Project Brackenhill — GP-Led Continuation Vehicle
A 2-hour Private Capital Advisory / GP-Led Secondary case study with a complete model answer
Modeled After
Moelis & Company
Moelis & Company's private capital advisory practice, which runs GP-led continuation vehicles for sponsors, together with the firm's sponsor-facing and special-committee deck conventions — the exhibit order, the process narrative and a recommendation page that names the alternative it was tested against.
Structure and exhibit set are modeled after Moelis & Company. The fund, the assets, the bidders and every figure in this case are entirely our own.
The Situation
P.
Brackenhill Capital Partners, Fund III
- Sector
- Private capital advisory — a GP-led secondary, in which a middle-market buyout manager sells assets from a fund it manages to a continuation vehicle it will also manage
- Size
- Geography
- United States; a US dollar-denominated Delaware limited partnership with US-domiciled portfolio companies
- Ownership
- Situation
The Prompt
P. — not by the general partner.
Supporting Materials
What you are handed at the start of the case, in the format a real process would use.
What You Have to Produce
The deliverables, in the order the committee will read them. The exercise runs 120 minutes.
PART 1
Where the fund stands, and why that is the frame
PART 2
The two assets, separately
PART 3
Is the mark honest
PART 4
Is the price evidence
PART 5
What the waterfall does to the price
PART 6
The vehicle, and what the limited partner is offered
PART 7
The conflict, treated as the analysis
PART 8
The recommendation, and the two different decisions
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 memo are in the solution set below.
- 01
- 02
- 03
- 04
- 05
- 06
- 07
- 08
- 09
- 10
Key Concepts
The ideas this case is built on. Know these cold and the case becomes a question of execution rather than knowledge.
GP-led continuation vehicle
A transaction in which a fund sells one or more portfolio companies to a new vehicle managed by the same general partner, funded by new secondary investors, by existing limited partners who elect to roll, and usually by the general partner's own rolled carried interest. It exists because a fund's term is finite and an asset's optimal hold is not: a manager reaching the end of a ten-year fund with two companies it still believes in has three choices — sell them into whatever window the term allows, hold them past the term with no capital to support them, or move them into a vehicle with fresh time and fresh capital. The structure is legitimate and the volume of it is now large. What makes it hard is that the manager sits on both sides of the trade, so every safeguard has to be tested rather than recited.
European whole-fund waterfall, catch-up and crystallization
A distribution scheme in which the general partner receives no carried interest until the fund has returned all contributed capital and paid the preferred return in full — as against a deal-by-deal waterfall, which pays carried interest on each realization as it happens. Two consequences drive this archetype. First, a fund in year eight with a large unpaid preferred return may never have paid a dollar of carried interest, so a single large distribution can be the first carry event in the fund's life. Second, the catch-up band between the preferred return and the point at which the general partner has reached its full share is a range in which the general partner captures every marginal dollar, and the limited partners capture none. Where a transaction lands relative to that band decides how much a better price is worth to the people being asked to approve it.
Net asset value validation, and why a premium to the mark is not evidence
The mark is the seller's own number, reviewed by an auditor for reasonableness rather than negotiated with a counterparty, so 'a premium to net asset value' is a comparison against a figure one side of the trade produced. Validating it means three things. Decomposing recent movement in the mark into what earnings and leverage did and what the multiple did. Setting the multiple movement against the observable re-rating in the asset's own sector, so a manager who marked up because the market did can be distinguished from one who marked up because a process was coming. And then treating the third-party bids as the only genuine external test — asset by asset, because a bidder who pays a real premium for one company and almost nothing for the other has told you something the aggregate hides.
Status quo option
The right of an existing limited partner to keep exactly the position it has: the same economics, on the same basis, with no carried interest crystallized out of its interest. Published institutional limited partner guidance treats it as the baseline protection in a transaction where the manager is on both sides, on the simple ground that an investor should not be made worse off by a transaction it did not ask for. It is usually discussed as a governance principle and it is better handled as arithmetic. Value the offered roll and the status quo roll at the same outcome and the comparison decomposes cleanly into two pieces: what a lower carried interest rate and a new fee are worth on an identical basis, and what the carried interest crystallized out of the basis costs. The second is frequently the larger, and when it is, no future outcome closes the gap — because the amount taken out of the basis compounds at the same rate as everything left in it.
