JoeCo Financials

($ in millions)

Balance Sheet 2020A

Cash $50
Accounts Receivable 30
Inventory 75
Prepaid Expenses 15
Total Current Assets $170

PP&E $83
Goodwill 28
Intangible Assets 36
Total Assets $317

Accounts Payable $55

Accrued Liabilities 37
Deferred Revenue 10
Total Current Liabilities $102

Existing Debt $100

Total Liabilities $202

Shareholders' Equity $115

Total Liabilities + Equity $317

Income Statement 2020A

Revenue $715
Less: COGS (490)
Gross Profit $225
Less: SG&A (150)
Less: R&D (25)
EBITDA $50
Less: D&A (10)
EBIT $40
Less: Interest (5)
EBT $35
Less: Taxes (10)
Net Income $25
LBO Model Instructions
A private equity firm is evaluating a potential leveraged buyout of JoeCo, a privately held coffee company. In the last twelve mo

Assume the PE firm acquired 80% of JoeCo’s equity at an entry multiple of 12.5x LTM EBITDA with the remaining 20% being r

Based on the assumptions provided below, calculate the IRR and MOIC from the investment with an operating 3-statement mo

Questions
1. What is the implied IRR and MOIC if the PE firm exits JoeCo at the same multiple as entry in a five-year horizon?

2. At what multiple would the PE firm need to exit JoeCo at to achieve a 3.0x MOIC after a five-year holding period?

3. If the firm’s minimum IRR threshold is 15%, what is the lowest multiple the PE firm could sell JoeCo at while still meeting the

Operational Assumptions
LTM Revenue was $715mm and is expected to grow 8% in 2021 – then in the years onward, the growth rate will increase incre

LTM Gross margin was 31.5% and this figure is expected to increase by 0.2% each year

SG&A, R&D, and D&A as a percentage of revenue will remain constant throughout the entire holding period (i.e. SG&A: 21%, R

Capex as a percentage of revenue will be 2.0% each year

An annual monitoring fee of $2mm will be paid to the private equity firm

Use a tax rate of 35%

Transaction Assumptions
Entry multiple to purchase JoeCo was 12.5x LTM EBITDA

Date of transaction closing was 12/31/2020

Transaction fees paid to the investment banks, consultants, and accountants were $10mm

Cash to B/S will be $5mm

Existing management team has agreed to rollover 20.0% equity

Financing fees will be 2.5% for all debt tranches (excluding the revolver) and will be amortized over a 7 year period

Intangible assets will be written up as 10.0% of the purchase premium with a useful life assumption of 15 years

PP&E was written up 20.0% from its LTM balance with a useful life assumption of 10 years
Financing Assumptions
Revolving credit line (“Revolver”) was left undrawn at purchase, priced at LIBOR + 400, the max capacity is 75% of LTM Invent

Term Loan B (“TLB”) was raised at 3.5x EBITDA, priced at LIBOR + 400 with a 2% Floor, 5% mandatory amortization, and 100

Senior Notes were raised at 1.5x EBITDA and has an interest rate of 7.0%

The final debt tranche used were Subordinated Notes (“Sub Notes”), which were raised at 1.0x EBITDA – carries a 12.5% inter

There is no prepayment optionality for neither the Senior Notes nor the Sub Notes

Assume all debt instruments have a 7 year term

company. In the last twelve months, JoeCo generated $715mm in revenue and $50mm in EBITDA.

with the remaining 20% being rolled over by the existing management team.

h an operating 3-statement model and provide answers for the following questions:

five-year horizon?

ear holding period?

oeCo at while still meeting the return hurdle?

growth rate will increase incrementally by 0.5% each year

ding period (i.e. SG&A: 21%, R&D: 3.5%, and D&A: 1.4%)

er a 7 year period

on of 15 years
capacity is 75% of LTM Inventory and AR, and the unused commitment fee is 0.25%

ndatory amortization, and 100% cash sweep

BITDA – carries a 12.5% interest rate, of which 8.5% is cash interest and 4% is paid-in-kind (“PIK”)
 Standard LBO Model
($ in millions)
Step 1. Model Assumptions

