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Large Private Equity Fund
An independent practice case, not supplied or endorsed by the named firm.
Model a pet-food take-private followed by an IPO and staged share sales, then recommend a maximum offer price.
Model a pet-food take-private followed by an IPO and staged share sales, then recommend a maximum offer price. You have three hours and a blank spreadsheet. Compare management, upside and downside cases, allowing for PIK debt, IPO dilution and sell-down discounts.
Burrowden's board has asked its financial adviser to sound out private equity buyers. The adviser has sent an information memorandum with the last twelve months' results and management's seven-year plan, a staple financing package and details of the share options outstanding. The fund's deal team has added an upside and a downside case of its own. All of it is in the candidate pack as Exhibits 1 to 7.
The shares trade at £24.00, about where they settled after Burrowden announced that its new plant would cost more than budgeted and be finished later than planned. The partner on the deal believes the board would recommend an offer at a 35% premium, £32.40 a share. No trade buyer of Burrowden's size is obvious and listed pet-care peers are well valued, so the partner expects to exit by re-listing the company and selling the fund's shares in stages. You are asked to build the model and come back with a view on that price and on the most the fund should offer.
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