Return Math Gets Harder: "12 Is the New 5"

A decade ago, the math behind a typical buyout was forgiving.

In 2015, a deal needed only about 5% annual EBITDA growth to generate a 2.5x MOIC over a five-year hold, thanks to cheap leverage. Back then, ~50% of purchase price was financed at 6–7% interest rates, and deal multiples climbed steadily on their own.

That math has changed dramatically: borrowing costs are now in the 8%–9% range and leverage closer to 30%–40%. Generating the same target return requires roughly 12% annual EBITDA growth, more than double what was needed a decade ago, or as Bain puts it, "12 is the new 5."

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The purchase-price environment isn't giving GPs any relief, either. The median PE entry multiple rose from 11.3x EBITDA in 2024 to 11.8x in 2025, and almost 80% of GPs expect multiples to hold roughly flat in 2026. With neither cheap debt nor multiple expansion available to carry a deal, GPs are left with a narrower path to their target returns, one that runs almost entirely through the operating performance of the businesses they buy. That shift is evident in how deals get approved, not only in how they are priced: investment committees increasingly demand a defensible view of the downside before a growth story is even entertained. Deal teams need to segment financial performance into distinct pre-pandemic, 2021–22 surge, and 2023–25 normalized periods to establish a credible earnings baseline, rather than taking recent results at face value.