Which typical 'return bridges' are usually built in an LBO pitch?
A typical PE pitch contains three to four standardized bridges, each giving a different view of value creation:
- Equity value bridge: Year 0 equity → Year 5 equity as a waterfall with all the drivers. The hero slide.
- EBITDA bridge: reported → adjusted → pro forma. Show the add-backs.
- Margin bridge: entry margin → exit margin. Disaggregate the margin levers.
- Multiple bridge: entry multiple → exit multiple. Sector comparison, premium drivers.
Together they answer the four standard IC questions.
Deep diveShow more details
```
Year 0 equity: $100m
+ EBITDA growth (organic): +$70m
+ Multiple expansion: +$25m
+ De-leveraging: +$130m
+ Margin expansion: +$25m
+ Bolt-on EBITDA: +$30m
− M&A friction: −$8m
− Working-capital build: −$12m
= Year 5 exit equity: $360m
```
- Bridges not consistent: if the sum doesn't tie, trust is gone.
- Multiple bridge too generic: the IC expects a sector comparison.
- Margin bridge without an inflation adjustment: implausible margin expansion.
Question: "Which bridge is most important?"
Answer: "The equity bridge is the hero slide — the IC looks at the composition of returns. But all four together are needed. Without the EBITDA bridge and margin bridge, the equity bridge isn't credible. Disaggregation = modeling quality"