Project Thackerly — Industrial LBO with Volume/Price Decomposition
A 3-hour Operating-Case LBO with Returns Attribution case study with a complete model answer
The Situation
Thackerly Bearings and Motion, Inc. manufactures and distributes precision bearings, mounted bearing units and power-transmission components — couplings, gear reducers and belt drives — to industrial original equipment manufacturers and to the maintenance, repair and operations aftermarket in North America.
Thackerly Bearings & Motion
- Sector
- Industrials — precision bearings, mounted units and power-transmission components, sold to original equipment manufacturers and to the maintenance, repair and operations aftermarket
- Size
- Geography
- North America; three works at Corrender, Indiana, Loxbury, Ohio and Vantone, South Carolina
- Ownership
- Situation
The Prompt
You are on the deal team at Harkforth Capital.
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
Decompose the growth into volume, price and mix
PART 2
Take realized price apart
PART 3
Measure operating leverage rather than describing it
PART 4
Place the last twelve months in the cycle
PART 5
Build the model from the bottom up, on three cases
PART 6
Size the asset-based revolver properly
PART 7
Returns, attribution and the price
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 for the unit build, not the income statement (25 minutes)
- 02
Decompose the growth before you forecast anything
- 03
Split price into escalation and surcharge
- 04
Measure the two flow-through rates
- 05
Build the mid-cycle year backwards (100 minutes for the model)
- 06
Run the downside against the borrowing base, not against a covenant
- 07
Solve twice, and 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.
Volume, price and mix
An exhaustive decomposition of a revenue movement. Volume is the change in units at a fixed price, price is each cell's own price change at a fixed volume, and mix is the closing term that makes the three sum to the movement exactly. There is no fourth line: a decomposition with a residual has not answered the question it was asked.
The order of a decomposition
Take volume first and price is measured at this year's units; take price first and it is measured at last year's. Both are exhaustive, both reconcile, and they give different answers. Neither is more correct. What is incorrect is not saying which one you used.
The grain at which mix is measured
Mix can only capture a shift between the cells you actually have. Measure at the product level and a shift between channels is booked as price; measure at the channel level and a shift between products is. The coarser the grain, the more of a movement lands in price, and at the company level mix is zero by construction.
Realized price and pass-through
What a customer actually pays per unit, after contractual escalation, surcharges, rebates and freight allowances. In an industrial the surcharge is usually a formula on an input index, applied with a lag and at less than one hundred percent, which means realized price is a lagged and damped version of an input cost rather than a pricing decision.
Incremental and decremental margin
What a dollar of incremental volume revenue adds to EBITDA, and what a dollar lost takes away. They are not the same number: cost goes back in as volume arrives and comes out only once a decline is believed, so the first year of a downturn gives back close to the full contribution margin while the first year of a recovery returns less.
Borrowing base and availability
An asset-based facility lends against a formula on eligible receivables and inventory rather than against a leverage turn. The consequence is that the line shrinks with the sales that create the need for it, so availability, not a covenant, is usually the first thing that binds in a downturn.
Springing covenant
A financial test that is dormant while liquidity is comfortable and becomes live below a stated availability threshold. Its existence is conditional on the thing it is supposed to protect, which is why modeling availability first and the covenant second is the only order that reflects how the facility behaves.
Mid-cycle earnings
A normalized year built from a stated operating rate and a stated input level rather than from a growth rate. It exists so that a multiple can be quoted on a denominator that is not a cycle position, and in a cyclical business the difference between the two denominators is usually wider than the range anyone negotiates over.
Maintenance against growth capital expenditure
Maintenance keeps the existing asset base running and is a charge against the earnings you already have. Growth buys capacity and belongs to a return calculation of its own, on its own depreciation vintage. Blending them hides both the free cash flow the business actually generates and the return the new capacity has to earn.
Returns attribution
A decomposition of the equity gain into its sources. In a cyclical, operating-leveraged business the useful version splits the earnings half on the same axes as the growth analysis, because a return earned on price in a business whose price is a lagged index is not the same return as one earned on volume.
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
- —Volume times price times cost-per-unit build
- —Maintenance versus growth capex split
- —Asset-based revolver with a borrowing base
- —Volume versus pricing decomposition of growth
- —Returns attribution bridge
- —Cyclical downside underwriting
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 Thackerly — Industrial LBO with Volume/Price Decomposition
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 Thackerly is worth in the abstract. It is being asked whether its own required return clears at a price this process will accept, and what structure the downside survives. That is a solve against a hurdle, not a valuation, and a terminal value would be answering a question nobody asked.
Which decomposition order is the right one?
Neither. Volume-first and price-first are both exhaustive and both reconcile to the same total; they disagree about how to split the movement between the second and third effects because they weight them differently. A strong answer picks one, says so in a sentence, and prints the mirror beside it so the reader can see the size of the choice.
Should mix be measured at the product level or the customer level?
At the finest grain the data supports, which here is product and channel together. Measured only by product, a shift toward the aftermarket channel shows up as a price increase; measured only by channel, a shift toward a higher-priced product family does. Both are defensible if you say which you did — what is not defensible is a blended company price effect described as pricing.
Why does the aftermarket surcharge behave differently from the OEM one?
Because one is a contractual formula and the other is a published list. A formula moves both ways with the index by construction. A list price goes up when it is announced and comes down only through discount and rebate, which is slower, so a spike leaves an overhang behind it that a buyer should not pay a multiple for.
How much of the three hours should go on the model?
About 25 minutes reading and decomposing, 100 on the workbook and 55 on the memorandum. The decomposition is worth doing before the forecast rather than after it, because every forward driver in the model is one of the three effects and building the forecast first usually means building it out of a growth rate you have not yet interrogated.
What separates a strong answer from an average one?
Four things: a decomposition that reconciles exactly, with the order and the grain both stated; a price effect split into what a contract says and what an index does; two flow-through rates rather than one, with the asymmetry explained as timing; and an exit whose cycle position is named out loud rather than inherited from the entry multiple.
What does the podcast cover that the memorandum does not?
How to read the pack under time pressure, the order to build in, and the failure modes that sink otherwise competent answers — decomposing at the wrong grain, treating a mix tailwind as independent of the volume decline it came from, quoting a single flow-through rate, and modeling an asset-based revolver as though it were a term loan with a covenant.
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 volume times price times cost-per-unit build, maintenance versus growth capex split, asset-based revolver with a borrowing base. 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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