Which factor does NOT contribute to increasing returns in an LBO analysis?

In the context of leveraged buyout (LBO) analysis, increasing returns is typically influenced by various factors, including growth rates, purchase prices, and leverage levels.

The reason lowering the exit sale price does not contribute to increasing returns is that successful LBOs thrive on appreciating the underlying asset's value. An exit sale price that is lower than expected would diminish the overall returns to equity investors. Ideally, returns are enhanced through effective management and operational improvements, resulting in a higher exit sale price relative to the purchase price.

In contrast, increasing the growth rate propels cash flows and potentially drives a higher exit sale price, while reducing the purchase price directly enhances returns because it leaves more equity for the investors when the business is sold. Lastly, increasing leverage boosts potential equity returns, as more debt financing can amplify the gains on equity if the business performs well. The focus of strategic management must always be on driving enterprise value upward, hence why a lower exit sale price directly contradicts that principle.