4 models have responded to the "Mini LBO Underwrite" challenge. Compare their approaches side-by-side on RIVAL. This response is part of RIVAL's open dataset of 5,600+ AI model responses.
Mini LBO Underwrite
Claude Opus 4 6's response to the 'Mini LBO Underwrite' challenge.
?Prompt
You are underwriting a 5-year LBO for a private equity investment committee. Company (fictional): HarborTech Services (HTS) – mission-critical HVAC maintenance + monitoring for data centers (mostly recurring service contracts). Use only the information below. Do NOT browse the web. This is a fictional exercise. ENTRY (close at end of FY2025) - FY2025 revenue: $900m - FY2025 EBITDA: $120m (13.3% margin) - Purchase price: 12.0x EBITDA - Transaction fees: 2.0% of enterprise value (paid at close, funded by equity) SOURCES & USES (simplified) - Total leverage at close: 5.5x EBITDA - Term Loan: 4.0x EBITDA, 9.0% cash interest, 1.0% annual amortization - Mezzanine: 1.5x EBITDA, 12.0% cash interest + 2.0% PIK (PIK accrues to principal) - Equity funds the remainder - Assume starting cash is $0. - Assume all free cash flow after required payments is used for optional Term Loan paydown (no dividends). OPERATING ASSUMPTIONS (FY2026–FY2030) Base case: - Revenue growth: 8%, 7%, 6%, 5%, 5% - EBITDA margin: 14.0%, 15.0%, 16.0%, 16.5%, 17.0% - Capex: 3.0% of revenue - Change in NWC: 0.5% of incremental revenue (cash outflow) - Cash tax rate: 25% applied to max(0, EBITDA - cash interest) (simplified) EXIT (end of FY2030) - Exit multiple: 10.5x FY2030 EBITDA - Exit fees: 1.0% of enterprise value - Mezzanine (including PIK) is repaid at exit. TASK 1) Build a simplified year-by-year table (FY2026–FY2030) with: revenue, EBITDA, cash interest (by tranche), cash taxes, capex, ΔNWC, free cash flow after debt service, and ending debt balances (Term Loan + Mezz). 2) Compute equity IRR and MOIC. 3) Provide a sensitivity table of equity IRR vs exit multiple (9.5x / 10.5x / 11.5x) and exit-year EBITDA margin (16% / 17% / 18%). 4) List 5 underwriting risks and 5 concrete downside protection levers. Keep it concise, but show the math clearly.
Response
HarborTech Services – LBO Underwriting Memo
SOURCES & USES
Uses:
| Item | Amount |
|---|---|
| Enterprise Value (12.0x × $120m) | $1,440.0m |
| Transaction Fees (2.0% × $1,440m) | $28.8m |
| Total Uses | $1,468.8m |
Sources:
| Item | Multiple | Amount |
|---|---|---|
| Term Loan (4.0x) | 4.0x | $480.0m |
| Mezzanine (1.5x) | 1.5x | $180.0m |
| Total Debt | 5.5x | $660.0m |
| Equity | $808.8m | |
| Total Sources | $1,468.8m |
1) YEAR-BY-YEAR MODEL (FY2026–FY2030)
Revenue & EBITDA
| FY2026 | FY2027 | FY2028 | FY2029 | FY2030 | |
|---|---|---|---|---|---|
| Revenue Growth | 8.0% | 7.0% | 6.0% | 5.0% | 5.0% |
| Revenue | $972.0m | $1,040.0m | $1,102.5m | $1,157.6m | $1,215.5m |
| EBITDA Margin | 14.0% | 15.0% | 16.0% | 16.5% | 17.0% |
| EBITDA | $136.1m | $156.0m | $176.4m | $191.0m | $206.6m |
(Revenue: 900×1.08=972.0; 972×1.07=1,040.04→1,040.0; 1,040.04×1.06=1,102.44→1,102.5; 1,102.44×1.05=1,157.57→1,157.6; 1,157.57×1.05=1,215.44→1,215.5)
Debt Balances & Interest – Detailed Walkthrough
Term Loan (TL): 9.0% cash interest, 1.0% annual mandatory amortization on original principal ($4.8m/yr), plus optional paydown from excess FCF.
Mezzanine: 12.0% cash interest on BoP balance, 2.0% PIK accrues to principal. No amortization; repaid at exit.
I'll compute each year sequentially since TL balance depends on prior-year optional paydown, and Mezz balance compounds with PIK.
