MOIC
LBOTotal value returned divided by total invested, ignoring how long it took.
Also written: multiple of invested capital, money multiple, cash on cash
MOIC is the simplest measure of a buyout outcome: 400 invested returning 950 is 2.4 times money. It says nothing about time, which is exactly why it is quoted next to IRR rather than instead of it.
The pair is diagnostic. A high IRR with a low MOIC means a quick flip that returned little in absolute terms; a high MOIC with a modest IRR means a long hold that compounded slowly. Funds need both because limited partners care about absolute euros as well as rate of return.
Because it is time blind, it cannot be gamed by accelerating a distribution, which makes it the more honest headline of the two for comparing what a deal actually produced.
The conversions worth memorising: 2.0x over three years is about 26%, 2.0x over five about 15%, 2.5x over five about 20% and 3.0x over five about 25%. Those four cover most buyout conversations.
Worked example
330 invested, 950 returned: a MOIC of 2.88x.
Over five years that is roughly a 24% IRR; over three it would be about 42%. MOIC is identical in both cases, which is exactly why it is quoted alongside rather than instead of IRR.
The four conversions worth memorising: 2.0x in three years is about 26%, 2.0x in five about 15%, 2.5x in five about 20%, and 3.0x in five about 25%.
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