anthropics/returns-analysis

Returns Analysis

Workflow

Step 1: Gather Deal Inputs

Ask for (or extract from prior analysis):

Entry:

• Entry EBITDA (LTM or NTM)
• Entry multiple (EV / EBITDA)
• Enterprise value
• Net debt at close
• Equity check size
• Transaction fees & expenses

Financing:

• Senior debt (x EBITDA, rate, amortization)
• Subordinated debt / mezzanine (if any)
• Total leverage at entry (x EBITDA)
• Equity contribution

Operating Assumptions:

• Revenue growth rate (annual)
• EBITDA margin trajectory
• Capex as % of revenue
• Working capital changes
• Debt paydown schedule

Exit:

• Hold period (years)
• Exit multiple (EV / EBITDA)
• Exit EBITDA (calculated from growth assumptions)

Step 2: Base Case Returns

Calculate:

| Metric | Value | |--------|-------| | Entry EV | | | Equity invested | | | Exit EBITDA | | | Exit EV | | | Net debt at exit | | | Exit equity value | | | MOIC | | | IRR | | | Cash-on-cash | |

Show the returns waterfall:

• EBITDA growth contribution
• Multiple expansion/contraction contribution
• Debt paydown contribution
• Fee/expense drag

Step 3: Sensitivity Tables

Build 2-way sensitivity matrices:

Entry Multiple vs. Exit Multiple | | Exit 6x | Exit 7x | Exit 8x | Exit 9x | Exit 10x | |---|---------|---------|---------|---------|----------| | Entry 7x | | | | | | | Entry 8x | | | | | | | Entry 9x | | | | | | | Entry 10x | | | | | |

EBITDA Growth vs. Exit Multiple (at fixed entry)

Leverage vs. Exit Multiple (at fixed entry and growth)

Hold Period vs. Exit Multiple

Show both IRR and MOIC in each cell (IRR / MOIC format).

Step 4: Scenario Analysis

Build 3 scenarios:

| | Bull | Base | Bear | |---|------|------|------| | Revenue CAGR | | | | | Exit EBITDA margin | | | | | Exit multiple | | | | | Exit EBITDA | | | | | MOIC | | | | | IRR | | | |

Step 5: Output

• Excel workbook with:
  • Assumptions tab
  • Returns calculation
  • Sensitivity tables (formatted with conditional coloring)
  • Scenario summary
• One-page returns summary suitable for IC deck

Key Formulas

• MOIC = Exit Equity Value / Equity Invested
• IRR = solve for r: Equity Invested × (1 + r)^n = Exit Equity Value (adjust for interim cash flows)
• Returns attribution:
  • Growth: (Exit EBITDA - Entry EBITDA) × Exit Multiple / Equity
  • Multiple: (Exit Multiple - Entry Multiple) × Entry EBITDA / Equity
  • Leverage: Debt paydown over hold period / Equity

Important Notes

• Always show returns both gross and net of fees/carry where applicable
• Management rollover and co-invest change the equity check — ask if relevant
• Dividend recaps or interim distributions affect IRR significantly — include if planned
• Don't forget transaction costs (typically 2-4% of EV) — they reduce Day 1 equity value
• Tax considerations (asset vs. stock deal, 338(h)(10) election) can materially affect after-tax returns