Project Orrington — Public-to-Private Feasibility
A 2-hour Take-Private Feasibility / Sponsor Client case study with a complete model answer
Modeled After
Barclays
Fairness and board materials placing an LBO bar directly inside the football field — sized at 5.0–5.5x net leverage for a 20–25% IRR — alongside a take-private premia study spanning 142 transactions
Structure and exhibit set are modeled after Barclays. The company, the financials and every figure in this case are entirely our own.
The Situation
Orrington Software Corporation (NYSE: ORNG) makes vertical software for property and casualty insurance carriers. Three product lines: policy administration, which is the system of record a carrier runs its book on; claims, which is intake through adjudication and payment; and billing and payments.
Orrington Software Corporation
- Sector
- Vertical software — policy administration, claims, and billing and payments systems sold as a subscription platform to property and casualty insurance carriers, with a legacy perpetual-license tail
- Size
- Geography
- United States; headquartered in Hartford, Connecticut and listed on the New York Stock Exchange
- Ownership
- Situation
The Prompt
You are staffed on a Take-Private Feasibility / Sponsor Client engagement for Orrington Software Corporation. You have 120 minutes to work through the materials and produce an answer deck and an Excel model.
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
The plan, the recurring base and the earnings basis
PART 2
The unaffected price and the treasury stock method
PART 3
The take-private premia study, and which cohort this deal is in
PART 4
Selected companies and selected transactions
PART 5
Debt capacity, tested three ways
PART 6
Sources and uses, the equity check and the club
PART 7
The returns, the ceiling 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
Fix the price the whole study is measured against
- 02
Screen both extracts in one pass
- 03
Choose the premium cohort before you build the structure
- 04
Test the debt three ways and take the lowest
- 05
Build the ladder, not the deal
- 06
Solve the price, then say what would have to be true
Key Concepts
The ideas this case is built on. Know these cold and the case becomes a question of execution rather than knowledge.
Unaffected price
The last close before the market learned that a transaction might be coming. It is the only price a board can be shown to have received a premium over, and it is the denominator of every premium in a take-private. Once a leak has moved the stock, the current price already embeds the market's estimate of the deal, so a premium struck against it flatters the offer and understates what a board must be given. Identifying the unaffected date, and being able to defend it, is the first piece of work in any public-to-private analysis.
Treasury stock method
Options in the money are assumed exercised and the proceeds are assumed used to buy back stock at the offer price, so the diluted share count rises as the price rises. A premium ladder tested with a constant share count understates the equity purchase price at every rung above the first. Above the exercise price, price times shares is linear in price, which means an enterprise value converts to a price per share in one step and the model never needs a circular reference.
Recurring-revenue debt capacity
Lenders to subscription software will size a facility against annual recurring revenue rather than EBITDA, because a contracted base with high gross retention is more predictable than an earnings line that absorbs growth spending. That lends more than a leverage test would. The coupon on the incremental dollar still has to be covered by earnings, so a coverage test can bind at a lower number than either the leverage test or the ARR test. Running all three and taking the lowest is the difference between a capacity analysis and a wish.
Price ceiling solved from a required return
An ordinary leveraged buyout model assumes a price and reports a return. A feasibility study runs the other way: it fixes the return the fund has promised and solves for the highest price that still delivers it. Where the debt capacity does not move with the price — and it usually does not, because it is sized off earnings — the exit equity value is a constant, and the ceiling can be solved in closed form rather than hunted for. It should also be truncated to the cent rather than rounded, because a maximum price rounded up is a price the model itself says does not work.
The LBO band on the football field
The solved price band belongs on the valuation summary as its own line, next to the trading comparison, the transaction comparison, the discounted cash flow and the premia study. It will normally be the lowest line on the page, and that is not evidence of an error: a buyer discounting at twenty to twenty-five percent will always bid below a valuation struck at a public cost of capital. Shown that way, a board can see the sponsor floor rather than being told a sponsor is interested.
Founder rollover
A founder who rolls exchanges existing shares for equity in the acquisition vehicle instead of taking cash. On identical terms to the sponsor's new money, every dollar rolled displaces a dollar of sponsor equity and takes the same share of the exit — so the rollover changes the size of the check and leaves the return exactly where it was. Presenting it as a returns enhancement is the most common structuring error in this archetype. It is a feasibility enhancement, which in a deal that needs a club is often the more useful thing.
