This is a practice version of the timed LBO test private equity funds set after interviews: a term sheet, an operating plan and a blank model, with two hours to produce returns and a view.
The company, Harlan Medical Supplies, is made up. The layout matches the full LBO project, so you can focus on speed and accuracy. Each of the eight sections has its own countdown, adding up to 120 minutes; checking is never blocked.
What graders look for, roughly in this order:
- sources that equal uses, with fees funded by equity;
- interest on opening balances, so the model has no circular reference;
- a sweep that pays the term loan in the right order and never overpays;
- exit equity that takes off all the debt and adds the cash;
- a sensible IRR, checked against the rules of thumb (2x in five years is about 15%).
Section Build Minutes
1 Sources and uses 15
2 Operating model 15
3 Interest, taxes, free cash flow 15
4-5 Debt schedule, cash, debt / EBITDA 30
6 Exit, MOIC, IRR 15
7-8 Sensitivity grid and verdict 30
Two hours in eight sections.