Project Alderwood — Specialty Chemicals Take-Private
A 2-hour Industrials / Chemicals Special Committee case study with a complete model answer
Modeled After
Evercore
Special committee materials for a hygiene and cleaning chemicals take-private: an eleven-page WACC appendix with a peer beta table and a pandemic beta reset, a macro appendix carrying caustic soda and base monomer price curves, five pages of institutional shareholder evolution, a Discounted Future Share Price Analysis, and a chemicals sponsor take-private screen used as an LBO proxy
Structure and exhibit set are modeled after Evercore. The company, the financials and every figure in this case are entirely our own.
The Situation
Alderwood Hygiene Chemicals, Inc. (NYSE: AHC) is a single-site producer of hygiene and cleaning chemicals at the Marchbourne Works in Louisiana, with 780kt of nameplate capacity.
Alderwood Hygiene Chemicals, Inc.
- Sector
- Commodity chemicals — a single-site producer of hygiene and cleaning chemicals selling into an index-priced market, sitting in the North American merchant cohort of the industry cost curve
- Size
- Geography
- United States; a single production site, the Marchbourne Works in Louisiana, selling into a North American merchant market priced off a published index
- Ownership
- Situation
The Prompt
You are the financial advisor to the Special Committee of the Board of Directors of Alderwood Hygiene Chemicals, Inc. 75 per share in cash.
Supporting Materials
What you are handed at the start of the case, in the format a real process would use.
Blank modeling template
XLSXUnlock
What You Have to Produce
The deliverables, in the order the committee will read them. The exercise runs 120 minutes.
PART 1
The industry balance, and the operating rate it produces
PART 2
The cost curve, and who sets the price
PART 3
The contract lag, the unit margin and the walk to EBITDA
PART 4
Define mid-cycle, then price the denominator error
PART 5
Free cash flow, the standalone alternative and the cost of capital
PART 6
Valuation, the reference points and the recommendation
How to Approach It
The order a strong candidate works in, and why. This is the shape of the answer — the finished answer deck and Excel model are in the solution set below.
- 01
Build in one direction only, and never reach for a growth rate
- 02
Rank the curve, then walk along it until demand is covered
- 03
Apply the lag to each side separately
- 04
Say what mid-cycle means before you use the word
- 05
Put the denominator error on the page as a number
- 06
Rank the evidence rather than averaging it
Key Concepts
The ideas this case is built on. Know these cold and the case becomes a question of execution rather than knowledge.
The industry cost curve
A cost curve ranks every producer of a commodity by delivered cash cost and stacks capacity behind each rank. The clearing price is set by the last unit of capacity demand has to call on, rather than by the average producer. Where a producer sits on the curve is therefore its margin, and that position is a function of feedstock intensity, energy exposure and scale rather than of anything management does in a given quarter. A curve moves when the input curves move, and positions on different energy references move differently.
The marginal producer and the cycle premium
Walk along the cost curve, accumulating capacity, until the cumulative total first covers industry demand. The cohort you are standing in is the marginal producer, and the index price is its delivered cash cost plus whatever the cycle is paying over cash cost. That premium widens as the operating rate rises and goes negative below a pivot rate — which is what a chemicals trough is, and why a model that floors the premium at zero cannot produce one. When demand crosses into a more expensive cohort, the index price steps rather than drifts.
The operating rate, derived
The industry operating rate is demand over nameplate capacity. It is an output rather than an input, and treating it as an assumption hides whether the turn is being caused by demand or by supply. Capacity is announced years in advance and lands in discrete lumps, so a cycle can turn down while demand compounds every single year. A producer's own utilization then sits at a spread to the industry rate, which a contracted book widens.
Pass-through and the contract reset lag
In an index-priced market, contracted volume typically resets to a published assessment on a schedule with a lag, while purchased inputs reset on a different and usually faster one. The difference between the two lag weights is the pass-through exposure. It is why unit margin moves against a rising input curve rather than with it: cost lands inside the period, part of the price does not. The exposure is symmetric — it costs margin on the way up and earns it back on the way down — and quantifying it is what separates a spread model from a revenue model.