Entry Valuation Transaction Assumptions

LTM EBITDA $50 Transaction Fees
Entry Multiple 12.5x Cash to B/S
Purchase Enterprise Value $625 Rollover Equity %
Financing Fees Amortization Period
Tax Rate

Circularity Toggle ("0" = On)

Debt Assumptions
Tranche x EBITDA $ Amount Rate Floor % Amort. % Fee
Revolver 0.0x - L + 400 2.5%
Term Loan B 3.5x 175 L + 400 2.0% 5.0% 2.5%
Senior Notes 1.5x 75 7.0% 2.5%
Subordinated Notes 1.0x 50 12.5% 2.5%
Total Debt 6.0x 300

Step 2. Sources & Uses Table

Sources & Uses

Sources $ Amount Uses
Revolver - Purchase Enterprise Value
Term Loan B $175 Cash to B/S
Senior Notes $75 Transaction Fees
Subordinated Notes $50 Financing Fees
Total Debt $300 Total Uses
Rollover Equity 70
Sponsor Equity 278
Total Equity $348

Total Sources $648 Check

Step 3. Purchase Price Allocation

Goodwill Calculation Intangible Assets Write-Up

Purchase Enterprise Value $625 Intangible Assets Allocation %
Less: Debt (100) Useful Life Assumption
Plus: Cash 50 Incremental Annual Amortization
Purchase Equity Value $575 Deferred Tax Liability Created
Less: Book Value of Equity (115) Annual Unwind of DTL
Plus: Existing Goodwill 28
Allocable Purchase Premium $488 PP&E Write-Up
Less: Intangible Assets Write-Up (49) PP&E Write-Up %
Less: PP&E Write-Up (17) Useful Life Assumption
Plus: Deferred Tax Liability 23 Incremental Annual Depreciation
Pro Forma Goodwill $445 Deferred Tax Liability Created
Annual Unwind of DTL
Step 4. Closing Balance Sheet

Closing B/S Adjustments 2020AAdjustments

Debits Credits

Cash $50 5 (50)

Accounts Receivable $30
Inventory $75
Prepaid Expenses $15
Total Current Assets $170

PP&E $83 17
Goodwill $28 445 (28)
Intangible Assets $36 49
Total Assets $317

Revolver -
Accounts Payable 55
Accrued Liabilities 37
Deferred Revenue 10
Total Current Liabilities $102

Existing Debt $100 (100)

Term Loan B 175
Senior Notes 75
Subordinated Notes 50
Capitalized Financing Fees (8)
Deferred Tax Liability 23
Total Liabilities $202

Shareholders' Equity $115 (125) 348

Total Liabilities + Equity $317

Balance Check -

Step 5. Income Statement

Income Statement 2020A 2021E 2022E 2023E 2024E

Revenue $715 $772.200 $838 $913 $1,000

Less: COGS ($490) ($527.66) (571) (620) (677)
Gross Profit $225 $244.54 $267 $293 $323
Less: SG&A (150) ($162.00) (176) (192) (210)
Less: R&D (25) ($27.00) (29) (32) (35)
EBITDA $50 $55.54 $62 $69 $78
Less: D&A (10) (10.80) (12) (13) (14)
Less: Intangible Assets Write-Up Amortization (3.25) (3) (3) (3)
Less: PP&E Write-Up Depreciation (1.66) (2) (2) (2)
Less: Monitoring Fees (2.00) (2) (2) (2)
EBIT $40 37.83 $43 $50 $57
Less: Interest (5) (21.99) (22) (21) (20)
 Less: Amortization of Financing Fees (1.07) (1) (1) (1)
EBT $35 14.77 $21 $28 $36
Less: Taxes (10) (5.17) (7) (10) (13)
Net Income 25 9.60 13 18 23

