Project Pellworth — Operating-Case LBO & Returns Attribution
A 2.5-hour Operating-Case LBO with Returns Attribution case study with a complete model answer
Modeled After
Blackstone
The operating-case buyout analysis Blackstone is reported to set, which formally decomposes the return: each driver's contribution to ending equity, its share of the multiple of money above 1.0x and its share of the IRR, with a check cell reconciling the bridge to the actual increase in equity value.
Structure and exercise format are modeled after Blackstone — the returns-attribution standard the firm is reported to apply. The company, the plan and every figure in this case are entirely our own.
The Situation
Pellworth Home Retail Group, Inc.
Pellworth Home Retail Group
- Sector
- Consumer / retail — home improvement and home furnishings, with an installed-services business and a direct channel
- Size
- Geography
- United States; Midwest and Southeast, headquartered in Columbus, Ohio
- Ownership
- Situation
The Prompt
You are on the deal team at Harnwood Capital 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 150 minutes.
PART 1
Rebuild the reported year from the drivers
PART 2
Price it and fund it
PART 3
Three operating cases, on one toggle
PART 4
The cash build and the debt schedule
PART 5
The exit, and why there are two returns
PART 6
The returns attribution bridge — the deliverable
PART 7
The order of attribution, and what depends on what
How to Approach It
The order a strong candidate works in, and why. This is the shape of the answer — the finished Excel model and memo are in the solution set below.
- 01
Read the three driver sets side by side (20 minutes)
- 02
Rebuild the reported year, then price it
- 03
Build one operating case, then copy it twice
- 04
Same discipline on the debt schedule
- 05
The exit, on both holds
- 06
Build the bridge, and make it reconcile (the deliverable)
- 07
Decompose the decomposition
- 08
Write the five sentences (30 minutes)
Key Concepts
The ideas this case is built on. Know these cold and the case becomes a question of execution rather than knowledge.
Returns attribution bridge
A decomposition of the equity value a deal creates into the sources that created it. It is only useful if it is exhaustive: every dollar of the increase in equity value has to land in a named component, and a residual line called 'other' means the decomposition does not describe the model it came from.
Valuing growth at the entry multiple
EBITDA growth is valued at the multiple you paid and the multiple change is valued on exit EBITDA. Those two add to the change in enterprise value with nothing left over. Value growth at the exit multiple instead and the two lines double count the interaction between them, which is why a bridge built that way needs a plug.
Order of attribution
EBITDA growth splits into revenue growth and margin expansion, and the split depends on which one you value first: whichever comes second carries the interaction between them. The total does not move, the two lines do, and the ranking between them can flip. That is why the order has to be stated rather than assumed.
Operating leverage
Margin improvement that comes from fixed cost spread over higher sales rather than from a rate a management team changed. It is not a lever; it is a consequence of the sales line, and it reverses exactly when sales do. Separating it from the rest of a margin bridge is what turns 'margin expansion' from one word into an argument.
Comparable store sales
Sales growth from stores that have been open long enough to lap themselves, decomposed into transactions and average ticket. A chain whose transactions are falling while its ticket rises is not the same business as one whose transactions are rising, even when the headline comp is identical.
Locked box
A sale priced on a stated set of accounts, with the buyer taking the economic risk from that date and paying at completion. If the box carries no ticking interest, the seller earns its money multiple over the period the accounts cover and its return over the longer period until the cash arrives — which makes timing a real, computable component of the return.
Lease-adjusted leverage
Net debt plus capitalized rent over EBITDA before rent. For a retailer whose EBITDA is stated after rent, the reported multiple understates the fixed obligation the business actually carries, and the two numbers can be more than a turn apart.
Level against swing
The level of a bridge component says how big it is; its swing between cases says how much of the answer depends on it. The two do not rank the same way, and it is the swing that belongs in the recommendation.
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 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
- —Three operating cases on a single toggle
- —Returns attribution bridge
- —EBITDA growth valued at the entry multiple
- —Multiple expansion valued on exit EBITDA
- —Debt paydown contribution
- —Value leaked to management as a negative component
- —Bridge reconciliation check
Memo
The written recommendation and how it was reached
Upgrade to Diamond
Sign up and upgrade to Diamond to unlock 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 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 Pellworth — Operating-Case LBO & Returns Attribution
60-second preview — upgrade to Diamond for the full walkthrough
Frequently Asked Questions
Why does the exercise care so much about the bridge tying exactly?
Because a bridge that does not tie is a set of estimates with a plug rather than a decomposition. The whole value of the exhibit is that a reader can take any component out and know exactly what the answer would have been without it. A residual destroys that: it means some of the return came from somewhere the analysis cannot name, and nobody reading it can tell how much.
Why is the base case exit multiple set equal to the entry multiple?
It is the house convention, and it is what makes the base case return an operating and deleveraging story by construction. If the base case is allowed a re-rating, the bridge cannot separate what the business earned from what the market handed over. The other two cases carry explicit exit multiples with a stated reason, which is how a re-rating should be underwritten: as an assumption someone can refuse.
How can timing be a component if it does not change the value?
Because a return is a value and a clock. Under a locked box with no ticking interest the price is fixed on one set of accounts and the money arrives later, so the same money multiple is earned over a longer period and the internal rate of return falls. It moves no value and no money multiple, and it does move the return — so it belongs in the return column of the bridge, with zeros beside it in the other two.
Does the order of attribution really change the answer?
It changes the split, never the total. Revenue growth valued at the entry margin leaves the whole interaction inside the margin line; valued at the exit margin it takes the interaction with it. On this case the two orders disagree about which of the two is the larger driver, which is exactly why a submission has to state the convention it used.
How much of the two and a half hours should go on the model?
About 20 minutes reading the drivers, 100 minutes on the workbook and 30 on the written recommendation. The workbook leaves 879 cells across 237 authored rows, which is 305 distinct formulas once you allow for filling right — comfortable if you build one case block and copy it, and impossible if you build all three from scratch.
What separates a strong answer from an average one?
Three things: a bridge that reconciles exactly, with no component the candidate cannot name; a stated order of attribution, because the reader cannot audit a split whose convention is hidden; and a recommendation that names the lever the answer depends on from the swing between the cases rather than from the size of the components in one of them.
About This Operating-Case LBO with Returns Attribution Case Study
Operating-Case LBO with Returns Attribution case study for private equity interviews. 150-minute format covering three operating cases on a single toggle, returns attribution bridge, ebitda growth valued at the entry multiple. Includes the full prompt, a tied-out Excel model, a written memo and an audio walkthrough.
This case study sits in Private Equity, under LBO Modeling Tests. Every case ships with the full prompt, the supporting materials, a complete model answer and an audio walkthrough of the judgment behind the recommendation.
150-Minute Format
The time limit a real assessment would give you
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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