Mid-cycle as a stated basis
Mid-cycle earnings are what a business earns at a normalized point in its cycle, and the phrase is meaningless until the normalization is specified. A defensible basis names the operating rate, the capacity fleet that rate is applied to, the level of every input curve and the year the fixed cost base is struck in. It also runs the arithmetic in the opposite direction from a forecast year: the rate is stated and demand falls out of it, rather than demand being forecast and the rate falling out. A figure whose revenue line and cost line sit in different years is not a basis.
The denominator problem in a cyclical
An EV/EBITDA multiple is silent about where in the cycle its denominator sits. Apply one peer multiple to a trough year, a normalized year and a peak year and the answers can differ by a factor of two or more on the same company with the same assets. That is the price of capitalizing a point in the cycle. It also runs in both directions across the peer set: if the peers' spot earnings are depressed, their spot multiple is inflated, and pairing an inflated multiple with a depressed earnings figure double-counts the same fact.
Position in the cycle, and why it differs across a peer set
Two producers can both be below mid-cycle and be below it by different amounts. A company with a large contracted book is less exposed to the spot market and therefore less depressed at the bottom, so applying the peer set's spot multiple to its spot earnings pays it twice for the same contract book. Computing each name's current-year earnings as a percentage of its own mid-cycle earnings is what makes that comparison visible, and it is a better screen than margin or size.
Beta windows and the premium peer
Two observation windows on the same peer set will disagree whenever one of them contains a market-wide shock that moved a whole sector for one reason. Choosing between them is a judgment, and the honest presentation names which of the two produces the friendlier answer. A separate trap is the peer that is an outlier on two statistics at once — the lowest beta and the highest multiple are frequently the same underlying fact — because a discount taken on the beta lowers the discount rate and raises the value, which is the opposite of a discount. The multiple is where a premium peer's premium is actually given up.
Working capital across a cycle
Net working capital in a commodity business scales with revenue, and revenue in a commodity business is a price times a volume. So working capital absorbs cash on the up-leg and releases it on the down-leg — a cyclical balance sheet is a shock absorber. A model that grows working capital with revenue in every year has missed the one place a chemicals business generates cash in a downturn, and it also corrupts the terminal value, because a one-off release off the down-leg cannot be perpetuated.
A sponsor screen as a floor, not a valuation
A screen of what a financial buyer can pay answers a financing question, not a value question, so it belongs at the bottom of a valuation summary rather than in the middle of it. For a cyclical there is a second discipline: the leverage has to be struck on normalized earnings rather than on peak earnings, because the trough is the part of the cycle the credit has to survive. When the screen sits below the offer, that is the buyer's best argument and it has to be printed rather than suppressed — it tells the committee whether the gap in front of it is negotiable at all.
What Makes It Hard
The specific traps in this case — the places candidates lose the assessment without noticing.
Check Your Answer
Type the figures you produced and find out how many are right before you open the worked answer. You get a verdict and, where you are off, a pointer to the part of the build to re-check — never the number itself. Everything you type stays on this device.
How to type a figure. Digits, with an optional unit: 1,234.5, $1,234.5, 2.6x, 21.4%. For a negative use (20.0) or -20.0. Enter as many decimals as you carried — precision is never penalised.
What the Case Asked For
The arithmetic is only half of it. Tick off what you actually produced — this half is yours to score, because nothing can grade a written recommendation from a checkbox.
The Model Answer
The worked answer in full: answer deck and Excel model, built the way a banker would actually build them. It is a reference, not a submission — a strong answer under the clock is far shorter.
What the Solution Covers
- —Input price curves as valuation context
- —Beta discount to a premium peer
- —Discounted future share price analysis
- —Sponsor take-private screen as an LBO proxy
- —Institutional shareholder evolution
- —Two-print football field discipline
Answer Deck
Full model answer, banker-formatted
Upgrade to Diamond
Sign up and upgrade to Diamond to unlock the answer deck, the Excel model and the audio walkthrough.
Get StartedThe Excel Model
The model is linked and tied out end to end — every schedule, every formula and every check, in the file itself.
