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Upper Mid-Market Private Equity Fund
An independent practice case, not supplied or endorsed by the named firm.
Build a consumer-brands LBO and recommend whether to proceed at the proposed premium to the share price.
Build a consumer-brands LBO and recommend whether to proceed at the proposed premium to the share price. You have one hour and a blank spreadsheet. Test the offer against a 20% IRR target and assess the effect of a lower exit multiple.
Linthorpe's shares fell after a profit warning in 2024, when raw material and packaging costs rose faster than the company could raise its prices, and they have not recovered. In early talks, its two largest shareholders have told the fund they would back a cash offer pitched 30% above the undisturbed price of £3.50 a share. The fund rates the management team and would keep it on board with a share option plan. Management has presented a five-year plan, the fund's lenders have indicated terms, and the fund's sector team has a view on what the business would be worth at exit.
The fund's consumer team has asked you, as its associate, for the model that will decide whether the offer goes to Linthorpe's board. If management delivers its plan, what does the fund earn at a 30% premium, and is that enough to make the offer worthwhile?
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