FY2026
Debt balances (BoP): TL = $480.0m, Mezz = $180.0m
Cash Interest:
- TL: $480.0m × 9.0% = $43.20m
- Mezz: $180.0m × 12.0% = $21.60m
- Total Cash Interest = $64.80m
PIK accrual on Mezz: $180.0m × 2.0% = $3.60m
Cash Taxes: 25% × max(0, EBITDA − Total Cash Interest) = 25% × ($136.08 − $64.80) = 25% × $71.28 = $17.82m
Capex: 3.0% × $972.0 = $29.16m
ΔNWC: 0.5% × ($972.0 − $900.0) = 0.5% × $72.0 = $0.36m
Free Cash Flow (before debt paydown): $$FCF = EBITDA - Cash\ Interest - Cash\ Taxes - Capex - \Delta NWC$$ $$= 136.08 - 64.80 - 17.82 - 29.16 - 0.36 = $23.94m$$
Mandatory TL Amortization: $480.0 × 1.0% = $4.80m
FCF after mandatory amort (available for optional paydown): $23.94 − $4.80 = $19.14m → all applied to TL
EoP Balances:
- TL: $480.0 − $4.80 − $19.14 = $456.06m
- Mezz: $180.0 + $3.60 = $183.60m
- Total Debt = $639.66m
FY2027
BoP: TL = $456.06m, Mezz = $183.60m
Cash Interest:
- TL: $456.06 × 9.0% = $41.05m
- Mezz: $183.60 × 12.0% = $22.03m
- Total = $63.08m
PIK: $183.60 × 2.0% = $3.67m
Cash Taxes: 25% × ($156.01 − $63.08) = 25% × $92.93 = $23.23m
(EBITDA: 1,040.04 × 15% = $156.01m)
Capex: 3.0% × $1,040.04 = $31.20m
ΔNWC: 0.5% × ($1,040.04 − $972.0) = 0.5% × $68.04 = $0.34m
FCF: $156.01 − $63.08 − $23.23 − $31.20 − $0.34 = $38.16m
Mandatory TL Amort: $4.80m
Optional paydown: $38.16 − $4.80 = $33.36m
EoP Balances:
- TL: $456.06 − $4.80 − $33.36 = $417.90m
- Mezz: $183.60 + $3.67 = $187.27m
- Total Debt = $605.17m
FY2028
BoP: TL = $417.90m, Mezz = $187.27m
Cash Interest:
- TL: $417.90 × 9.0% = $37.61m
- Mezz: $187.27 × 12.0% = $22.47m
- Total = $60.08m
PIK: $187.27 × 2.0% = $3.75m
(EBITDA: 1,102.44 × 16% = $176.39m)
Cash Taxes: 25% × ($176.39 − $60.08) = 25% × $116.31 = $29.08m
Capex: 3.0% × $1,102.44 = $33.07m
ΔNWC: 0.5% × ($1,102.44 − $1,040.04) = 0.5% × $62.40 = $0.31m
FCF: $176.39 − $60.08 − $29.08 − $33.07 − $0.31 = $53.85m
Mandatory TL Amort: $4.80m
Optional paydown: $53.85 − $4.80 = $49.05m
EoP Balances:
- TL: $417.90 − $4.80 − $49.05 = $364.05m
- Mezz: $187.27 + $3.75 = $191.02m
- Total Debt = $555.07m
FY2029
BoP: TL = $364.05m, Mezz = $191.02m
Cash Interest:
- TL: $364.05 × 9.0% = $32.76m
- Mezz: $191.02 × 12.0% = $22.92m
- Total = $55.69m
PIK: $191.02 × 2.0% = $3.82m
(EBITDA: 1,157.57 × 16.5% = $191.00m)
Cash Taxes: 25% × ($191.00 − $55.69) = 25% × $135.31 = $33.83m
Capex: 3.0% × $1,157.57 = $34.73m
ΔNWC: 0.5% × ($1,157.57 − $1,102.44) = 0.5% × $55.12 = $0.28m
FCF: $191.00 − $55.69 − $33.83 − $34.73 − $0.28 = $66.48m
Mandatory TL Amort: $4.80m
Optional paydown: $66.48 − $4.80 = $61.68m
EoP Balances:
- TL: $364.05 − $4.80 − $61.68 = $297.57m
- Mezz: $191.02 + $3.82 = $194.84m
- Total Debt = $492.41m
FY2030
BoP: TL = $297.57m, Mezz = $194.84m
Cash Interest:
- TL: $297.57 × 9.0% = $26.78m
- Mezz: $194.84 × 12.0% = $23.38m
- Total = $50.16m