Downloads are available to Diamond members
Excel Model and PowerPoint Deck and Answer Deck (PDF) — yours to open, edit and rebuild
Walkthrough
A conversational walkthrough of how to approach the case under time pressure — where to start, what to cut, and how the recommendation gets defended.
Audio Walkthrough
How to approach Project Alderwood — Specialty Chemicals Take-Private
60-second preview — upgrade to Diamond for the full walkthrough
Frequently Asked Questions
Why is there no revenue growth rate anywhere in this case?
Because a commodity producer does not have one. Revenue is a realized price times a volume; the price comes from the marginal producer on the cost curve and the volume comes from capacity times a utilization rate the industry balance sets. A growth rate would be a second, coarser statement of the same thing, and it would disagree with the first. If you find yourself typing one, it means a step in the chain has been skipped — usually the operating rate.
How do I find the marginal producer?
Build every cohort's delivered cash cost from its bill of materials and the four input curves, sort the cohorts from cheapest to most expensive, and accumulate their capacity in that order. Walk the cumulative line until it first covers industry demand. The cohort you are in when you cross is the marginal producer. Then add the cycle premium, which is a stated slope times the distance between the operating rate and a stated pivot — nothing there is assumed, and the crossing is computed rather than picked.
What exactly should mid-cycle mean?
Four things, stated together: the operating rate you are normalizing to, the capacity fleet you apply it to, the level of every input curve, and the year the fixed cost base is struck in. Then run the arithmetic in the opposite direction from a forecast year — state the rate and let demand fall out of it, rather than forecasting demand and reading the rate. A mid-cycle rate applied to today's capacity ignores the capacity being built, which is the whole reason the cycle turns.
Should I strike the multiple on the current year or on mid-cycle?
On mid-cycle, and the exhibit that proves it is worth more than the argument. Apply one peer multiple to the first forecast year, to mid-cycle and to the peak year, and print all three answers. Then check the peer set the same way: if their current-year earnings are below their own mid-cycle, their current-year multiple is inflated, and pairing an inflated multiple with a depressed earnings figure counts the same fact twice.
Which beta window should I use, and how do I present the choice?
Use the one whose observation period does not contain a market-wide shock that moved the whole sector for a single reason, carry the other as a named sensitivity, and say out loud which of the two produces the friendlier answer. A committee that is not told which of two defensible choices flatters the analysis has not really been advised. Do the same with the size premium: whether or not you apply one, say so rather than leaving its absence silent.
The natural comparable trades at a premium. Where does the discount go?
On the multiple, never on the beta. The premium peer is usually the outlier on both statistics at once, because a contract-insulated earnings stream produces both a lower beta and a higher multiple — the same fact. Marking the subject company at that peer's beta lowers its discount rate and raises its value, which is the opposite of a discount. Strike the subject at the quartiles of the whole set instead, and say why.
Is the sponsor take-private screen a valuation?
No. It answers what a financial buyer can pay at a given return, which is a financing question. Carry it as the floor of the field and lever it on normalized earnings rather than peak earnings, because the trough is the part of the cycle the credit has to survive. If the screen lands below the offer, print that — it is the buyer's best argument, and it tells the committee whether the gap in front of it can be closed by negotiation at all.
Why take only the premium from the precedent set?
Because a precedent multiple compares targets each struck at its own point in its own cycle, and doing it properly requires a mid-cycle earnings figure for every one of them — a research exercise rather than a two-hour one. A precedent multiple computed on reported earnings would repeat exactly the denominator error the case exists to test. Take the premium, mark the bar as a reference rather than a valuation, and say what you left out and why.
How long should the presentation be?
Short enough that the Committee reaches the recommendation. This is a two-hour exercise and the workbook consumes most of it, so what you hand back is the submission a strong candidate produces rather than a book a bank sends a client. Lead with the answer, put the evidence behind it, put backup in an appendix, and make sure every exhibit that carries a mid-cycle figure also states the basis it is struck on.
About This Industrials / Chemicals Special Committee Case Study
Industrials / Chemicals Special Committee case study for investment banking interviews. 120-minute format covering input price curves as valuation context, beta discount to a premium peer, discounted future share price analysis. Includes the full prompt, a model answer deck, a tied-out Excel model and an audio walkthrough.