Operating Assumptions
Revenue Growth % 8.0% 8.5% 9.0% 9.5%
Gross Margin % 31.5% 31.7% 31.9% 32.1% 32.3%
SG&A % of Revenue 21.0% 21.0% 21.0% 21.0% 21.0%
R&D % of Revenue 3.5% 3.5% 3.5% 3.5% 3.5%
EBITDA Margin % 7.0% 7.0% 7.0% 7.0% 7.0%
D&A % of Revenue 1.4% 1.4% 1.4% 1.4% 1.4%
Consulting Fees to Sponsor 2.00 2.00 2.00 2.00 2.00

Step 6. Cash Flow Statement

Cash Flow Statement 2021E 2022E 2023E 2024E

Net Income $10 $13 $18 $23

Plus: D&A 11 12 13 14
Plus: Amortization of Financing Fees 1 1 1 1
Plus: PIK Interest 2 2 2 2
Plus: Intangible Assets Write-Up Amortization 3 3 3 3
Plus: PP&E Write-Up Depreciation 2 2 2 2
Less: Deferred Tax Liabilities (2) (2) (2) (2)
Less: Δ in NWC (1) (2) (2) (2)
Cash Flow from Operating Activities $25 $30 $35 $42

Less: Capex (15) (17) (18) (20)

Cash Flow from Investing Activities $10 $13 $17 $22

Less: Mandatory Amortization (9) (9) (9) (9)

Free Cash Flow (Pre-Revolver) $1.10 $4 $8 $13
Revolver Drawdown / (Paydown) - - - -
Free Cash Flow (Post-Revolver) $1 $4 $8 $13
Less: Cash Sweep (1) (4) (8) (13)
Cash Flow After Financing Activities - - - -

Beginning Cash Balance $5 $5 $5 $5

Net Change in Cash Flow - - - -
Ending Cash Balance 5 $5 $5 $5 $5

Operating Assumptions
Capex % of Revenue 2.0% 2.0% 2.0% 2.0%

Step 7. Debt Schedule

Debt Schedule 2021E 2022E 2023E 2024E

LIBOR (bps) 150 175 200 225

Revolver
Beginning Balance - - - -
 Revolver Drawdown / (Paydown) - - - -
Ending Balance - - - - -

Total Revolver Capacity $79 $79 $79 $79

Beginning Available Capacity $79 $79 $79 $79

Ending Available Capacity $79 $79 $79 $79

Revolver Interest Rate 5.5% 5.8% 6.0% 6.3%

Revolver Interest Expense - - - -

Unused Revolver Commitment Fee 0.25% 0.25% 0.25% 0.25%

Unused Commitment Fee $0.2 $0.2 $0.2 $0.2

Term Loan B
Beginning Balance $175.00 $165.15 $151.98 $134.86
Less: Mandatory Amortization ($8.75) ($8.75) ($8.75) ($8.75)
Less: Cash Sweep ($1.10) ($4.43) ($8.37) ($13.04)
Ending Balance 175 $165.15 $151.98 $134.86 $113.08

TLB Interest Rate 6.0% 6.0% 6.0% 6.0%

TLB Interest Expense $10 $10 $9 $7

Senior Notes
Beginning Balance $75 $75 $75 $75
Less: Mandatory Amortization - - - -
Ending Balance 75 $75 $75 $75 $75

Senior Notes Interest Rate 7.0% 7.0% 7.0% 7.0%

Senior Notes Interest Expense $5 $5 $5 $5

Subordinated Notes
Beginning Balance $50 $52 $54 $56
Less: Mandatory Amortization - - - -
Plus: PIK Interest 2 2 2 2
Ending Balance 50 $52 $54 $56 $58

