise the exit price/multiple — usually requires multiple expansion (re-rating the company) or holding through a more favorable market. (3) Increase the leverage used — more debt = less equity in = higher equity returns IF the deal works (also amplifies downside). (4) Grow the company faster — drive revenue and EBITDA growth organically or via bolt-on M&A. (5) Improve margins — cut costs (consolidate facilities, reduce headcount, renegotiate suppliers), price more aggressively, or improve operational efficiency. Most successful LBOs combine 2–3 of these levers. Multiple expansion alone (buying low, selling high) is increasingly rare in mature PE markets — operational improvement is now the dominant alpha source.