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Upper Mid-Market Private Equity Fund
An independent practice case, not supplied or endorsed by the named firm.
Complete an LBO for an online exam-preparation business and test how renewal-fee cuts affect returns.
Complete an LBO for an online exam-preparation business and test how renewal-fee cuts affect returns. The template combines seat sales, annual renewals, accreditation costs and a circular debt schedule. Calculate returns before and after management's promote and the price that meets a 25% IRR.
The founders are selling, and their price is 11.0x 2025 pro forma EBITDA, with the business handed over free of cash and borrowings and the deal due to complete on 31 December 2025. Lenders are ready with a Term Loan B, unsecured notes and a revolving credit facility (RCF) that stays undrawn at completion. Renewal pricing will be the committee's first topic: several large client firms have asked for lower renewal fees, and renewals are most of the revenue from 2026. The partner wants a working model and four answers: what the fund earns at the asking price, before and after management's share of the gain; how far that return falls if renewal fees are cut, and whether it still clears the fund's 25% hurdle; how sensitive returns are to the multiples paid on entry and received on exit; and, last, the highest price at which the fund still makes 25%.
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