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
Minimax M2 Her'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
HTS LBO Model
1) Year-By-Year Projections
| Year | Revenue | EBITDA | Cash Interest (TL) | Cash Interest (Mezz) | Cash Taxes | Capex | ΔNWC | Free Cash Flow | TL Balance | Mezz Balance |
|---|---|---|---|---|---|---|---|---|---|---|
| 2025 | $900.00m | $120.00m | $43.20m | $21.60m | $0.00m | $27.00m | $0.00m | -$28.80m | $480.00m | $198.00m |
| 2026 | $972.00m | $136.08m | $43.20m | $21.60m | $12.78m | $29.16m | $3.60m | $25.74m | $436.80m | $224.04m |
| 2027 | $1,040.04m | $156.01m | $43.20m | $21.60m | $20.15m | $31.20m | $3.40m | $36.45m | $393.60m | $250.08m |
| 2028 | $1,102.44m | $181.90m | $43.20m | $21.60m | $29.28m | $33.07m | $3.12m | $51.63m | $350.40m | $276.12m |
| 2029 | $1,157.56m | $190.99m | $43.20m | $21.60m | $31.55m | $34.73m | $2.76m | $57.15m | $307.20m | $302.16m |
| 2030 | $1,215.44m | $206.63m | $43.20m | $21.60m | $35.46m | $36.46m | $2.89m | $67.02m | $264.00m | $328.20m |
2) Exit and Returns
- EV at Exit: 10.5 * $206.63m = $2,169.54m
- Exit Fees: 1.0% * $2,169.54m = $21.70m
- Net Exit Proceeds: $2,169.54m - $21.70m - $264.00m - $328.20m = $1,555.64m
- Equity MOIC: $1,555.64m / $396.00m = 3.93x
- Equity IRR: 31.5%
3) IRR Sensitivity Table
| Exit Multiple \ EBITDA Margin | 16% | 17% | 18% |
|---|---|---|---|
| 9.5x | 25% | 27% | 28% |
| 10.5x | 30% | 32% | 33% |
| 11.5x | 34% | 36% | 37% |
4) Risks and Downside Protections
Key Underwriting Risks:
- Revenue Concentration - Reliance on a few large clients in the volatile data center market.
- Technological Disruption - Emerging cooling technologies could make traditional maintenance less critical.
- Recession Sensitivity - Data center construction/expansion could freeze during economic downturns.
- Interest Rate Risk - Floating rates on the debt could strain cash flow if rates rise.
- Execution Risk - Delays integrating any acquired businesses could impact margins.
Concrete Downside Protections:
- Conservative Leverage - Using only 5.5x total leverage, well below market peaks, provides breathing room.
- Margin Expansion Strategy - Aggressively driving margins from 13.3% to 17.0% creates significant cash flow cushion.
- Contract Recurrence - Long-term service contracts provide visibility and stability to revenue and cash flow.
- Focus on Cash Paydown - Prioritizing debt reduction over dividends strengthens the balance sheet over time.
- Operational Improvements - Tight controls on capital expenditures and working capital improve cash conversion cycles.
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About MiniMax M2-her
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- Provider
- Minimax
- Released
- 2026-01-27
- Size
- LARGE
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- 65,536 tokens
