Project Glassmere — Secondary Buyout IC Memo
A 3-hour Investment Committee Memo (Secondary Buyout) case study with a complete model answer
Modeled After
Blackstone
The investment committee memo Blackstone is reported to set on a sponsor-to-sponsor transaction, graded on whether the thesis survives the fact that the obvious levers have already been pulled, and on whether growth assumptions are explained rather than simply stated.
Structure and exercise format are modeled after Blackstone — the investment committee format the firm is reported to use. The company, the financials and every figure in this case are entirely our own.
The Situation
Glassmere Compliance Software, Inc. sells regulatory compliance and audit-management software to mid-market banks and credit unions in the United States, across three modules: regulatory change management, which tracks rule changes through to the policies and controls they touch; audit and issue management; and consumer complaint surveillance.
Glassmere Compliance Software
- Sector
- Technology / vertical software — regulatory compliance and audit-management software for mid-market banks and credit unions
- Size
- Geography
- United States; headquartered in Charlotte, North Carolina
- Ownership
- Situation
The Prompt
You are on the deal team at Wrayburn Partners.
Supporting Materials
What you are handed at the start of the case, in the format a real process would use.
Blank model template
XLSXUnlock
What You Have to Produce
The deliverables, in the order the committee will read them. The exercise runs 180 minutes.
PART 1
Earnings quality, and the basis every multiple is struck on
PART 2
What the first owner actually did
PART 3
The seller's own return, as a negotiating fact
PART 4
The residual thesis, priced lever by lever
PART 5
The plan, and what you would underwrite instead
PART 6
Structure, returns and the price
PART 7
Risks, and the fund-level test
How to Approach It
The order a strong candidate works in, and why. This is the shape of the answer — the finished memo and Excel model are in the solution set below.
- 01
Read for the basis before you read for the story (25 minutes)
- 02
Reconcile earnings quality, and price the presentation
- 03
Decompose the first owner's margin bridge
- 04
Rebuild the seller's return
- 05
Build the residual thesis, and be honest about its size
- 06
Build the model on your own basis (100 minutes)
- 07
Write the memorandum (55 minutes)
Key Concepts
The ideas this case is built on. Know these cold and the case becomes a question of execution rather than knowledge.
Secondary buyout
A purchase from another financial sponsor rather than from a founder or a corporate. The seller is a professional who has already run the obvious playbook, so the buyer's thesis has to be something the incumbent could not or would not do — a change in what the business can access, or work the incumbent declined because it depressed reported margin ahead of a sale.
Basis of adjustment
Which definition of EBITDA a multiple is struck on. In a sponsor-run process there are usually at least three — reported, the seller's Adjusted, and the buyer's own normalized figure — and the same enterprise value is a materially different multiple on each. Every multiple in a memorandum should carry its basis in the label.
Capitalized software as an earnings-quality item
Capitalizing more development spend lowers operating expense and raises EBITDA while raising capital expenditure by the same amount, so cash flow is unchanged. It matters because the price is a multiple of EBITDA: a buyer who accepts a higher capitalization rate pays for presentation and receives nothing for it.
Vendor due diligence
Accounting and commercial reports commissioned by the seller and distributed to bidders. They shorten the process and reduce surprises, and they are also the seller's work product on the seller's timetable. Reading them skeptically — and finding the things they do not cover, such as contract terms — is the diligence that moves price.
Net revenue retention
Revenue from the installed base this period against the same cohort last period, including expansion, contraction and churn. Read it beside gross retention: if net retention falls while gross retention holds, the base is not leaving, it is buying less. That is a product-roadmap fact rather than a churn problem.
Staple financing
A committed debt package arranged by the seller and offered to every bidder. Because the quantum is fixed and does not flex with the price, every extra dollar of enterprise value is an extra dollar of sponsor equity — which turns the price question into a solve rather than a circular reference.
Reservation price
The highest price at which the buyer's own return hurdle still clears. It is a ceiling, so it truncates to the precision it is quoted at rather than rounding: a price rounded up is a price at which the hurdle is missed.
Returns attribution
A decomposition of the equity gain into earnings growth, multiple change, deleveraging and leakage. Its value here is comparative. Running the same decomposition on the seller's hold and on your own shows whether you are buying a re-rating that has already happened.
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: memo 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
- —Underwriting after another sponsor's value creation
- —Residual thesis construction
- —Second-owner diligence priorities
- —Vendor due diligence scepticism
- —Returns without multiple expansion
- —Recommendation against a mean-reversion assumption
Memo
The written recommendation and how it was reached
Upgrade to Diamond
Sign up and upgrade to Diamond to unlock the memo, 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 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 Glassmere — Secondary Buyout IC Memo
60-second preview — upgrade to Diamond for the full walkthrough
Frequently Asked Questions
Why is there no discounted cash flow in this case?
Because the committee is not being asked what Glassmere is worth in the abstract. It is being asked whether the firm's own required return clears at a price a competitive auction will accept. That is a price solve rather than a valuation. You fix the return and the financing and solve for the price. A terminal value would be answering a question nobody asked.
Why are there no comparable companies or precedent transactions?
The price here is a guided multiple in a live process and a solve against a hurdle. A curated peer table would be decoration in the memorandum and, in a candidate-facing artifact, it would hand over part of the answer. The comparison that does the work is between the seller's basis of adjustment and yours.
Is a secondary buyout really a different exercise from a normal LBO?
The mechanics of the model are the same. What changes is the entry and the history: the obvious levers have been used, part of what looks like operating improvement may be presentation, the seller's own return is knowable and is a negotiating fact, and the diligence is unusually good in a way that argues for a lower price rather than a higher one.
How much of the three hours should go on the model?
About 25 minutes reading and normalizing, 100 minutes on the workbook and 55 on the memorandum. The workbook leaves 921 cells across 277 authored rows, which is roughly 22 seconds a row — comfortable if you build the case blocks once and copy them, and impossible if you rebuild each forward case from scratch.
What separates a strong answer from an average one?
Three things: carrying the earnings basis in every multiple you print, answering why the incumbent did not take each lever you underwrite rather than listing levers, and stating what your maximum implies about winning the auction instead of recommending a price you know will not clear and calling it participation.
What does the podcast cover that the memorandum does not?
How to read the prompt under time pressure, where the marks actually sit, the order to build in, and the four failure modes that sink otherwise competent answers — writing it as a first-time buyout, accepting the seller's basis, assuming the exit multiple equals the entry multiple, and accepting a plan with no mechanism behind it.
About This Investment Committee Memo (Secondary Buyout) Case Study
Investment Committee Memo (Secondary Buyout) case study for private equity interviews. 180-minute format covering underwriting after another sponsor's value creation, residual thesis construction, second-owner diligence priorities. Includes the full prompt, a written memo, a tied-out Excel model and an audio walkthrough.
This case study sits in Private Equity, under Investment Committee Memos. Every case ships with the full prompt, the supporting materials, a complete model answer and an audio walkthrough of the judgment behind the recommendation.
180-Minute Format
The time limit a real assessment would give you
Memo
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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