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Mid-Market Private Equity Fund
An independent practice case, not supplied or endorsed by the named firm.
Model a payments buyout with a senior loan, Holdco PIK notes and a 30% management rollover.
Model a payments buyout with a senior loan, Holdco PIK notes and a 30% management rollover. You have three hours and a one-sheet template. Forecast both divisions, calculate returns for each exit year and find the break-even exit multiple.
The deal is agreed: Lyndhurst's founders will sell to the fund for 10.5x 2025 EBITDA, and the sale completes on 31 December 2025. They are not cashing out entirely: together with the senior managers they will put part of their proceeds back in and hold 30% of the new equity, on the same terms as the fund's shares.
The fund wants to borrow 4.5x 2025 EBITDA, more than a senior lender will provide alone, so £45m of it comes from PIK notes issued by a holding company above Lyndhurst. The notes pay no cash before exit; their interest is added to what is owed, and then earns interest itself. A senior term loan supplies the rest of the debt and is paid down from cash flow, and a revolving credit facility (RCF) sits undrawn as a back-stop.
The investment committee does not want to rely on a change in valuation, so its base case sells Lyndhurst at the multiple the fund pays, 10.5x: the return has to come from higher earnings and lower debt. It asks four things: how big the fund's cheque is; what the fund earns, as an IRR and a multiple of money (MOIC), if it sells at the end of 2026, 2027, 2028, 2029 or 2030, the last being the headline case; the lowest exit multiple at which the fund still gets its money back; and how the 2030 returns shift with the entry and exit multiples.
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