Sub Notes Cash Interest Rate 8.5% 8.5% 8.5% 8.5%

Sub Notes PIK Rate 4.0% 4.0% 4.0% 4.0%

Sub Notes Cash Interest Expense $4.34 $5 $5 $5

Sub Notes PIK Interest Expense $2.00 $2 $2 $2

Interest Expense Calculation

Revolver - - - -
Unused Commitment Fee $0.20 0.2 0.2 0.2
Term Loan B $10.20 10 9 7
Senior Notes $5.25 5 5 5
Subordinated Notes $6.34 7 7 7
Total Interest Expense $21.99 $22 $21 $20

Step 8. Balance Sheet

Balance Sheet 2020PF 2021E 2022E 2023E 2024E

Cash $5 $5 $5 $5 $5
Accounts Receivable $30 32 35 38 42
Inventory $75 81 87 95 104
Prepaid Expenses $15 16 18 19 21
Total Current Assets $125 $134 $145 $157 $172

PP&E $100 $103 $106 $110 $114

Goodwill $445 445 445 445 445
Intangible Assets $85 82 78 75 72
Total Assets $755 $764 $775 $788 $803

Revolver - - - - -
Accounts Payable $55 59 64 70 76
Accrued Liabilities $37 40 43 47 52
Deferred Revenue $10 11 12 13 14
Total Current Liabilities $102 $110 $119 $130 $142

Term Loan B $175 $165 $152 $135 $113

Senior Notes $75 75 75 75 75
Subordinated Notes $50 52 54 56 58
Capitalized Financing Fees ($8) (6) (5) (4) (3)
Deferred Tax Liability $23 21 19 18 16
Total Liabilities $417 $417 $414 $409 $401

Shareholders' Equity $338 $347 $361 $379 $402

Total Liabilities and Equity $755 $764 $775 $788 $803

Balance Check - - - - -

NWC Calculation
Current Assets $120 $129 $140 $152 $167
Less: Current Liabilities 102 110 119 130 142
Net Working Capital $18 $19 $21 $23 $25

Working Capital Drivers

Days Sales Outstanding (DSO) 15 15 15 15 15
Days Inventory Held (DIH) 56 56 56 56 56
Prepaid Expenses % of Revenue 2.1% 2% 2% 2% 2%
Days Payables Outstanding (DPO) 41 41 41 41 41
Accrued Liabilities % of Revenue 5.2% 5% 5% 5% 5%
Deferred Revenue % of Revenue 1.4% 1% 1% 1% 1%

Net Debt Calculation

Revolver - - - -
Term Loan B 165 152 135 113
Senior Notes 75 75 75 75
Subordinated Notes 52 54 56 58
Total Debt $292 $281 $266 $247
Less: Cash (5) (5) (5) (5)
Net Debt $287 $276 $261 $242
Step 9. Returns Calculation

Exit Valuation 2020A 2021E 2022E 2023E 2024E

Exit LTM EBITDA $56 $62 $69 $78

Exit Multiple Assumption 12.5x 12.5x 12.5x 12.5x
Exit Enterprise Value $694 $774 $867 $974
Less: Net Debt (287) (276) (261) (242)
Exit Equity Value $407 $498 $606 $733
Sponsor Implied Ownership % 80.0% 100.0% 100.0% 100.0%
Exit Proceeds to Sponsor $326 $498 $606 $733
Monitoring Fees 2 2 2 2
Total Proceeds to Sponsor $328 $500 $608 $735

Cash (Outflows) / Inflows Year 0 Year 1 Year 2 Year 3 Year 4

12/31/20 12/31/21 12/31/22 12/31/23 12/31/24
Exit Year 2021 ($278) $328
Exit Year 2022 ($278) $2 $500
Exit Year 2023 ($278) $2 $2 $608
Exit Year 2024 ($278) $2 $2 $2 $735
Exit Year 2025 ($278) $2 $2 $2 $2

IRR 17.9%
MOIC 1.2x

Step 10. Sensitivity Analysis

Internal Rate of Return (IRR)

