Project Rothwell — Up-C Structure & Tax Receivable Agreement
A 2-hour FIG / Wealth Management Fairness Opinion case study with a complete model answer
Modeled After
Jefferies
Special committee fairness materials valuing a Tax Receivable Agreement as a discrete discounted tax attribute at the implied cost of equity rather than at WACC, alongside a purchased-intangible amortization tax-shield DCF, an Up-C and Class A/B structure explainer, and two qualitative pages defending the peer set
Structure and exhibit set are modeled after Jefferies. The company, the financials and every figure in this case are entirely our own.
The Situation
Rothwell Wealth Partners, Inc. (NASDAQ: RWPT) is the public company at the top of an Up-C structure.
Rothwell Wealth Partners, Inc.
- Sector
- Wealth management — a fee-based registered investment adviser and acquirer of advisory practices, paid on client assets rather than on product
- Size
- Geography
- United States, with revenue earned in dollars as a fee on client assets held by domestic advisory practices
- Ownership
- Situation
The Prompt
You are the financial advisor to the Special Committee of the Board of Directors of Rothwell Wealth Partners, Inc.
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 Up-C structure, before any number is struck
PART 2
Unlevered free cash flow, on one set of conventions, in all three plans
PART 3
The cost of capital — and how many rates this case needs
PART 4
The tax receivable agreement, valued as its own asset
PART 5
Two discounted cash flows, with the tax legs on separate lines
PART 6
The comparable companies, screened and then defended in words
PART 7
The allocation of the consideration, which is the fairness question
PART 8
Reconcile against the prior book, and recommend
How to Approach It
The order a strong candidate works in, and why. This is the shape of the answer — the finished answer deck, Excel model and memo are in the solution set below.
- 01
Read the structure before you value anything
- 02
Say out loud that there are two claims, and keep them apart on every page
- 03
Build one cash flow engine and run all three plans through it
- 04
Decide the rate question on what the claim IS, not on what tab it sits on
- 05
Build the schedule before you build any view of what it is worth
- 06
Value the agreement more than one way, and label each
- 07
Put the peers and the subject on one footing before striking a multiple
- 08
Read the allocation against the ownership
- 09
Get the governance vocabulary right
- 10
Reconcile, then say the uncomfortable thing
Key Concepts
The ideas this case is built on. Know these cold and the case becomes a question of execution rather than knowledge.
The Up-C structure
A public corporation sits on top of an operating partnership and owns some of its units; the pre-IPO owners hold the rest, together with a class of stock that carries a vote and no economic rights. It lets pre-IPO owners keep pass-through treatment on their own units while the business gets a listed currency. The consequence for a valuation is that economics and votes are held in different instruments, so the share count on the cover page is not the number of claims on the cash flow.
The exchange right, and the basis step-up it creates
A unit and a paired vote share may be exchanged for one Class A share. The public company is then treated as acquiring its share of the underlying assets at the exchanged unit's value, and the excess over the tax basis already behind that unit is amortized over fifteen years. The deduction is real, it reduces cash tax, and it exists only because the exchange happened.
The tax receivable agreement
A contract, struck at the listing, under which the public company pays a stated share of the cash tax savings from that step-up back to the holder who exchanged — here 85%, with the company keeping the rest. It is an unsecured obligation that arises only to the extent savings are actually realized, and it can run for decades. It is a claim on the company that is not debt, and it belongs to a group of holders rather than to the business.
The early termination payment
Most such agreements accelerate on a change of control: the remaining units are deemed exchanged, the tax attributes are assumed fully usable, and the whole future stream is discounted at a rate the contract itself fixes. The result is a contractual entitlement rather than a market valuation, and the two can differ substantially. Whether a committee treats the contractual figure as an anchor or as a mark is one of the case's central judgments.
Where the tax legs sit in the capital structure
Both the attribute and the obligation depend on the company generating taxable income, and the obligation ranks behind the debt and is not a fixed charge. That places them in a different risk position from the operating assets as a whole, which is why the discount rate applied to them is a decision rather than an inheritance from the tab above.
Fee-based wealth management economics
Revenue is a fee on average client assets, so revenue divided by assets — expressed in basis points — is the sector's price. Growth comes from market return, net client flows and acquired practices, and the last of those has a price. A model that separates organic growth from acquired growth, and charges the acquisition consideration, is describing the business; one that does not is describing a business that does not exist.
Comparability across different structures
When some companies in a set carry a structural claim and others do not, a quoted enterprise value is not a like-for-like measure. Putting them on one basis before striking a multiple is the difference between a comparison and an accident, and the adjustment has to be applied to the subject as well as to the set or the structure is counted twice in opposite directions.
Conflict without control
A holder group can sit on both sides of a transaction without controlling the company. The distinction matters because the legal framework that applies to a controlling stockholder does not apply to a significant minority holder, and importing it into a document that will be filed is a claim that cannot be supported. What can be said is what the conflicts are, where they are, and what the committee is doing about them.
Sequential substitution
A bridge between two valuations built by changing one input at a time and re-running the whole calculation, so the steps sum to the total change by construction rather than by a residual. The decomposition depends on the order, which is why the order is stated. It is the only form of reconciliation that cannot hide an unexplained difference in a line called 'other'.
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, Excel model 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
- —Tax receivable agreement valued as a separate attribute
- —Discounting a tax asset at cost of equity
- —Purchased intangible amortization tax shield DCF
- —Up-C and Class A/B structure mechanics
- —Qualitative peer set defense
- —Line-by-line reconciliation against a prior book
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 Excel model, the memo 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 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 Rothwell — Up-C Structure & Tax Receivable Agreement
60-second preview — upgrade to Diamond for the full walkthrough
Frequently Asked Questions
What is an Up-C structure, and why do companies use one?
