Academic private-equity case · HHL Leipzig
Project Fetch
Leveraged buyout model solving for the maximum affordable bid at a 25% target return.
- 24.9%
- Base case IRR
- 3.04×
- MOIC over five years
- 8.0×
- Maximum entry multiple
A leveraged buyout model built around one of the central questions in private equity: what is the maximum price an investor can pay while still achieving the required return?
The challenge
Purchase price, leverage, operating performance, debt repayment and exit valuation all interact to determine sponsor returns.
Rather than simply calculate IRR from a predetermined acquisition price, I wanted the model to work backwards from the investor’s required return and establish the maximum valuation the investment could support.
The process
I modelled an acquisition at approximately 8.0× 2026 adjusted EBITDA, representing approximately €24m enterprise value. The transaction was financed with:
| Component | Amount |
|---|---|
| Unitranche debt | ~€13.5m |
| Opening leverage | 4.5× |
| Sponsor equity | ~€12.0m |
I built the operating forecast, sources & uses, debt schedule, cash-flow sweep and sponsor return calculations.
I then sensitised the investment across entry valuation, operating performance and exit assumptions, and finally back-solved the model to identify the entry multiple that produced approximately the sponsor’s 25% target IRR.
The outcome
The base case generated approximately 24.9% IRR and 3.04× MOIC over a five-year holding period while assuming a flat 8.0× exit multiple.
The model therefore established approximately 8.0× EBITDA as the maximum affordable entry valuation at a 25% target return.
By keeping the exit multiple flat, the investment thesis depended primarily on business performance and deleveraging rather than multiple expansion.