A hypothetical sponsor-backed buyout of a specialty chemicals manufacturer, built to test whether the deal clears a 20%+ IRR hurdle under realistic leverage and exit assumptions.
Modeled as a financial sponsor acquiring a family-owned specialty chemicals manufacturer with stable cash flows but limited existing leverage — the kind of target a mid-market PE fund would screen for a control buyout. The core question: at what entry multiple and leverage level does this deal clear a 20%+ IRR hurdle over a 5-year hold?
| Entry EV / EBITDA | 7.2x |
| Entry leverage (Debt / EBITDA) | 4.5x |
| Revenue CAGR (5-yr) | 9.0% |
| EBITDA margin (exit) | 21.5% |
| Exit EV / EBITDA | 7.5x |
| Hold period | 5 years |
Built bottom-up from a three-statement operating model, layered with a debt schedule (term loan + revolver), mandatory amortization, and a cash sweep. Returns are triangulated three ways — IRR, MOIC, and a levered vs. unlevered decomposition — to separate the return that came from operating improvement versus the return that came from leverage.
| 4.0x | 4.5x | 5.0x | |
|---|---|---|---|
| 6.5x | 26.1% | 27.8% | 29.2% |
| 7.2x | 19.8% | 22.4% | 24.6% |
| 8.0x | 14.5% | 16.9% | 18.8% |