Triton Mock Case Study – Laboratory services recap

At a glance

Model a seven-year laboratory-services buyout and compare returns with and without a dividend recapitalisation. You have 90 minutes and a blank spreadsheet. Compare the planned 2028 recap with later dates, including the effects on debt, management equity and investor returns.

The brief

Veymoor's private equity owner is selling the whole company, and the fund has been invited to bid. The deal team expects to pay 7.5x LTM EBITDA for the business free of cash and debt, completing on 31 December 2025. Veymoor's managers will sell their shares alongside the owner and will not reinvest. Their stake in the fund's return will be a new option pool whose strike is reduced by any dividend the fund takes, so the recap decision matters to them too.

Management's seven-year plan is the base case. The fund would lever the business at completion, re-lever it at the end of Year 3 (31 December 2028) to pay itself a dividend, and sell at the end of Year 7 (31 December 2032). Calculate the fund's returns and assess whether the recap is worthwhile. Is it worth doing at all, or would it be better at the end of 2029 or 2030, when EBITDA is higher and more of the acquisition debt has been repaid? Set the fund's IRR and multiple of money with the recap against the same measures without it. Use a 20% IRR and 2.5x money as the return targets for this case.