Project Ravenwood — Founder Sale, Buyer Selection
A 30-minute M&A Qualitative / Sell-Side case study with a complete model answer
Modeled After
Moelis & Company
Sell-side process materials tracking a buyer universe through a funnel — contacted, presentations, indications of interest, final bids — with buyer-by-buyer engagement detail and a process recommendation set against alternatives
Structure and exhibit set are modeled after Moelis & Company. The company, the buyers, the terms and every figure in this case are entirely our own.
The Situation
Ravenwood Discount Retail, Inc.
Ravenwood Discount Retail, Inc.
- Sector
- Consumer & Retail — offline discount and value retail
- Size
- Geography
- United States (68% of revenue) and Europe (32%)
- Ownership
- Situation
The Prompt
You are the sell-side adviser, and you report to Delia Ravenwood personally rather than to a board. Three round-one indications are in front of you and she wants your view before she decides who to take into a second round.
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 30 minutes.
PART 1
Value the business standalone, and state the basis of each read
PART 2
Build a cost of capital for a company that has no beta
PART 3
Say which valuation methodology absorbs a synergy, and why
PART 4
Rank the three by willingness to pay, then by ability to pay
PART 5
Compare the bids on what the seller actually receives
PART 6
Design the process, and name the counterparty
Attempt It First
Blank modelling template
The answer model with every produced cell cleared — the shell you build your attempt in. Work it in Excel against the clock, then check yourself against the model answer below.
How to Approach It
The order a strong candidate works in, and why. This is the shape of the answer — the finished Excel model is in the solution set below.
- 01
Read the terms before you read a price
- 02
Fix the basis of every valuation read
- 03
Separate willingness to pay from ability to pay
- 04
Notice what an accretion breakeven is, and what it is not
- 05
Price the probability, the delay and the downside
- 06
Choose the process for what it actually buys
Key Concepts
The ideas this case is built on. Know these cold and the case becomes a question of execution rather than knowledge.
Willingness to pay versus ability to pay
Willingness is a valuation question: what the asset is worth to this buyer, standalone value plus whatever part of its own synergy it is prepared to pay away. Ability is a funding question: what its balance sheet, its leverage policy or its required return will actually let it write a check for. The two are computed differently, they bind for different reasons, and a buyer's real ceiling is the lower of the two. Candidates who compute only one of them routinely rank the three parties in the wrong order, because the buyer that would pay the most is not always the buyer that can.
Cost of the acquisition currency
Cash costs the deposit yield it was earning, after tax. Debt costs its coupon, after the tax shield. Stock costs the acquirer's own earnings yield, because every share issued hands a permanent claim on future earnings to somebody else, which is why a buyer trading on a high earnings multiple has the cheapest equity currency of anyone in the room. That advantage is real and it is also conditional: it exists only if the seller will take shares.
Accretion breakeven
The purchase price at which a transaction stops adding to earnings per share, given a stated funding mix. It is a financing statistic and never a valuation, and on an all-cash purchase funded with cheap debt it lands at a multiple no acquirer would defend in a board room. Quoting it as a ceiling is one of the fastest ways to lose an interviewer's confidence; using its ORDER across two buyers as evidence about their relative currencies is what it is good for.
Private-company adjustment
A discount applied to a trading comparable to reflect that the subject has no registered stock, no ready market and a fraction of the scale. It belongs to the trading comparables and not to the precedent transactions, because a precedent is itself a whole-company private-market deal that already reflects both. Applying it to both is a double count in one direction; adding a synergy estimate on top of a precedent multiple is a double count in the other.
Which methodology absorbs a synergy
Add a synergy to a multiple-based valuation and the value rises by the multiple times the synergy — so the percentage uplift is the synergy divided by the base earnings, and is identical whatever the multiple happens to be. A capitalized or discounted earnings approach treats the synergy as its own stream, capitalizes it at the cost of capital and charges the one-time cost of achieving it, so it moves by a different amount for reasons you can state. Working out which moves more, and why, is a standard question and a fast way to separate a candidate who understands the mechanics from one who has memorized an answer.
Certainty of close
The gap between a price and proceeds. Antitrust review, an acquirer's own shareholder vote, a financing commitment whose only remedy is a reverse termination fee — each is a condition the seller does not control, each carries a probability and a delay, and each can be priced. A reverse termination fee is a price on a failure, not a guarantee against one, and a seller who treats the two as equivalent has mispriced the bid.
Contingent consideration
An earn-out is discounted by the payer at the payer's required return and by the receiver at the risk of the underlying business, which are rarely the same rate. That difference makes the instrument positive-sum and is the reason earn-outs exist at all. The reason to refuse one anyway has nothing to do with the arithmetic: after closing the buyer runs the business and sets the budget the trigger is measured against, and a metric in the payer's hands is not a receivable.
