Traditional Search Fund Financial Models + Equity Step up

intermediary profile

August 16, 2024

by an intermediary in Knoxville, TN, USA

I am constructing Financial Models for a Traditional Search based on a traditional LBO Model as well as the Stanford primer exhibits, but I am struggling to understand where to include the Equity Step up in the model. Do I include it in my sources and uses?



Does anyone have examples of what they have seen as an effective way to include the step up in the model?

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Reply by an investor
from McGill University in San Diego, CA, USA
There are a couple of hyperlinks on page 8 that might be helpful: https://yale.app.box.com/s/0mo483h9lmfd04bl1om9dkc7oz4xm2s6
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Reply by a searcher
from Harvard University in Piedmont, CA, USA
This file shows how the equity step up works. This is a "back of envelope" LBO model that's very high level, but it does show how the step up rolls into the investor equity.

See cell C42 - Preferred Shares are calculated by taking the equity the investors put into the purchase + (search capital * 1.5).

https://docs.google.com/spreadsheets/d/1DZYP6TMoCib2lE8bs0YO4yajPeG4OknWAcaLPlIHzZo/edit?gid=###-###-#### #gid=###-###-####
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