You are working at the prestigious private equity firm Green Capital and are tasked to analyze the value creation of one portfolio company. You're provided with the following information:

Assume the following characteristics for the company Aston Genomics:

IRR on a cash flow basis: 0.2539
Average debt-to-equity ratio during the holding period: 0.63
Cost of debt: 0.04
EBITDA at entry: 9.5 Mn. €
EBITDA at exit: 20.3 Mn €
Multiple at entry: 4.8 x
Multiple at exit: 9.3 x

What is the combined EBITDA growth/ Multiple/ Correction effect on the enterprise value according to the value creation model, rounded to the nearest integer?

To determine the combined EBITDA growth, multiple expansion, and correction effect on the enterprise value (EV) of Aston Genomics, we can use the value creation model which typically decomposes the EV change into components due to EBITDA growth and multiple expansion.

Here are the calculations:

### Step 1: Calculate the Enterprise Value at Entry and Exit

**Enterprise Value (EV) at Entry:**
\[ \text{EV at Entry} = \text{EBITDA at Entry} \times \text{Multiple at Entry} \]
\[ \text{EV at Entry} = 9.5 \, \text{Mn €} \times 4.8 \]
\[ \text{EV at Entry} = 45.6 \, \text{Mn €} \]

**Enterprise Value (EV) at Exit:**
\[ \text{EV at Exit} = \text{EBITDA at Exit} \times \text{Multiple at Exit} \]
\[ \text{EV at Exit} = 20.3 \, \text{Mn €} \times 9.3 \]
\[ \text{EV at Exit} = 188.79 \, \text{Mn €} \]

### Step 2: Calculate the Total Change in Enterprise Value
\[ \text{Total Change in EV} = \text{EV at Exit} - \text{EV at Entry} \]
\[ \text{Total Change in EV} = 188.79 \, \text{Mn €} - 45.6 \, \text{Mn €} \]
\[ \text{Total Change in EV} = 143.19 \, \text{Mn €} \]

### Step 3: Calculate the Components of Value Creation

**EBITDA Growth Effect:**
\[ \text{EBITDA Growth Effect} = (\text{EBITDA at Exit} - \text{EBITDA at Entry}) \times \text{Multiple at Entry} \]
\[ \text{EBITDA Growth Effect} = (20.3 \, \text{Mn €} - 9.5 \, \text{Mn €}) \times 4.8 \]
\[ \text{EBITDA Growth Effect} = 10.8 \, \text{Mn €} \times 4.8 \]
\[ \text{EBITDA Growth Effect} = 51.84 \, \text{Mn €} \]

**Multiple Expansion Effect:**
\[ \text{Multiple Expansion Effect} = \text{EBITDA at Exit} \times (\text{Multiple at Exit} - \text{Multiple at Entry}) \]
\[ \text{Multiple Expansion Effect} = 20.3 \, \text{Mn €} \times (9.3 - 4.8) \]
\[ \text{Multiple Expansion Effect} = 20.3 \, \text{Mn €} \times 4.5 \]
\[ \text{Multiple Expansion Effect} = 91.35 \, \text{Mn €} \]

**Combined EBITDA Growth and Multiple Expansion Effect:**
\[ \text{Combined Effect} = \text{EBITDA Growth Effect} + \text{Multiple Expansion Effect} \]
\[ \text{Combined Effect} = 51.84 \, \text{Mn €} + 91.35 \, \text{Mn €} \]
\[ \text{Combined Effect} = 143.19 \, \text{Mn €} \]

Rounding to the nearest integer:
\[ \text{Combined Effect} = 143 \, \text{Mn €} \]

Therefore, the combined EBITDA growth and multiple expansion effect on the enterprise value is **143 Mn €**.

Would you like more details or have any questions?

Here are five questions you can ask next:
1. How do we calculate the equity value change given the change in enterprise value?
2. What is the impact of debt on the overall value creation in private equity investments?
3. Can you explain the role of IRR in evaluating private equity performance?
4. How does the cost of debt affect the value creation in leveraged buyouts?
5. What other factors could influence the enterprise value of a company in a private equity context?

**Tip:** When analyzing value creation in private equity, always separate the effects of operational improvements from financial structuring to understand the true drivers of value.

Explore how EBITDA growth and multiple expansion impact the enterprise value of Aston Genomics in this detailed analysis. Learn the step-by-step calculations and the significance of each component, including the effects of EBITDA growth and multiple expansion on the company's valuation.

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