Project Shorewell — Take-Home from a 10-K
A 3-hour Take-Home Case Study + IC Memo case study with a complete model answer
Modeled After
KKR
The take-home KKR is reported to set, supplied as nothing more than a public filing and a blank workbook with three tabs: the candidate spreads the statements, builds an analysis at various prices, constructs the buyout with no given assumptions, and carries an unlevered IRR line to isolate the contribution of leverage.
Structure and exercise format are modeled after KKR — the take-home format the firm is reported to use. The company, the filing, the plan and every figure in this case are entirely our own.
The Situation
Shorewell Footwear Company designs, sources and sells footwear under three brands — Shorewell, Kittery Trail and Bell Harbor — through wholesale accounts and through its own stores and website. It is listed, it files, and it is not in play: nothing has been announced, no banker has been retained, and there is no process.
Shorewell Footwear Company
- Sector
- Footwear — three brands sold through wholesale accounts and through owned retail stores and e-commerce
- Size
- Geography
- United States; a domestic wholesale and retail footprint with production placed with contract manufacturers overseas
- Ownership
- Situation
The Prompt
You are a candidate for a private equity investment seat. An email arrives with two attachments — an annual report and a blank workbook — and it reads:
"Attached is the most recent annual report for a listed footwear company.
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 180 minutes.
PART 1
Spread the statements, and tie every subtotal back
PART 2
Construct an earnings figure the filing does not print
PART 3
Read the notes the face of the statements does not show you
PART 4
Write the assumptions tab, and defend every line of it
PART 5
Build the analysis at various prices
PART 6
Build the buyout: sources and uses, the plan, the schedule
PART 7
Carry an unlevered return beside the levered one
PART 8
Solve for the prices that bind, and say what would have to be true
PART 9
Write the memorandum, including what you could not determine
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 the filing before you touch a cell
- 02
Spread the statements and construct the earnings
- 03
Write the assumptions, with the reasons
- 04
Analysis at various prices, then sources and uses
- 05
The plan, the cash flow and the debt schedule
- 06
Returns, both ways, and the solves
- 07
Write the memorandum
Key Concepts
The ideas this case is built on. Know these cold and the case becomes a question of execution rather than knowledge.
Constructing an earnings figure a filing does not print
A registrant is not required to present EBITDA, and this one presents none — nor any non-GAAP measure, nor any reconciliation. It also carries no depreciation line on the income statement, because depreciation sits inside cost of sales and inside operating expenses. The only statement that shows it as a number is the cash flow statement. So the first move on a filing-only exercise is to take depreciation out of the cash flow statement and add it back to operating income, and then to go to the property note for the split between the two cost captions, which is what a cash margin needs. A candidate who never finds the depreciation will use operating income as their earnings and strike a multiple on it, and the model will still run.
A recurring charge is not a one-time charge
The most flattering thing available on almost any filing is to add the whole restructuring line back. Read the sequence before you do: a line that carries a charge in each of the three years presented is describing a cost of the business, not an event. The note here breaks the current year's charge into components and says which heading has recurred, which is the disclosure that lets you add back the part that is non-recurring and leave the rest inside the earnings. Saying in the memorandum which components you added back and why is worth more than the arithmetic itself, because the number is only defensible if the split is.
Stock-based compensation, charged or added back
Every valuation that runs off an earnings multiple has to state what is in the earnings, and the most common way a memorandum gets taken apart is that nobody can tell which basis a multiple was struck on. Stock-based compensation is the sharpest instance: it is non-cash, so it sits on the cash flow statement as an add-back, and it is also how a company pays people, so the shares it issues are real shares. Either treatment can be defended. Silence cannot. Whichever way you go, say it in one sentence near the top and be consistent everywhere below it.
Segments that are not the unit the business is run in
A segment footnote is prepared on the basis the chief operating decision maker actually reviews, which is not always the basis a buyer wants. Two things to test before you build anything on top of one: how large the unallocated corporate block is relative to the segments' combined income, because burdening it on the only key the filing supports can move both margins a long way; and whether the segments are about to change, because a reorganization disclosed in the management discussion means the one comparable series the filing gives you will not be extended.
A balance sheet dated the seasonal trough
A fiscal year end is chosen, and consumer businesses frequently choose the point at which inventory is lowest. That makes the balance sheet in the filing a photograph taken on the least representative day of the year, and the only disclosure that reveals it is the unaudited quarterly data. Two consequences follow and they point in different directions: a revolving facility has to be sized against the peak, because a facility sized off the year end runs out mid-year; while an annual model rolls forward an annual balance, so the year-end ratio is the right run-rate to hold in the plan. The peak changes the facility, not the plan.
The obligations that are not the debt caption
A bridge from equity value to enterprise value that stops at funded debt less cash will miss things a buyer pays for. An operating lease liability can exceed the funded debt, and whether it belongs in the bridge depends on whether the earnings are struck before or after rent — both conventions are defensible and the choice is often worth more than the analysis that follows, so declare it before quoting a multiple. A pension deficit is a claim that ranks ahead of the equity. An accrued legal contingency is a liability the buyer inherits, and the disclosed range above the accrual is the cheapest piece of downside information in any filing.
