Project Rushmere — Consideration Structuring & Collars
A 1.5-hour Equity Capital Markets / Deal Structuring case study with a complete model answer
Modeled After
Goldman Sachs
Consideration-mechanics materials with no valuation exhibit at all: historical exchange ratio analysis across multiple lookback windows, fixed and floating collar payoff diagrams paired left and right as acquiror shares issued against implied value received, and precedent collar statistics across 86 deals
Structure and exhibit set are modeled after Goldman Sachs. The company, the financials and every figure in this case are entirely our own.
The Situation
Rushmere Robotics, Inc. (NASDAQ: RSHM) designs and manufactures autonomous mobile robots and the fleet software that runs them, sold into warehouse and distribution operators.
Rushmere Robotics, Inc.
- Sector
- Industrial automation — autonomous mobile robots and fleet software on the target side, material handling, motion control and industrial software on the acquiror side
- Size
- Geography
- United States. Rushmere is headquartered in Ann Arbor, Michigan; Vantrell is listed on the NYSE.
- Ownership
- Situation
The Prompt
You are financial advisor to the board of Rushmere Robotics, Inc. Vantrell Industrial, Inc.
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 90 minutes.
PART 1
The two unaffected dates, and the premium against each
PART 2
The premium on price against the premium on the exchange ratio
PART 3
Historical exchange ratio analysis
PART 4
Collar mechanics, both ways round
PART 5
The four structures, described in one vocabulary
PART 6
Three payoff panels, at eight closing prices
PART 7
The range each structure leaves the seller
PART 8
The precedent set, on both measures
PART 9
Maximum dilution from future vesting, and pro forma ownership
PART 10
Tax and accounting consequences, 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
Establish what kind of document this is before building anything
- 02
Settle both unaffected dates rather than choosing one
- 03
Measure the premium on exchange ratios as well as on price
- 04
Draw the payoffs before arguing about them
- 05
Scale every band by volatility before calling it protection
- 06
Compare the two collared structures against each other, not against nothing
- 07
Finish with the consequences nobody asks about
Key Concepts
The ideas this case is built on. Know these cold and the case becomes a question of execution rather than knowledge.
Fixed exchange ratio
The seller receives a fixed number of acquiror shares per share held, so the number of shares issued is known at signing and the value received is not. The seller therefore participates in the acquiror's stock from the moment the agreement is signed and carries every dollar of its movement until closing. It is by a wide margin the most common structure in all-stock deals, and the reason is symmetrical: the buyer knows exactly how much it is issuing, which is the number its own board voted on.
Fixed value, or floating exchange ratio
The seller receives a fixed dollar amount per share, delivered in whatever number of acquiror shares that amount buys at closing. Value received is certain and the share count is not, so the risk sits entirely with the buyer, and the issuance obligation is open-ended, which is why a pure fixed-value structure is rare in practice and usually appears with a cap. It is worth building anyway, as the limiting case that bounds every collared variant.
Collar
A band of acquiror share prices inside which one variable is held fixed and outside which the other one is. Two forms exist and they are not variations on a theme: fixing the RATIO inside the band leaves the seller exposed in the middle of the distribution and protected in the tails, while fixing the VALUE inside the band does exactly the reverse. The same nominal band width therefore allocates risk in opposite regions depending on which form is written, and a candidate who treats 'a collar' as one thing has missed the exercise.
Two-tier collar and the outer trigger
A collar that holds value at a floor is an open-ended obligation on the buyer's share count, so most collared deals bound it: beyond an outer trigger the ratio stops adjusting and value moves again. The payoff is flat, then sloped, then flat, then sloped. The outer trigger is where protection runs out, and it is usually the point at which a walk-away right — often paired with a buyer election to top up — becomes the only remaining protection.
Unaffected date
The last trading day before the market began pricing a transaction, and therefore the denominator of every premium anybody quotes. It is a judgment rather than a fact, and it moves: a media report is one candidate, a Schedule 13D amendment disclosing an approach is another, and a rumor with no filing behind it is a third. Where two dates are defensible, both belong in the materials, because the premium against each is materially different and the counterparty will have computed the other one.
Historical exchange ratio analysis
The target's price divided by the acquiror's, averaged over a series of lookback windows and compared with the ratio being offered. It is the natural premium exhibit for an all-stock deal because it removes the acquiror's own price movement from both sides of the comparison. Presenting every window rather than one is the discipline: the pattern across windows is a fact about how the two stocks have traded relative to each other, not a fact about the offer.
Volatility scaling
Annualized volatility multiplied by the square root of the time to closing, which converts a rate into the width of the distribution over the period that actually matters. It is the only way to compare a collar band on one name with a collar band on another, and it routinely inverts the naive comparison: a band that is wider in percent can be narrower in standard deviations if the underlying is more volatile or the timetable longer.
Maximum dilution from future vesting
Unvested options, restricted stock units and performance stock units are all future share issuance, and a performance award has a range rather than a number. Until the merger agreement fixes the settlement level, the buyer is exposed to the maximum, so the buyer's counsel builds the diluted count there. The treasury method on the options is applied at the offer value rather than the market price, because that is the consideration each option is actually being cashed against.