Exit Multiple

Entry
Multiple

Multiple on Invested Capital (MOIC)

Exit Multiple

Entry
Multiple
 $10
5
20.0%
7 Years
35%

$ Fee
-
4
2
1
$8

$ Amount
$625
5
10
8
$648

10.0%
15 Years
3
17
$1

20.0%
10 Years
2
6
$1
2020PF

$5
$30
$75
$15
$125

$100
$445
$85
$755

-
$55
$37
$10
$102

-
$175
$75
$50
($8)
$23
$417

$338

$755

2025E

$1,100
(743)
$357
(231)
(38)
$88
(15)
(3)
(2)
(2)
$66
(19)
 (1)
$46
(16)
30

Step
10.0% 0.50%
32.5% 0.20%
21.0%
3.5%
7.0%
1.4%
2.00

2025E

$30
15
1
2
3
2
(2)
(2)
$49

(22)
$27

(9)
$19
-
$19
(19)
-

$5
-
$5

2.0%

2025E

250

-
 -
-

$79

$79
$79

6.5% <<LIBOR floor is to LIBOR only, not the sum of LIBOR and spread
-

0.25%
$0.2

$113.08
($8.75)
($18.57)
$85.76

6.0%
$6

$75
-
$75

7.0%
$5

$58
-
2
$61

8.5%
4.0%

$5
$2

-
0.2
6
5
7
$19
2025E

$5
46
114
23
$188

$119
445
69
$821

-
83
57
15
$156

$86
75
61
(2)
14
$389

$432

$821

$183
156
$27

15
56
2%
41
5%
1%

-
86
75
61
$222
(5)
$217
 2025E

$88
12.5x
$1,099
(217)
$882
100.0%
$882
2
$884

Year 5
12/31/25

$884
Standard LBO Model
($ in millions)
Step 1. Model Assumptions

Entry Valuation Transaction Assumptions

LTM EBITDA $50 Transaction Fees
Entry Multiple 12.5x Cash to B/S
Purchase Enterprise Value $625 Rollover Equity %
Financing Fees Amortization Period
Tax Rate

Circularity Toggle ("0" = On)

Debt Assumptions
Tranche x EBITDA $ Amount Rate Floor % Amort. % Fee
Revolver 0.0x - L + 400 - - -
Term Loan B 3.5x 175 L + 400 2.0% 5.0% 2.5%
Senior Notes 1.5x 75 7.0% - - 2.5%
Subordinated Notes 1.0x 50 12.5% - - 2.5%
Total Debt 6.0x $300

Step 2. Sources & Uses Table

Sources & Uses

Sources $ Amount Uses
Revolver - Purchase Enterprise Value
Term Loan B 175 Cash to B/S
Senior Notes 75 Transaction Fees
Subordinated Notes 50 Financing Fees
Total Debt $300 Total Uses
Rollover Equity 70
Sponsor Equity 278
Total Equity $348

Total Sources $648 Check

Step 3. Purchase Price Allocation

Goodwill Calculation Intangible Assets Write-Up

Purchase Enterprise Value $625 Intangible Assets Allocation %
Less: Debt (100) Useful Life Assumption
Plus: Cash 50 Incremental Annual Amortization
Purchase Equity Value $575 Deferred Tax Liability Created
Less: Book Value of Equity (115) Annual Unwind of DTL
Plus: Existing Goodwill 28
Allocable Purchase Premium $488 PP&E Write-Up
Less: Intangible Assets Write-Up (49) PP&E Write-Up %
Less: PP&E Write-Up (17) Useful Life Assumption
Plus: Deferred Tax Liability 23 Incremental Annual Depreciation
Pro Forma Goodwill $445 Deferred Tax Liability Created
Annual Unwind of DTL
 Step 4. Closing Balance Sheet

Closing B/S Adjustments 2020A Adjustments

Debits Credits

Cash $50 5 (50)