Crystallized carry, and rolling it
A sale of assets out of a fund can trigger carried interest that was, an hour earlier, a contingent claim. The market standard, and the standard the institutional guidance asks for, is that the general partner reinvests all of it into the continuation vehicle. That is a real alignment fact and it is routinely overstated. Rolling carried interest changes the general partner's risk — a contingent claim becomes committed equity that can be lost — but it does not change its cash, because no check is written, and the preferred return on the new vehicle restarts on a fresh and higher basis. The precise statement is worth practicing: one hundred percent rolled is the right answer to the question that was asked, and it is not the same thing as new capital.
Conflicts register, and the residue after the mitigant
The discipline that separates a conflicts analysis from a conflicts disclosure. For each conflict, three columns: what the conflict is, what is being done about it, and what survives. An adviser-run process mitigates the general partner being on both sides — and the general partner chose the adviser, the buyer list and the timetable, so the process is only ever as wide as the list it was run against. Audited marks below sector medians mitigate the mark being the seller's — and the premium is still a premium to a number the seller chose. A hundred percent carry roll mitigates the crystallization — and no check was written. A committee waiver mitigates the whole thing — and the committee is composed of limited partners who are themselves electing. A register that prints the middle column and stops is marketing.
The roll-or-cash election and its default
Each limited partner chooses between taking cash at the transaction price and rolling into the vehicle, usually within a stated number of business days of receiving the disclosure pack. Three features of the mechanic decide whether the choice is real. The length of the period and whether it runs from the announcement or from delivery of complete information. Whether a status quo option is among the choices at all. And the default for a limited partner that does not respond — because a default that rolls a non-responder creates a new multi-year commitment out of silence, and silence is not consent. These are the terms an advisory committee can actually change without touching the price, which is what makes them the natural home for the conditions attached to a recommendation.
Distributed-to-paid-in versus total value to paid-in
Distributed-to-paid-in measures cash returned against cash called; total value to paid-in adds remaining value. A sale at a modest premium to carrying value moves the first sharply and the second barely, because it converts value into cash without creating much of it. The distinction is least likely to be drawn when it matters most: a manager approaching a first close on its next fund has a strong interest in the first number, and a limited partner deciding whether to re-up is entitled to see the second beside it. The rule generalizes — whenever a transaction moves a liquidity measure and leaves a value measure flat, showing one without the other is presenting liquidity as performance.
Fee rate versus fee quantum on a continuation vehicle
Continuation vehicles are usually priced below the originating fund on both carried interest and management fee, and the comparison is more slippery than it looks. The management fee rate falls, and the base typically changes from invested capital in the old fund to the transaction price in the new one — which is a larger number — and the period restarts, which adds years. The carried interest rate falls, and the preferred return restarts on a fresh and higher basis, and a tier often restores the original rate above a stated gross multiple. The only way to compare is to price both structures at the same outcome on the same asset, in dollars, over the same period. Anyone comparing rates is comparing the labels.
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 memo, 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
- —Continuation vehicle structuring
- —Net asset value and mark validation
- —LP rollover versus cash election
- —Crystallized carry and re-set economics
- —Conflicts management and LPAC process
- —Pricing against a competitive process
Answer Deck
Full model answer, banker-formatted
Memo
The written recommendation and how it was reached
Upgrade to Diamond
Sign up and upgrade to Diamond to unlock the answer deck, the memo and the audio walkthrough.
Get StartedDownloads are available to Diamond members
PowerPoint Deck and Memo (PDF) 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 Brackenhill — GP-Led Continuation Vehicle
60-second preview — upgrade to Diamond for the full walkthrough
Frequently Asked Questions
What is a GP-led continuation vehicle case study in an investment banking interview?
It is a private capital advisory case in which a private equity manager proposes to sell assets out of a fund it manages into a new vehicle it will also manage, and you are asked to advise the existing fund's limited partner advisory committee on whether the transaction should proceed and on what terms. It appears in private capital advisory, financial sponsors and secondaries groups, and increasingly in generalist advisory interviews because the volume of GP-led secondaries has made the archetype mainstream. It tests something an M&A case does not: whether you can reason about a price set by a party on both sides of the trade, read a distribution waterfall, and treat a conflict as an analysis rather than as a disclosure.
Why does a European whole-fund waterfall matter so much in a continuation vehicle case?
