How do you measure operating improvement separately from market conditions?
Operating improvement is EBITDA growth from sponsor actions, separated from market tailwinds and acquired EBITDA. The standard formula:
```
Total EBITDA growth = Operating improvement
+ Market / industry growth
+ Acquired EBITDA (M&A)
```
pure operating improvement is often smaller than believed — market growth and M&A often drive the bulk of the EBITDA increase. A clean disaggregation shows the IC what the sponsor actually contributed.
Deep diveShow more details
| Component | Value | Calculation |
|---|---|---|
| Year 5 EBITDA total | $70m | – |
| − Year 0 EBITDA | ($50m) | – |
| = Total EBITDA growth | $20m | – |
| − Industry-average growth | ($10m) | 4% p.a. × $50m × 5 years |
| − Acquired EBITDA (bolt-ons) | ($8m) | from M&A |
| = Pure operating improvement | $2m | left for sponsor performance |
market growth 30–50%, acquired EBITDA 20–40%, pure operating 20–40%.
| Lever | EBITDA impact |
|---|---|
| Pricing optimization | +1–3% |
| Cost-out (procurement, SG&A) | +2–5% |
| Sales effectiveness | +2–4% |
| Footprint optimization | +1–3% |
Question: "How much of your EBITDA growth is sponsor action?"
Answer: "Important to separate in the pitch. Operating improvement from the plan is ~30–40% of total growth. The rest is riding the market and M&A. A clear disaggregation signals modeling depth — many sponsors lump it all together"