This case study sits in Investment Banking, under Industrials. Every case ships with the full prompt, the supporting materials, a complete model answer and an audio walkthrough of the judgment behind the recommendation.
120-Minute Format
The time limit a real assessment would give you
Answer Deck
Included in the model answer
Excel Model
Included in the model answer
Audio Walkthrough
How to approach the case under time pressure
200K+ students have used IB Vine to help land offers at top firms.
Moelis & Co.
“I loved IB Vine. I’m going into Private Capital Advisory (PCA); you have the lessons on there for PCA and that was actually a game changer. I went into those interviews and knew about the core PCA concepts like net asset value, primary fundraising vs. secondary advisory, etc. I swear I was on IB Vine like a few hours a day. The opportunity to have that learning section and go through the questions people submit and everything — there’s no better tool out there. I loved the guides/lessons. The user interface is amazing. The way you’ve simplified it is so spectacular — it’s just so much easier to digest. It’s fun to use too; I’d rather use IB Vine than scroll through a guide. To be honest, I think the product is perfect. I genuinely owe you a big thanks.”
Moelis & Co.
“IB Vine is a tool we really love to use in the club I’m a part of, and there’s really no other resource like it. You guys do a phenomenal job with the question bank. I recruited specifically for Energy banking, and IB Vine was my most used resource for generalist questions (which were about 50% of my interview questions; the rest being Energy-specific); the majority of such questions I saw in interviews were at least similar (if not the same) to the ones on IB Vine.”
Perella Weinberg
“Once I read through the BIWS learning guides, I really didn’t refer to them again. I didn’t even really run through the 400 question guide once I found IB Vine, which I heard about through one of my classmates. We even get a free subscription (like most business schools) to Wall Street Prep, and if I’m being completely honest, I never even logged in to WSP. IB Vine is pretty much the only tool I used (along with our club question bank & mock interviews with peers) and it was invaluable for recruiting.”
Cantor Fitzgerald
“What a platform, made such a huge difference. I did superdays at Evercore, PJT, M. Klein and Barclays among others from a non-target school and did not miss a single technical in any interview process through prepping with IB Vine.”
Barclays
“Very accurate questions and all of the solutions are easy to follow. At least 10 of the questions I studied through this platform appeared in my Round 1 or Superday interviews.”
TD Securities
“THANK YOU SO MUCH IB VINE, I COULD NOT HAVE DONE THIS WITHOUT YOU, SERIOUSLY!!! IB Vine was the best website ever. I spent at least two hours on this daily (seriously) from October through I get my offer in February.”
Citadel
“I’m doing public equities this summer and next. I know the name is “IB Vine” but at the undergrad level a lot of the technicals across public equities are the same as investment banking. I recommend your software to all my friends!”
Piper Sandler
“I loved this site! 1000% this is the best resource I used in the process.”
Lazard
“This was the greatest tool ever. I genuinely enjoyed running through the technicals/behaviorals and it was very helpful!”
Houlihan Lokey
“IB Vine was the most helpful resource I had during recruiting. I will continue to promote it to other students at WashU and elsewhere.”
Jefferies
“Awesome product, helped me crush my technicals in my interviews and land a great role. Thank you, seriously was a huge help.”
Morgan Stanley
“Very helpful to get real-life questions unlike the 400 guide, especially for merger math. Built deeper understanding of key concepts.”
Houlihan Lokey
“Extremely helpful study tool that carried me through the recruitment process from start to end.”
Evercore
“You guys are doing great work over there with IB Vine. Absolute staple for interview prep.”
Rothschild
“IB Vine was incredibly helpful and I am forever thankful for all the help.”
RBC
“IB Mock was amazing - I used it for multiple hours. Also the flashcards and the lessons features on IB Vine were fantastic. Thank you!”
Dragoneer
“IB Vine is such a great platform, really impressive. There is so much value in this. The audio podcasts / mock interview library are pretty incredible.”
Case Study Preparation
Explore All Case Studies
100+ case studies, each with the full prompt, supporting materials and an audio walkthrough; most also ship a model answer deck and a tied-out Excel model.
Every case has a public page like this one. The member library is the signed-in index members work through.