Accounts Receivable 30
Inventory 75
Prepaid Expenses 15
Total Current Assets $170

PP&E $83 17
Goodwill 28 445 (28)
Intangible Assets 36 49
Total Assets $317

Revolver -
Accounts Payable 55
Accrued Liabilities 37
Deferred Revenue 10
Total Current Liabilities $102

Existing Debt $100 (100)

Term Loan B - 175
Senior Notes - 75
Subordinated Notes - 50
Capitalized Financing Fees - (8)
Deferred Tax Liability - 23
Total Liabilities $202

Shareholders' Equity $115 (125) 348

Total Liabilities + Equity $317

Balance Check -

Step 5. Income Statement

Income Statement 2020A 2021E 2022E 2023E 2024E

Revenue $715 $772.200 $838 $913 $1,000

Less: COGS (490) ($527.66) (571) (620) (677)
Gross Profit $225 $244.54 $267 $293 $323
Less: SG&A (150) ($162.00) (176) (192) (210)
Less: R&D (25) ($27.00) (29) (32) (35)
EBITDA $50 $55.54 $62 $69 $78
Less: D&A (10) (10.80) (12) (13) (14)
Less: Intangible Assets Write-Up Amortization - (3.25) (3) (3) (3)
Less: PP&E Write-Up Depreciation - (1.66) (2) (2) (2)
Less: Monitoring Fees - (2.00) (2) (2) (2)
EBIT $40 37.83 $43 $50 $57
Less: Interest (5) (21.99) (22) (21) (20)
Less: Amortization of Financing Fees - (1.07) (1) (1) (1)
EBT $35 14.77 $21 $28 $36
Less: Taxes (10) (5.17) (7) (10) (12)
Net Income $25 9.60 $13 $18 $23

Operating Assumptions
Revenue Growth % NA 8.0% 8.5% 9.0% 9.5%
Gross Margin % 31.5% 31.7% 31.9% 32.1% 32.3%
SG&A % of Revenue 21.0% 21.0% 21.0% 21.0% 21.0%
R&D % of Revenue 3.5% 3.5% 3.5% 3.5% 3.5%
EBITDA Margin % 7.0% 7.2% 7.4% 7.6% 7.8%
D&A % of Revenue 1.4% 1.4% 1.4% 1.4% 1.4%
Consulting Fees to Sponsor NA $2 $2 $2 $2

Step 6. Cash Flow Statement

Cash Flow Statement 2021E 2022E 2023E 2024E

Net Income $10 $13 $18 $23

Plus: D&A 11 12 13 14
Plus: Amortization of Financing Fees 1 1 1 1
Plus: PIK Interest 2 2 2 2
Plus: Intangible Assets Write-Up Amortization 3 3 3 3
Plus: PP&E Write-Up Depreciation 2 2 2 2
Less: Deferred Tax Liability Unwind (2) (2) (2) (2)
Less: Δ in NWC (1) (2) (2) (2)
Cash Flow from Operating Activities $25 $30 $35 $42

Less: Capex (15) (17) (18) (20)

Cash Flow from Investing Activities ($15) ($17) ($18) ($20)

Less: Mandatory Amortization (9) (9) (9) (9)

Free Cash Flow (Pre-Revolver) $1.09 $4 $8 $13
Revolver Drawdown / (Paydown) - - - -
Free Cash Flow (Post-Revolver) $1 $4 $8 $13
Less: Cash Sweep (1) (4) (8) (13)
Cash Flow After Financing Activities - - - -

Beginning Cash Balance $5 $5 $5 $5

Net Change in Cash Flow - - - -
Ending Cash Balance $5 $5 $5 $5

Operating Assumptions
Capex % of Revenue 2.0% 2.0% 2.0% 2.0%

Step 7. Debt Schedule

Debt Schedule 2021E 2022E 2023E 2024E

LIBOR (bps) 150 175 200 225

Revolver
Beginning Balance - - - -
Revolver Drawdown / (Paydown) - - - -
Ending Balance - - - -