Equity check sizing and club dynamics
A fund's limited partnership agreement caps how much of committed capital can go into one investment, so the equity a transaction requires can exceed what a sponsor may write alone regardless of whether the return works. That turns a pricing question into a process question: a club takes longer to assemble, leaks, and gives a board a second party to diligence. Any honest feasibility answer states the check, states the limit, and says how many partners the transaction needs at the price being contemplated.
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
- —Take-private premium and financing capacity
- —LBO band inside the football field
- —Equity check sizing and club dynamics
- —Recurring-revenue debt capacity
- —Founder rollover structuring
- —Returns across the premium band
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 Orrington — Public-to-Private Feasibility
60-second preview — upgrade to Diamond for the full walkthrough
Frequently Asked Questions
What is a public-to-private feasibility study, and how is it different from an LBO model?
An LBO model assumes a purchase price and reports the return it produces. A feasibility study fixes the return the fund has promised its investors and solves for the highest price that still delivers it, then compares that price with what a board would actually have to be offered. The output is a price ceiling and a recommendation rather than an IRR. It also has to answer two questions an LBO model takes as given: what a lender would really put up against this balance sheet, and whether the equity left over is a check the sponsor can write at all.
Why is the unaffected price the right denominator for a take-private premium?
Because it is the only price a board can be shown to have received a premium over. Once news of a possible transaction reaches the market, the share price starts to embed the market's guess at the offer, so any premium measured against it is partly a premium over the deal itself. Identifying the last unaffected trading day — usually the close before the first public report — and using it consistently is the first discipline in a take-private analysis, and using the current price instead understates what a board must be offered by roughly the amount the leak already moved the stock.
How do you size debt for a recurring-revenue software business?
Three ways, and you take the lowest. A leverage test in turns of LTM Adjusted EBITDA is the traditional one. A recurring-revenue test in turns of ARR reflects that a contracted base with high gross retention is more predictable than an earnings line absorbing growth spending, and it will usually lend more. A coverage test fixes the ratio of Adjusted EBITDA to cash interest, and at current coupons it can bind below both of the others — because the incremental dollar of debt still has to be paid for out of earnings. Reporting which test binds, and how much headroom you did not use, is the substance of the exhibit.
Does a founder rollover improve the sponsor's returns?
Not on identical terms, and assuming it does is the most common structuring error in this archetype. If the founder rolls into the same instrument as the sponsor's new money, each dollar rolled displaces a dollar of sponsor equity and takes the same proportional share of the exit — so the multiple of invested capital and the internal rate of return are unchanged. What the rollover changes is the size of the check the sponsor has to write, which matters enormously when the check is bumping against a fund's concentration limit. A rollover improves feasibility, not returns.
Why does the LBO band belong on the football field?
Because it answers a different question from every other line on the page, and a board needs both. The trading comparison, the transaction comparison and the discounted cash flow all say what the asset is worth. The sponsor band says what a particular kind of buyer, discounting at a particular required return, can actually pay. It will normally sit lowest, and that gap is the cost of the sponsor's own capital rather than evidence of a mispricing. Showing it as its own band lets a board see the floor for itself instead of being told that a sponsor is interested.
What does this case test that a standard LBO case does not?
Whether you can run an analysis to a conclusion you did not want. The mechanics — a debt schedule, a sweep, a returns bridge — are ordinary, and none of them decides anything on its own. What decides the answer is whether you strike the premium on the right price, take the binding capacity rather than the flattering one, notice that the ceiling can be solved rather than searched for, test your conclusion against the friendliest premium you could defensibly cite, and then, when the answer comes out no, quantify the gap and name what would have to be true instead of softening the recommendation.
About This Take-Private Feasibility / Sponsor Client Case Study
Take-Private Feasibility / Sponsor Client case study for investment banking interviews. 120-minute format covering take-private premium and financing capacity, lbo band inside the football field, equity check sizing and club dynamics. 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 Leveraged Buyouts. 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
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