Fiduciary duties in a wholly owned private sale
The enhanced-scrutiny standard a public-company board faces when selling control does not operate the same way when a single stockholder is also the sole director and is directing the sale, because there is no minority with standing to invoke it. There is no proxy statement, no meeting, no Rule 13e-3, no go-shop and no majority-of-the-minority condition anywhere in the transaction. In practice, this seller may lawfully trade price for speed, for her employees and for the name over the door, and an adviser who assumes value maximization is the only permitted objective is advising the wrong client.
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: Excel model, built the way a banker would actually build it. It is a reference, not a submission — a strong answer under the clock is far shorter.
What the Solution Covers
- —Private company valuation and the illiquidity adjustment
- —Comparables-derived cost of capital where the target has no beta
- —Which valuation methodology absorbs synergies
- —Buyer ranking by willingness to pay versus ability to pay
- —Cash versus stock consideration and the cost of each currency
- —Certainty of close, antitrust risk and contingent consideration
- —Auction process design and the value of tension
Memo
The written recommendation and how it was reached
Upgrade to Diamond
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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 Memo (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 Ravenwood — Founder Sale, Buyer Selection
60-second preview — upgrade to Diamond for the full walkthrough
Frequently Asked Questions
How does a company being private change how you value it?
There is no share price, so there is nothing to put a premium on and every figure is an enterprise value. There is no beta, no market capitalization and no observable capital structure, so the cost of capital has to be built from the comparable companies rather than from the subject. And the trading comparables are minority stakes in registered, liquid businesses several times the size, which is what a private-company adjustment is for — applied to those and not to precedent transactions, which are already whole-company private-market deals.
Why can a buyer with a high price-to-earnings multiple pay more?
Because its shares are the cheapest currency it has. Cost of stock is the acquirer's own earnings yield, which is one divided by its price-to-earnings multiple, so a buyer on twenty times earnings gives up five percent a year for every share it issues while a buyer on fourteen times gives up seven. That is a real and quantifiable advantage in a stock deal. It is worth nothing at all in an all-cash deal, where the binding constraint is the balance sheet rather than the earnings statement, which is exactly the situation a seller creates by insisting on cash.
Which valuation methodology increases the most when you add synergies?
Run the arithmetic rather than reciting an answer. A multiple-based read rises by the multiple times the synergy, so its percentage uplift is the synergy over the base earnings and is the same whichever multiple you use. A capitalized or discounted earnings read gives the synergy its own stream at the cost of capital and charges the one-time cost of achieving it, so it moves for different reasons and by a different amount. Being able to explain the mechanism is what the question is testing.
Should a seller always take the highest offer?
No, and this case is built to make that concrete. An offer is a price; what a seller receives is a price multiplied by the probability it closes, discounted for the time until it does, plus whatever the fallback is worth if it does not. A bid that is higher on the page can be lower once an antitrust second request, an acquirer's own shareholder vote or a financing remedy capped at a reverse termination fee is priced in. And a private seller with no minority is entitled to weigh things a model does not carry at all — her employees, the name on the stores and a clean break — which is a legitimate objective and not a lapse of duty.
What process would you run for a sale like this?
It depends entirely on how many parties could actually transact on the seller's terms, and that is a number you have to work out rather than assume. Breadth costs weeks and leaks; a bilateral negotiation is fast and quiet and gives up the tension that moves a price. The honest way to choose is to count the parties that can fund the deal in the currency on offer, price what the extra weeks would buy, and then say which of the three options you would run and what it costs. An answer that says 'run a broad auction to maximize value' without doing that count is a reflex, not a recommendation.
How would a stock offer change the answer?
It would change who the strongest bidder is, because it restores the advantage the highest-multiple buyer has and it removes the balance-sheet constraint that is otherwise binding on both strategics. It would also change what the seller is holding afterwards: shares in an acquirer are an investment decision, not a sale, and they carry lock-ups, market risk and a view on the buyer's own equity story. The right way to answer is to say what changes mechanically, what it is worth, and then what the seller would have to be willing to accept in exchange — which is the trade she has already said she does not want to make.
What will I actually be asked in the discussion?
How you would value it and on what basis; which methodology absorbs synergies and why; who could pay the most and who could pay the most in cash; who you would sell to and how you would run the process; and what you would want to ask each management team that you have not been told. Expect to be pushed on any ranking you give, on whether you would change your answer if a term were relaxed, and on what the seller's own terms have cost her. That last one is where the strongest answers separate themselves.
About This M&A Qualitative / Sell-Side Case Study
M&A Qualitative / Sell-Side case study for investment banking interviews. 30-minute format covering private company valuation and the illiquidity adjustment, comparables-derived cost of capital where the target has no beta, which valuation methodology absorbs synergies. Includes the full prompt, a tied-out Excel model and an audio walkthrough.
This case study sits in Investment Banking, under Mergers & Acquisitions. Every case ships with the full prompt, the supporting materials, a complete model answer and an audio walkthrough of the judgment behind the recommendation.
30-Minute Format
The time limit a real assessment would give you
Excel Model
Included in the model answer
Audio Walkthrough
How to approach the case under time pressure
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