Unlevered return, beside the levered one
A levered return conflates two things: what the asset does, and what the balance sheet does to it. Running the same purchase for cash — same enterprise value, same fees, same opening cash, no debt, no interest, and cash accumulated at the same rate — isolates them, because everything that then differs between the two cases is leverage. The difference is usually smaller than people expect, and it is bounded by two facts you can read off your own assumptions: the spread between the after-tax cost of the debt and what the asset yields unlevered, and how much debt there is relative to the equity check. A thin spread on a small balance is worth very little, and knowing that changes what you argue about.
Saying what the source could not settle
On an exercise whose only input is a public document, the boundary of what can be known is part of the answer rather than an apology for it. The discipline is to write three things for each item: what you could not determine, what the filing does say about it, and what you would ask for first. Two examples of the shape. A statement that no single customer exceeded ten percent of revenue is a floor, not a distribution — two accounts at nine percent look identical to twenty accounts at one. And a covenant struck on a definition of earnings that the filing does not reproduce is a covenant you cannot test, however exact the disclosed threshold is.
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
- —Spreading a P&L and balance sheet from a filing
- —Analysis at various prices
- —EV/(EBITDA less capex) and EV/tax-effected EBIT
- —LBO built without given assumptions
- —Unlevered IRR to isolate leverage's contribution
- —Making and defending your own assumptions
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 Shorewell — Take-Home from a 10-K
60-second preview — upgrade to Diamond for the full walkthrough
Frequently Asked Questions
Why is there no confidential information memorandum, no data room and no term sheet?
Because that is the archetype. This tier exists to test what a candidate can establish from a public document, and adding any of those would make it a different exercise. Firms set it this way on purpose: the filing is a document everyone can read, so the only variable is the reader. It also removes the crutch most candidates lean on, which is a seller-prepared adjusted-earnings bridge — here you build the earnings yourself and you own every add-back you make.
If none of the assumptions are given, how can there be a right answer?
There is no single right set of assumptions, and the marking does not look for one. What it looks for is whether each assumption is stated, whether the reason given for it survives contact with the filing, and whether the assumptions are consistent with one another — a capital program that assumes a shrinking asset base while the plan assumes growth is not wrong in arithmetic, it is wrong in itself. The arithmetic is checkable and it is the smaller half of the mark; the defense is the larger half, which is why the final round is a conversation about the assumptions tab rather than about the model.
What does the unlevered return actually add?
It separates what you are buying from how you are paying for it. A levered return can be strong because the asset is good, or because the debt is cheap and plentiful, and the two lead to completely different conversations — one about the business and one about the market. Running the identical purchase for cash, with the same fees and the same opening cash and no debt at all, means everything that then differs between the two cases is leverage and nothing else. The prompt asks for it explicitly here, which means it is being marked, and the difference between the two figures is usually the most quotable sentence in the whole memorandum.
How much of the three hours should the workbook take?
The template measures out at 927 cells the candidate fills, which collapse to 422 distinct formulas once every fill-right and copy-down group is counted once — almost every projected row is written in the first projected column and dragged across four more, the grid is one formula filled both ways, and the price ladder is one column copied across five. Against the whole 180 minutes that is about twenty-six seconds a formula. But this case has two deliverables, so the whole clock is the wrong denominator: the suggested budget is twenty minutes of reading, one hundred and twenty-five minutes of workbook and thirty-five minutes of writing, which puts the workbook at roughly eighteen seconds a formula.
Is there anything in the filing that does not change the answer at all?
Several things, and reading them is still worth the minutes. The debt note gives a maturity schedule and two financial covenants — none of which reaches the answer, because the existing debt is refinanced at close, but which tell you how the company's own lenders sized it and how much refinancing risk sits in one year. The revenue recognition and critical accounting estimate notes give reserve balances with no roll-forward and no aging behind them. None of those is a model input. All of them are diligence items, and the difference between a candidate who read the notes and one who did not is visible in what they say they do not know.
What is the most common way candidates lose marks on this case?
Quoting a multiple without saying what is in the earnings or which convention the bridge is on. On this company both matter more than usual: the treatment of a recurring restructuring charge, the treatment of stock-based compensation, and whether the operating lease liability is in the bridge or the rent is in the earnings can each move the entry multiple by a material amount, and a reader who cannot tell which choices were made cannot evaluate anything downstream of them. One sentence near the top of the memorandum, stating the basis and the convention, is the cheapest mark in the exercise.
About This Take-Home Case Study + IC Memo Case Study
Take-Home Case Study + IC Memo case study for private equity interviews. 180-minute format covering spreading a p&l and balance sheet from a filing, analysis at various prices, ev/(ebitda less capex) and ev/tax-effected ebit. 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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