An Up-C keeps the operating business in a partnership after the listing. A newly formed corporation goes public, uses the proceeds to buy units in that partnership, and the pre-IPO owners keep the rest of the units plus a class of stock that carries a vote and no economics. The pre-IPO owners keep pass-through tax treatment on the units they still hold, and they get a mechanism — the exchange right — to convert into listed stock over time on their own schedule. The structure is common where the pre-IPO owners are individuals or funds with large low-basis positions, which is why it turns up so often in asset and wealth management, insurance broking and professional services.
Why does an exchange create a tax benefit at all?
Because the public company is treated as buying its share of the partnership's assets at their current value rather than inheriting the seller's old basis. The difference between what the exchange is worth and the tax basis already behind that unit is a step-up, and where the underlying assets are intangibles and goodwill it is amortized over fifteen years. That amortization reduces the corporation's cash tax bill in each of those years. Nothing about the operating business changes; the benefit is a consequence of the structure and the transaction, which is exactly why it is valued separately from the business.
What does the tax receivable agreement actually oblige the company to do?
To share the benefit. Under a typical agreement — and this one — the public company pays a stated percentage of the cash tax savings it actually realizes from the step-up to the holder who exchanged, and keeps the remainder. The obligation is unsecured, it is not debt, it arises only to the extent savings are realized, and payments are usually made after the relevant return is filed. Most agreements also contain an acceleration provision: on a change of control, or on certain breaches, the whole remaining stream becomes payable as a single amount computed on assumptions the contract itself specifies.
Why would a tax attribute be discounted at a different rate from the operating cash flows?
Because it is a different claim with a different risk. A tax deduction is only worth the tax it saves, and it only saves tax if the company has taxable income. A payment under the agreement is unsecured, ranks behind the debt, is not a fixed charge, and disappears entirely in the state of the world where the earnings do not arrive. Both legs therefore depend on the same uncertain thing, and it is not the same thing that the blended cost of capital of the operating assets is compensating for. The exercise asks you to reason from what the claim is to what rate it takes, and to show what the alternative rate would have done. The point is the argument, not the number.
Why is the contractual early termination amount not simply the value of the agreement?
Because it is computed on assumptions written into the contract rather than observed in a market: that every remaining unit is exchanged, that the company will have enough taxable income to use every deduction in the year it arises, and that the stream is discounted at a rate the contract names. Each of those is a negotiated term. A contract can fix a rate; it cannot make that rate the cost of capital of the stream it is discounting. That does not make the number irrelevant — it is a real contractual entitlement and it will anchor the negotiation — but a committee that adopts it as its own mark has outsourced the valuation to the party being paid.
Why is the fairness question about the allocation rather than the price?
Because the buyer is putting up one pool of money and splitting it two ways, and only one of those ways reaches the Class A holders. If the settlement of the agreement is set above what the claim is worth, the excess has to come from somewhere, and it comes from the price. So the useful test is 'holding the total consideration constant, what would the price per economic interest be if the agreement were settled at what we think it is worth', rather than 'is this price fair' in isolation. That comparison is computable, it is the difference between two numbers on your own page, and it is the exhibit the Committee needs in order to negotiate.
The Continuing Members hold 41.1% of the vote. Are they a controlling stockholder?
No. The case punishes imprecision here. A significant minority position is not control, and the doctrine that governs a controlling stockholder standing on both sides of a transaction does not reach a holder group that does not control the company. What is true, and quite bad enough, is that the same holders sell units, roll part of their stake into the buyer, designate three of eight board seats, and receive the entire settlement of the agreement. The right response is to name each of those, to structure the process as though dealing with a controller and say on the record why, and to require the protections that make a disinterested vote meaningful, rather than asserting a legal framework the facts do not support.
Why does the exercise ask for a reconciliation against an earlier valuation?
Because it is what actually happens, and because it is the fastest way to find out whether a candidate understands their own model. The board saw a number five months ago; yours will differ; the first question in the room is why. A bridge built by sequential substitution — one input changed at a time, the whole valuation re-run, the difference recorded — sums to the total change by construction and leaves nothing in a residual. It also surfaces the things that matter: whether the difference is rates and multiples, which is ordinary, or a treatment that changed, which is not.
How should you allocate 120 minutes across a case with three deliverables?
By design, because the clock is the constraint that most often decides the grade here. A working budget: about 18 minutes reading the pack and screening the extract before you type anything; about an hour and a quarter in the workbook, front-loaded onto the structure tab and the agreement because everything else depends on them; and the balance — around half an hour — on the presentation and the memorandum. Inside the workbook, finish every tab roughly before you perfect any tab. The Committee cannot act on one beautiful schedule, and the two written deliverables are where the recommendation actually lives.
What separates a strong answer from a merely correct one?
Three things, and none of them is arithmetic. The first is that the two claims are visibly held apart on every page, including in the equity bridge, so a reader can see what is being valued and at what rate. The second is that the judgments are stated as judgments — which rate each stream takes and why, what weight the deductions beyond the forecast carry, what a four-name comparable set can support — rather than buried in a present value. The third is that the recommendation engages with the allocation and with the conflict in the same breath, names the strongest argument against itself, and answers it. A book that gets every number right and says none of that has produced a calculation rather than advice.
About This FIG / Wealth Management Fairness Opinion Case Study
FIG / Wealth Management Fairness Opinion case study for investment banking interviews. 120-minute format covering tax receivable agreement valued as a separate attribute, discounting a tax asset at cost of equity, purchased intangible amortization tax shield dcf. Includes the full prompt, a model answer deck, a tied-out Excel model, a written memo and an audio walkthrough.
This case study sits in Investment Banking, under Financial Institutions. 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
Memo
Included in the model answer
Audio Walkthrough
How to approach the case under time pressure
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