Total Revolver Capacity $80 $80 $80 $80

Beginning Available Capacity $80 $80 $80 $80

Ending Available Capacity $80 $80 $80 $80

Revolver Interest Rate 5.5% 5.8% 6.0% 6.3%

Revolver Interest Expense - - - -

Unused Revolver Commitment Fee 0.25% 0.25% 0.25% 0.25%

Unused Commitment Fee $0.2 $0.2 $0.2 $0.2

Term Loan B
Beginning Balance $175.00 $165.16 $151.98 $134.87
Less: Mandatory Amortization ($8.75) ($8.75) ($8.75) ($8.75)
Less: Cash Sweep ($1.09) ($4.42) ($8.37) ($12.83)
Ending Balance $165.16 $151.98 $134.87 $113.29

TLB Interest Rate 6.0% 6.0% 6.0% 6.3%

TLB Interest Expense $10 $10 $9 $8

Senior Notes
Beginning Balance $75 $75 $75 $75
Less: Mandatory Amortization - - - -
Ending Balance $75 $75 $75 $75

Senior Notes Interest Rate 7.0% 7.0% 7.0% 7.0%

Senior Notes Interest Expense $5 $5 $5 $5

Subordinated Notes
Beginning Balance $50 $52 $54 $56
Less: Mandatory Amortization - - - -
Plus: PIK Interest 2 2 2 2
Ending Balance $52 $54 $56 $58

Sub Notes Cash Interest Rate 8.5% 8.5% 8.5% 8.5%

Sub Notes PIK Rate 4.0% 4.0% 4.0% 4.0%

Sub Notes Cash Interest Expense $4.34 $5 $5 $5

Sub Notes PIK Interest Expense $2.00 $2 $2 $2

Interest Expense Calculation

Revolver - - - -
Unused Commitment Fee $0.20 0.2 0.2 0.2
Term Loan B $10.20 10 9 8
Senior Notes $5.25 5 5 5
Subordinated Notes $6.34 7 7 7
Total Interest Expense $21.99 $22 $21 $20

Step 8. Balance Sheet

Balance Sheet 2020PF 2021E 2022E 2023E 2024E

Cash $5 $5 $5 $5 $5
Accounts Receivable 30 32 35 38 42
Inventory 75 81 87 95 104
Prepaid Expenses 15 16 18 19 21
Total Current Assets $125 $134 $145 $157 $172

PP&E $100 $103 $106 $110 $114

Goodwill 445 445 445 445 445
Intangible Assets 85 82 78 75 72
Total Assets $755 $764 $775 $788 $803

Revolver - - - - -
Accounts Payable 55 59 64 70 76
Accrued Liabilities 37 40 43 47 52
Deferred Revenue 10 11 12 13 14
Total Current Liabilities $102 $110 $119 $130 $142

Term Loan B $175 $165 $152 $135 $113

Senior Notes 75 75 75 75 75
Subordinated Notes 50 52 54 56 58
Capitalized Financing Fees (8) (6) (5) (4) (3)
Deferred Tax Liability 23 21 19 18 16
Total Liabilities $417 $417 $414 $409 $401

Shareholders' Equity $338 $347 $361 $379 $402

Total Liabilities and Equity $755 $764 $775 $788 $803

Balance Check - - - - -

NWC Calculation
Current Assets $120 $129 $140 $152 $167
Less: Current Liabilities 102 110 119 130 142
Net Working Capital $18 $19 $21 $23 $25

Working Capital Drivers

Days Sales Outstanding (DSO) 15 15 15 15 15
Days Inventory Held (DIH) 56 56 56 56 56
Prepaid Expenses % of Revenue 2.1% 2.1% 2.1% 2.1% 2.1%
Days Payables Outstanding (DPO) 41 41 41 41 41
Accrued Liabilities % of Revenue 5.2% 5.2% 5.2% 5.2% 5.2%
Deferred Revenue % of Revenue 1.4% 1.4% 1.4% 1.4% 1.4%