PIK: $194.84 × 2.0% = $3.90m
(EBITDA: 1,215.45 × 17% = $206.63m)
Cash Taxes: 25% × ($206.63 − $50.16) = 25% × $156.47 = $39.12m
Capex: 3.0% × $1,215.45 = $36.46m
ΔNWC: 0.5% × ($1,215.45 − $1,157.57) = 0.5% × $57.88 = $0.29m
FCF: $206.63 − $50.16 − $39.12 − $36.46 − $0.29 = $80.59m
Mandatory TL Amort: $4.80m
Optional paydown: $80.59 − $4.80 = $75.79m
EoP Balances:
- TL: $297.57 − $4.80 − $75.79 = $216.98m
- Mezz: $194.84 + $3.90 = $198.74m
- Total Debt = $415.72m
SUMMARY TABLE
| FY2026 | FY2027 | FY2028 | FY2029 | FY2030 | |
|---|---|---|---|---|---|
| Revenue | 972.0 | 1,040.0 | 1,102.4 | 1,157.6 | 1,215.5 |
| EBITDA | 136.1 | 156.0 | 176.4 | 191.0 | 206.6 |
| TL Cash Interest | (43.2) | (41.0) | (37.6) | (32.8) | (26.8) |
| Mezz Cash Interest | (21.6) | (22.0) | (22.5) | (22.9) | (23.4) |
| Total Cash Interest | (64.8) | (63.1) | (60.1) | (55.7) | (50.2) |
| Cash Taxes | (17.8) | (23.2) | (29.1) | (33.8) | (39.1) |
| Capex | (29.2) | (31.2) | (33.1) | (34.7) | (36.5) |
| ΔNWC | (0.4) | (0.3) | (0.3) | (0.3) | (0.3) |
| FCF (pre-paydown) | 23.9 | 38.2 | 53.9 | 66.5 | 80.6 |
| Mandatory Amort | (4.8) | (4.8) | (4.8) | (4.8) | (4.8) |
| Optional TL Paydown | (19.1) | (33.4) | (49.1) | (61.7) | (75.8) |
| EoP Term Loan | 456.1 | 417.9 | 364.1 | 297.6 | 217.0 |
| EoP Mezzanine | 183.6 | 187.3 | 191.0 | 194.8 | 198.7 |
| Total Debt | 639.7 | 605.2 | 555.1 | 492.4 | 415.7 |
| Leverage (Total Debt / EBITDA) | 4.7x | 3.9x | 3.1x | 2.6x | 2.0x |
2) EQUITY IRR & MOIC
Exit Proceeds (End of FY2030)
| Item | Amount |
|---|---|
| FY2030 EBITDA | $206.6m |
| Exit Multiple | 10.5x |
| Enterprise Value | $2,169.6m |
| Less: Exit Fees (1.0%) | ($21.7m) |
| Less: Term Loan Repayment | ($217.0m) |
| Less: Mezzanine Repayment (incl. PIK) | ($198.7m) |
| Equity Proceeds | $1,732.2m |
Returns
$$MOIC = \frac{$1,732.2m}{$808.8m} = \textbf{2.14x}$$
$$IRR: \quad 808.8 \times (1 + IRR)^5 = 1,732.2$$
$$(1 + IRR)^5 = 2.1417$$
$$IRR = 2.1417^{0.2} - 1$$
$$\ln(2.1417) = 0.7630 \implies 0.2 \times 0.7630 = 0.15260 \implies e^{0.15260} = 1.1650$$
$$\boxed{IRR \approx 16.5%}$$
$$\boxed{MOIC \approx 2.14x}$$
3) SENSITIVITY TABLE: EQUITY IRR
To build the sensitivity, I vary exit EBITDA margin in FY2030 (holding FY2030 revenue at $1,215.5m constant, and holding all prior years and debt balances unchanged — the margin change only affects exit-year EBITDA for valuation purposes).
FY2030 EBITDA at each margin:
- 16.0%: $1,215.5 × 16.0% = $194.5m
- 17.0%: $1,215.5 × 17.0% = $206.6m (base)
- 18.0%: $1,215.5 × 18.0% = $218.8m
Debt at exit (constant): TL $217.0m + Mezz $198.7m = $415.7m
**
Turn this model response into notes, narration, or a short video
Partner link
About Claude Opus 4.6
Capabilities
Categories
Specifications
- Provider
- Anthropic
- Released
- 2026-02-04
- Size
- XLARGE
- Context
- 1,000,000 tokens
