[airstrike]

I misspoke. Generally speaking, when modeling an LBO you assume entry = exit multiple to be conservative. What I meant to say is that in Tech, if you sell at the same, call it, 10x multiple on Revenue but your annual revenue grew some X% over the period, you can still get to a very compelling IRR even if the actual CF profile of the business hasn't improved at all. Obviously if you sell at a higher multiple that is doubly true.

The point is Tech companies don't strictly need profitability to be considered good LBO candidates, because everything is done at the top line level for the "sexier" very high growth companies.

The asset still "pays for itself" on exit, just not so much during the investment period. In other words, the value to equity holders is not from debt paydown with the assets' cash flows, but with the exit proceeds.