Continuity of interest and boot
A stock-for-stock merger is intended to qualify as a reorganization, which requires the sellers to retain a continuing proprietary interest in the combined enterprise. An all-stock deal satisfies it comfortably, and the seller takes a carryover basis with a tacking holding period. The mechanic worth knowing is the one that breaks it: cash consideration is boot and is taxable to the extent of gain, so a cash true-up outside a breached collar — the obvious way to bridge a gap — changes the tax answer as well as the economics.
Acquisition-date measurement under ASC 805
Consideration transferred in a business combination is measured at the fair value of the equity issued on the ACQUISITION date, which is the closing date and not the signing date. That single rule makes the accounting consequence of the two structures run opposite to intuition: under a fixed exchange ratio the share count is fixed and the price is not, so consideration and goodwill move with the acquiror's own stock, while under a fixed value the two effects cancel. It is one of the few places where a negotiating point has a balance sheet consequence neither side raised.
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
- —Historical exchange ratio analysis
- —Fixed versus floating collar payoff diagrams
- —Precedent collar statistics
- —Dual unaffected-date construction
- —Maximum dilution from future vesting
- —Pro-forma economic ownership
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 Rushmere — Consideration Structuring & Collars
60-second preview — upgrade to Diamond for the full walkthrough
Frequently Asked Questions
Why is there no valuation in a case about an acquisition?
Because the price is already agreed and the materials this case is modeled on contain no valuation exhibit at all. Both boards have signed off on the exchange ratio; what is in front of the Rushmere board is a set of mechanics for paying it. A discounted cash flow answers a question nobody in the room is asking, and building one signals that the brief was misread. The discipline is to answer the question posed rather than the question you have practiced.
If all four structures pay the same amount, what is there to analyze?
They pay the same amount at ONE price — the acquiror's price on the reference date. The merger closes months later at a price nobody knows, and across the range of prices that could obtain, the four structures deliver materially different amounts to the seller and cost materially different numbers of shares to the buyer. The identical headline is the setup for the case rather than a fact about it, and the payoff panels are where the differences become visible.
Which unaffected date is the right one?
Both are defensible, which is why both belong in the materials. A trade report is a classic unaffected-date marker, and so is a Schedule 13D amendment disclosing that a holder has approached the board about strategic alternatives. The second is arguably stronger, because it is a filing rather than a rumor. The useful output is the two premiums side by side, the difference between them stated in percentage points, and a clear note of which side will argue for which.
Why measure a premium on exchange ratios at all?
Because a premium on price mixes two movements together. Between the unaffected date and the reference date the target's price is frozen for the purpose of the calculation while the acquiror's has been free to move, so any re-rating in the acquiror's stock shows up inside the quoted premium. Measuring on exchange ratios removes it. If the two measures disagree, the gap tells you how much of the headline is the acquiror's own performance rather than anything it conceded. In a fixed-ratio deal that portion can evaporate before closing.
Isn't a collar just downside protection?
Only in the loosest sense, and the loose sense is what the case is built to break. Fixing the exchange ratio inside a band gives the seller no protection at all in the middle of the distribution and caps and floors the tails; fixing the value inside the band does the opposite. Both are called collars, both can be written on the same band, and choosing between them is a decision about WHERE in the distribution you want protection — which is a different question from how much.
How do I know whether the proposed band is wide or narrow?
Not from the percentage. Multiply the acquiror's annualized volatility by the square root of the expected time to closing and divide the band's half-width by the result: the band is then expressed in standard deviations, which is the only unit in which two collars on two different names are comparable. Run the same calculation on the precedent set's median band at its median volatility and timetable, and note whether the two comparisons agree — they need not.
Why are performance stock units carried at maximum?
Because until the merger agreement fixes the settlement level, maximum is the number the buyer is exposed to. The merger agreement will usually deem performance awards to settle at target, at actual, or at some negotiated point, and that provision is worth real ownership, enough that it is negotiated rather than left to the plan. Building the diluted count at target alone understates the issuance the buyer has agreed to, and understating it in favor of your own client is the version of the error that gets noticed.
Does the consideration structure change the tax treatment?
Not among these four, and saying why is more useful than saying that it does not. All four pay solely in acquiror stock, so continuity of interest is total under each and the exchange is tax-free to the seller except for cash in lieu of fractional shares. What would change the answer is cash: a cash true-up outside a breached collar is boot and is taxable to the extent of gain. Naming the mechanic that breaks a result is worth more than asserting the result.
How should I split the 90 minutes between the workbook and the deck?
The template's own cover prints the measured scope, the suggested build order and the rate that implies, and it leaves time for the second deliverable. Roughly two thirds of the clock is the workbook and the rest is reading and writing. If you are formatting a payoff table at minute eighty-five, the time went to the wrong place. A complete package with a stated recommendation beats a beautiful exhibit set with no answer on the end of it.
About This Equity Capital Markets / Deal Structuring Case Study
Equity Capital Markets / Deal Structuring case study for investment banking interviews. 90-minute format covering historical exchange ratio analysis, fixed versus floating collar payoff diagrams, precedent collar statistics. 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 Equity Capital Markets. Every case ships with the full prompt, the supporting materials, a complete model answer and an audio walkthrough of the judgment behind the recommendation.
90-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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