Because it decides who benefits from a better price. In a European structure the general partner receives no carried interest until contributed capital and the preferred return have been paid in full, so a fund in year eight can have paid no carry at all while a large accrued preferred return sits unpaid. When a big distribution finally arrives it runs through three bands: the preferred return, which goes entirely to the limited partners; the catch-up, in which the general partner takes one hundred percent of every marginal dollar; and then the ordinary split. If the transaction lands inside the catch-up band, the limited partners' recovery is fixed and every extra dollar of price goes to the manager — which would make the whole price-discovery exercise worth nothing to them. Working out which band you are in, and saying so, is a five-line calculation and it changes how much weight the rest of the analysis carries.
How do you tell whether a premium to net asset value is real evidence about price?
By refusing to treat the mark as given. Net asset value is the seller's own number, so start by decomposing recent movement in it: hold the earlier multiple constant, let earnings and net debt move, and take multiple expansion as the residue. If a large share of a recent uplift came from raising the multiple in the quarters immediately before the process, that is a question to answer rather than to deny. The answer lives in the sector: compare each asset's markup with the move in the median multiple of its own selected companies over exactly the same period. A markup that lagged an observable re-rating is conservative; one that ran ahead of it is not. Then use the bids as the only genuine external test, asset by asset — and expect the aggregate premium to be concentrated in one of the two.
What is a status quo option and why does it matter more than the headline economics?
It is the right of an existing limited partner to keep exactly the position it has — same economics, same basis, no carried interest crystallized out of its interest. Institutional limited partner guidance treats it as the baseline protection where the manager is on both sides, and it is often discussed as a principle rather than priced. Price it and the comparison decomposes into two pieces. A continuation vehicle's economics are usually cheaper than the originating fund's, and on an identical basis that is worth real money. But the roll as offered is made on a basis that has already had the limited partner's share of crystallized carried interest removed. When the second effect is larger than the first, the offered roll is worth less than a status quo roll at every outcome — because the amount taken out of the basis compounds at the same rate as everything left in it, so the lower rate never closes the gap.
Does the general partner rolling 100% of its crystallized carry solve the alignment problem?
It is the right answer to the question that was asked, and it is not the same thing as new capital. Rolling all of the crystallized carried interest into the vehicle is the market standard and the standard the published guidance asks for, and it changes the general partner's risk: a contingent claim on a fund that might never have paid it becomes committed equity that can be lost. But no check is written, the preferred return in the new vehicle restarts on a fresh and higher basis, and the general partner's stake was created by the very transaction it is being used to justify. The precise formulation is worth practicing, because it shows you can give a manager credit for meeting a standard while still describing accurately what the standard does and does not deliver.
How should you allocate 120 minutes across a GP-led continuation vehicle case?
Roughly: 20 minutes reading the two input documents and writing down the four questions in order, because doing the parts out of order is what produces a document that reads as advocacy; 25 minutes on the fund's position and the two assets rebuilt separately; 20 minutes on the mark decomposition and the sector comparison; 15 minutes on the process and the price asset by asset; 20 minutes on the waterfall, the crystallized carried interest and the marginal-dollar exhibit; 15 minutes pricing the election, which is the highest-value single exhibit in the case; and the last 25 minutes on the conflict register, the general partner's own economics and the recommendation with its conditions. The conflict register is not an appendix and should not be written like one — it is the page every other page feeds, and if it is the thing you run out of time for, the answer will read as a valuation exercise about a transaction whose defining feature is that it is not one.
What should you actually recommend, and is approving a conflicted transaction ever right?
Frequently, yes — and the recommendation is rarely a bare yes or no. If the assets are the right assets, the process was competitive, the price clears the mark and sits inside the sector's own multiples, and the alternative is holding good businesses in a fund with no capital to support them and less than two years of term, then blocking the transaction serves nobody. What is usually wrong is not the transaction but the terms on which the limited partners are being asked to decide: no status quo option, a default that rolls a non-responder, an election period running from announcement rather than from full disclosure, a bid table shown to the committee and withheld from everyone else, a follow-on facility only one investor may fund, and an adviser fee borne entirely by the seller. Each of those can be fixed before closing without moving the price, which is exactly what makes them the right conditions to attach.
About This Private Capital Advisory / GP-Led Secondary Case Study
Private Capital Advisory / GP-Led Secondary case study for investment banking interviews. 120-minute format covering continuation vehicle structuring, net asset value and mark validation, lp rollover versus cash election. Includes the full prompt, a model answer deck, a written memo and an audio walkthrough.
This case study sits in Investment Banking, under Private Capital Advisory. 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
Memo
Included in the model answer
Audio Walkthrough
How to approach the case under time pressure
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