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
Gpt 5 1 Chat'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
Below is a clean, concise underwriting output following your instructions.
- YEAR‑BY‑YEAR SUMMARY (FY26–FY30)
All figures in $m. Term loan = 480 initial; mezzanine = 180 initial. Optional amortization applied.
FY26
• Revenue 972
• EBITDA 136.1
• Cash interest: TL 43.2 / Mezz 21.6
• Cash taxes 17.8
• Capex 29.2
• ΔNWC 0.4
• FCF after debt service 19.1
• Ending TL 456.1 / Mezz 183.6
FY27
• Revenue 1040
• EBITDA 156.0
• Cash interest: TL 41.0 / Mezz 22.0
• Cash taxes 23.3
• Capex 31.2
• ΔNWC 0.3
• FCF after debt service 33.4
• Ending TL 417.9 / Mezz 187.3
FY28
• Revenue 1102
• EBITDA 176.3
• Cash interest: TL 37.6 / Mezz 22.5
• Cash taxes 29.1
• Capex 33.1
• ΔNWC 0.3
• FCF after debt service 53.7
• Ending TL 359.4 / Mezz 191.0
FY29
• Revenue 1157
• EBITDA 190.9
• Cash interest: TL 32.3 / Mezz 22.9
• Cash taxes 33.9
• Capex 34.7
• ΔNWC 0.3
• FCF after debt service 66.8
• Ending TL 287.8 / Mezz 194.8
FY30
• Revenue 1215
• EBITDA 206.6
• Cash interest: TL 25.9 / Mezz 23.4
• Cash taxes 39.3
• Capex 36.5
• ΔNWC 0.3
• FCF after debt service 81.2
• Ending TL 201.8 / Mezz 194.8
- Equity IRR and MOIC
• Exit EV = 10.5×206.6 = 2169.3
• Exit fees = 21.7
• Net proceeds after repaying TL 201.8 and Mezz 194.8 = 1750.9
• Equity invested at entry = 818.8
• MOIC = 2.14×
• IRR ≈ 17%
- Sensitivity: Equity IRR (%)
Rows = Exit EBITDA margin; Columns = Exit multiple.
EBITDA margin 16%
• 9.5×: ~11%
• 10.5×: ~15%
• 11.5×: ~19%
EBITDA margin 17% (base)
• 9.5×: ~13%
• 10.5×: ~17%
• 11.5×: ~21%
EBITDA margin 18%
• 9.5×: ~15%
• 10.5×: ~19%
• 11.5×: ~23%
- Underwriting risks
• Data‑center slowdown reducing growth and margin expansion
• Labor cost inflation compressing EBITDA margins
• Customer concentration in hyperscalers
• High leverage sensitivity to interest rate shifts
• Technology shifts reducing HVAC requirements per MW
Downside protection levers
• Accelerated cost takeout program within first 12 months
• Renegotiation of long‑term service contracts with escalators
• Add‑on acquisitions for cross‑sell and scale efficiencies
• Capex prioritization and deferral
• Early refinancing to reduce cash interest burden
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About GPT-5.1 Chat
Capabilities
Categories
Specifications
- Provider
- Openai
- Released
- 2025-11-13
- Size
- LARGE
- Context
- 128,000 tokens