Net Debt Calculation

Revolver - - - -
Term Loan B 165 152 135 113
Senior Notes 75 75 75 75
Subordinated Notes 52 54 56 58
Total Debt $292 $281 $266 $247
Less: Cash (5) (5) (5) (5)
Net Debt $287 $276 $261 $242
 Step 9. Returns Calculation

Exit Valuation 2020A 2021E 2022E 2023E 2024E

Exit LTM EBITDA $56 $62 $69 $78

Exit Multiple Assumption 12.5x 12.5x 12.5x 12.5x
Exit Enterprise Value $694 $774 $867 $974
Less: Net Debt (287) (276) (261) (242)
Exit Equity Value $407 $498 $606 $732
Sponsor Implied Ownership % 80.0% 80.0% 80.0% 80.0%
Exit Proceeds to Sponsor $326 $399 $485 $586
Monitoring Fees 2 2 2 2
Total Proceeds to Sponsor $328 $401 $487 $588

Cash (Outflows) / Inflows Year 0 Year 1 Year 2 Year 3 Year 4

12/31/20 12/31/21 12/31/22 12/31/23 12/31/24
Exit Year 2021 ($278) $328
Exit Year 2022 ($278) $2 $401
Exit Year 2023 ($278) $2 $2 $487
Exit Year 2024 ($278) $2 $2 $2 $588
Exit Year 2025 ($278) $2 $2 $2 $2

IRR 17.9% 20.4% 20.9% 21.0%

MOIC 1.2x 1.4x 1.8x 2.1x

Step 10. Sensitivity Analysis

Internal Rate of Return (IRR)

Exit Multiple
21.0% 9.5x 10.5x 11.5x 12.5x 13.5x 14.5x 15.5x
9.5x
10.5x
Entry 11.5x
Multiple 12.5x
13.5x
14.5x
15.5x

Multiple on Invested Capital (MOIC)

Exit Multiple
2.6x 9.5x 10.5x 11.5x 12.5x 13.5x 14.5x 15.5x
9.5x
10.5x
Entry 11.5x
Multiple 12.5x
13.5x
14.5x
15.5x
 $10
5
20.0%
7 Years
35%

$ Fee
-
4
2
1
$8

$ Amount
$625
5
10
8
$648

10.0%
15 Years
3
17
$1

20.0%
10 Years
2
6
$1
2020PF

$5
30
75
15
$125

$100
445
85
$755

-
55
37
10
$102

-
175
75
50
(8)
23
$417

$338

$755

2025E

$1,100
(743)
$357
(231)
(38)
$88
(15)
(3)
(2)
(2)
$66
(19)
 (1)
$45
(16)
$29

Step
10.0% 0.50%
32.5% 0.20%
21.0%
3.5%
8.0%
1.4%
$2

2025E

$29
15
1
2
3
2
(2)
(2)
$49

(22)
($22)

(9)
$18
-
$18
(18)
-

$5
-
$5

2.0%

2025E

250

-
 -
-

$80

$80
$80

6.5%
-

0.25%
$0.2

$113
(9)
(18)
$86

6.5%
$6

$75
-
$75

7.0%
$5

$58
-
2
$61

8.5%
4.0%

$5
$2

-
0.2
6
5
7
$19
2025E

$5
46
114
23
$188

$119
445
69
$821

-
83
57
15
$156

$86
75
61
(2)
14
$390

$431

$821

$183
156
$27

15
56
2.1%
41
5.2%
1.4%

-
86
75
61
$222
(5)
$217
 2025E

$88
12.5x
$1,099
(217)
$882
80.0%
$706
2
$708

Year 5
12/31/25

$708

21.0%
2.6x