Example of margin-driven value creation in private equity

we'll take the same company that we showed last time but now add EV a margin gross profit margin and operating expense margin to the table and then when we calculate all the Deltas and averages we see that the EV margin goes up by 5% the gross margin goes up by 2% and the operating expense margin goes down by 3% we expect all these movements to drive positive value creation we already knew that the EBA to change at 10 gives us EBA to growth of 49.5 that doesn't change but now the inclusion of the average ebit margin into the Revenue growth formula brings it from 99 million down to a much more reasonable value of 27.2 the 5% increase in ebit margin gives us ebit margin expansion at 223 and as expected adding up Revenue growth and ebit margin expansion gives us the total ebit growth of 49.5 further the 2% increase in gross profit margin gives us gross margin expansion of 8.9 and 3% decrease in operating expense margin gives us operating margin reduction of 13.4 and these terms add up to e a margin expansion of 223 we see that these values give us a much more reasonable looking chart here both Revenue growth and eida margin values are contained within eida growth and also both the gross margin expansion and operating margin reduction values are contained within eida margin expansion