The MOIC (Multiple of Invested Capital) is the most widely used gross return metric in private equity, measuring the total cash returned to an investor relative to the total cash invested, without adjusting for time. A MOIC of 2.5x means the investor received CHF 2.50 for every CHF 1.00 invested — a net gain of 1.5x. Unlike the IRR, the MOIC does not account for the duration of the investment: two deals with identical MOICs but different holding periods will have very different IRRs.

The MOIC is calculated as: (Total distributions received + Residual value of unrealised investment) / Total capital invested. The gross MOIC is calculated before management fees and carried interest; the net MOIC is calculated after these deductions. The difference between gross and net MOIC is typically 0.3–0.5x for a standard fund with 2% management fee and 20% carried interest. Mid-market PE funds typically target a gross MOIC of 2.5–3.5x over a 4–7 year holding period, corresponding to IRRs of 20–30% depending on duration.

In LBO modelling, the target MOIC drives the maximum acceptable entry price: if a fund targets a 3.0x MOIC over 5 years with an exit EBITDA of CHF 3.0 million and a 8x exit multiple, the exit enterprise value is CHF 24 million — and the maximum entry equity price is determined by working back through the debt repayment schedule. At Hectelion, we build MOIC-driven LBO models in our valuation and structuring mandates.

At Hectelion, we model MOIC and IRR targets in our LBO valuation models and financial structuring mandates for PE funds and institutional investors.