Project Rennick — Software LBO with No Multiple Expansion
A 3-hour Operating-Case LBO with Returns Attribution case study with a complete model answer
The Situation
Rennick Workflow Software, Inc. sells workflow automation to architecture, engineering and construction firms across the United States.
Rennick Workflow Software, Inc.
- Sector
- Technology / vertical software — workflow automation for architecture, engineering and construction firms
- Size
- Geography
- United States; headquartered in Denver, Colorado
- Ownership
- Situation
The Prompt
You are on the deal team at Denbry 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
Read the two years of history before you forecast anything
PART 2
The at-scale margin, and its basis in writing
PART 3
Three operating cases, built from drivers
PART 4
A downside case that says why both lines move
PART 5
Decompose the growth in Adjusted EBITDA
PART 6
Debt capacity against the recurring base
PART 7
The five-year build, both covenants, and the returns
PART 8
Test the convention you were told to build
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 history before you forecast anything (25 minutes)
- 02
Build the two years and look at what changed
- 03
Construct the at-scale margin, and write the basis while you have it
- 04
Build the first operating case completely, then copy it (100 minutes total)
- 05
Size the debt against the recurring base
- 06
Run the returns, then test the exit convention
- 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.
Net revenue retention, read beside gross retention
Gross retention is the money you keep from the installed base; net retention is what you keep plus what the survivors buy on top. Read alone, a falling net retention looks like churn. Read beside a stable gross retention it is something else entirely — the base is not leaving, it has stopped expanding — and the two are cured by completely different kinds of spending.
The cost of a dollar of new ARR
New-logo sales and marketing divided by the new-logo ARR it produced. It is the price of growth, and it is the number that turns a sales budget into a growth forecast: bookings are spending divided by the ratio, which makes the budget a decision the model can show rather than an assumption it hides.
The growth-versus-margin trade
In software, margin is largely a decision. Cut sales capacity and margin rises while growth falls; add it and the reverse. That is why a downside case that lowers growth AND margin needs a mechanism that moves both, and why the interesting case is usually the one in which a company chooses margin over growth on purpose.
The Rule of 40
Revenue growth plus operating margin, as a single score. It is a useful summary and a poor decision rule: two plans can score within a few points of each other and be very different businesses, with very different recurring bases and very different exit audiences. Use it to describe, not to choose.
At-scale margin
What a subscription business earns once it is not buying growth so hard. It is a judgment, not an observation, so it has to be constructed from component rates with a stated basis for each rather than read off the last year of a forecast. It matters twice: it is a valuation anchor and it is what a lender underwrites against.
Recurring-revenue debt capacity
Lenders to subscription businesses size against the base rather than against trailing earnings, because reported EBITDA in a growing software company is largely a spending decision and the recurring base is not. A facility written as a multiple of ARR reads very differently as a multiple of reported earnings, and both numbers are true.
Exit multiple hard-wired to entry
A common house convention that removes multiple expansion from the return, so the answer has to come from earnings growth and deleveraging. It is a discipline, and it is not neutral, because it prices a point of growth and a point of margin the same way, which no buyer does.
Returns attribution
A decomposition of the equity gain into earnings growth, multiple change, deleveraging and leakage. Where the exit multiple is linked to the entry, the multiple line is zero by construction — and a zero that comes from an instruction looks exactly like a zero that comes from discipline.
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
- —Net dollar retention driven revenue build
- —Rule of 40 operating cases
- —Exit multiple hard-wired to entry
- —Returns from growth and deleveraging only
- —Recurring-revenue debt capacity
- —Sales and margin decomposition of EBITDA growth
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 Rennick — Software LBO with No Multiple Expansion
60-second preview — upgrade to Diamond for the full walkthrough
Frequently Asked Questions
Why is there no price solve in this case?
Because the price is agreed. Denbry is in exclusivity at 25.0x FY2025A Adjusted EBITDA and the committee is not being asked what to pay. It is being asked which operating plan to underwrite and what the transaction returns on it. Building a reservation price here is a well-executed answer to a question the prompt did not ask, and it costs time you need for the cases.
Why is there no discounted cash flow and no peer set?
The committee is deciding whether its own required return clears on a plan it can execute, which is a returns exercise rather than a valuation. And the price is given, so a curated comparable-company table would be decoration in the memorandum and, in a candidate-facing artifact, would hand over part of the answer. The comparison that does the work is between the three operating cases.
What does it actually mean to build revenue from drivers?
Opening ARR times net revenue retention gives you what the existing base is worth at year end. Add new-logo ARR — which is the new-logo sales budget divided by the cost of a dollar of new-logo ARR — and you have closing ARR. Subscription revenue is the average of the two balances; services revenue is implementation on the new logos plus ongoing configuration on the base. Nothing in that chain is a growth percentage somebody chose.
How should a downside case be constructed on a software business?
Start from a mechanism, not from a number. Rennick prices by the seat and sells to construction firms, so a downturn shows up as contraction at renewal rather than as logo loss — and what the company does about it is a decision with a cost. If your downside lowers growth and margin without a driver that moves both, you have taken a haircut and called it a case.
How much of the three hours should go on the model?
About 25 minutes reading, 100 minutes on the workbook and 55 on the memorandum. The template leaves 1,097 cells across 307 authored rows, which is 330 distinct formulas — roughly 18 seconds each on the workbook budget — and it is comfortable if you build the first operating-case block once and copy it, and impossible if you rebuild each case from scratch.
What separates a strong answer from an average one?
Three things: building bookings as an output of a spending decision rather than typing a growth rate; constructing the at-scale margin from rates with a written basis rather than claiming it; and noticing that the exit convention you were told to use is not neutral, then testing it, saying what it does to the comparison between your cases, and letting that change your recommendation if it should.
What does the podcast cover that the memorandum does not?
How to read the prompt under time pressure, the order to build the workbook in and what to cut if you run out of time, and the four failure modes that sink otherwise competent answers on this archetype — typing a growth rate, a downside that is a haircut, an at-scale margin with no basis, and letting a modeling convention pick the operating plan.
About This Operating-Case LBO with Returns Attribution Case Study
Operating-Case LBO with Returns Attribution case study for private equity interviews. 180-minute format covering net dollar retention driven revenue build, rule of 40 operating cases, exit multiple hard-wired to entry. 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.
180-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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