Private Equity Investment Memo Template (LBO, IRR, MOIC)
PE deal memo: sources and uses, thesis, market, QoE bridge, value creation plan, valuation, LBO returns and sensitivity, terms, diligence, risks, exit, fund fit
Anleitung: Use it for the final approval of a buyout, growth or venture deal by the GP investment committee. Fill sources and uses and the returns tables from one model version first, then the thesis and value creation plan that explain them. The main pitfall is a base case equal to the management case, or returns that ignore fee leakage at entry.
Vorschau
Private Equity Investment Memo: [Project name]
Final investment memo for one private equity or venture transaction, written by the deal team for the general partner's investment committee: recommendation, transaction summary with sources and uses, thesis, market, company, management, quality of earnings, value creation plan, valuation, financing structure and returns (IRR and MOIC), key legal terms, diligence findings, risks, ESG, exit routes and fund fit. Based on common private markets practice, with regulatory references cited by number (EU AIFMD control provisions, merger control and foreign investment screening) and industry guidelines named only. Replace every
[bracketed]value and every row marked Example. This is a document format, not financial, investment, tax, legal or accounting advice; obtain the law, the fund documents and any guideline for the normative text.
Document control
| Field | Value |
|---|---|
| Document ID | [PEM-YYYY-NNN] |
| Project code name | [Project name] |
| Target | [Target legal name, jurisdiction] |
| Fund | [Fund name and vintage] |
| Deal stage | [Screening / First round / Final approval / Post-signing update] |
| Deal lead | [@deal-partner] |
| Model version relied on | [Model file name, version, date] |
| Version | [0.1] |
| Status | [Draft / Submitted / Approved / Approved with conditions / Rejected / Withdrawn] |
| Owner | [@deal-team] |
| Approvers/reviewers | [@ic-chair], [@cfo-or-coo], [@chief-compliance-officer] |
| Last updated | YYYY-MM-DD |
| Classification | [Strictly confidential: subject to NDA dated YYYY-MM-DD] |
Approvals
| Role | Name | Decision | Date |
|---|---|---|---|
| Investment committee chair | [@name] | [Approve / Approve with conditions / Reject] | YYYY-MM-DD |
| Managing partner | [@name] | [Decision] | YYYY-MM-DD |
| Chief compliance officer | [@name] | [Conflicts cleared / Not cleared] | YYYY-MM-DD |
| Fund CFO | [@name] | [Fund limits and liquidity confirmed] | YYYY-MM-DD |
Revision history
| Version | Date | Author | Change summary |
|---|---|---|---|
| 0.1 | YYYY-MM-DD | [@name] | Screening memo |
| 0.5 | YYYY-MM-DD | [@name] | Example: First-round bid at 10.0x LTM EBITDA |
| 1.0 | YYYY-MM-DD | [@name] | Example: Final approval memo, model v7, after confirmatory diligence; price reduced to 9.5x for the open tax audit and change-of-control consents, so the base case meets the 20% target |
Contents
- Recommendation and approval requested
- Transaction summary
- Investment thesis
- Market and competitive position
- Company overview and business model
- Management and governance
- Historical performance and quality of earnings
- Business plan and value creation plan
- Valuation and entry price
- Financing structure and returns analysis
- Legal structure and key terms
- Due diligence findings
- Risks and mitigants
- ESG and sustainability
- Exit strategy
- Fund fit, conflicts and approvals
- Glossary and references
- Standard and licence note
1. Recommendation and approval requested
State the recommendation, the maximum price the team asks authority for, the equity commitment from the fund and the conditions that must be satisfied before signing.
| Field | Value |
|---|---|
| Recommendation | [Approve / Approve with conditions / Decline] |
| Headline price (enterprise value) | [Amount] ([x.x]x LTM EBITDA) |
| Walk-away price | [Amount] |
| Fund equity commitment | [Amount] ([x.x]% of fund commitments) |
| Co-investment offered | [Amount, to whom] |
| Target signing and closing | YYYY-MM-DD / YYYY-MM-DD |
| Conditions to signing | [Conditions] |
Example: Approve a binding offer for 100% of Heron Fleet Systems at an enterprise value of EUR 380m (9.5x LTM EBITDA of EUR 40m), with a walk-away at EUR 383m (9.6x), the highest price at which the sponsor base case still meets the fund's 20% target gross IRR. Fund III equity of EUR 162m (10.8% of EUR 1,500m commitments), alongside EUR 30m of co-investment from limited partners that opted in and management rollover of EUR 20m. The first-round bid of 10.0x (EUR 400m) is not renewed: at that price the base case returns 18.2% gross, below the hurdle, and confirmatory diligence found the open tax audit and the change-of-control clauses (section 12). Conditions: signed unitranche commitment letter and a clean confirmatory tax diligence report.
2. Transaction summary
Describe the seller and process (bilateral, limited auction, broad auction), the perimeter acquired, the pricing mechanism and the timetable.
| Item | Detail |
|---|---|
| Seller (Example) | Founder (60%) and a minority growth investor (40%) |
| Process (Example) | Limited auction, second round, four bidders |
| Perimeter (Example) | 100% of share capital, including the UK and Polish subsidiaries |
| Pricing mechanism (Example) | Locked box at 2026-06-30 with permitted leakage schedule |
| Exclusivity (Example) | Four weeks from bid acceptance |
Explain how the price was reached and what the team knows about competing bids, without speculation. In a limited auction the committee needs three facts: the price that is likely to win, the price at which the deal still meets the fund's return target, and the walk-away. When the first two do not overlap, say so plainly and either ask for an explicit exception to the hurdle with reasons, or lower the bid and accept the risk of losing the asset. The example does the second.
2.1 Sources and uses
| Uses | EUR m | Sources | EUR m | x LTM EBITDA |
|---|---|---|---|---|
| Enterprise value (cash-free, debt-free) (Example) | 380.0 | Unitranche term loan (Example) | 180.0 | 4.5x |
| Transaction fees and expenses (Example) | 12.0 | Fund III equity (Example) | 162.0 | 4.1x |
| Co-investment, LPs that opted in (Example) | 30.0 | 0.8x | ||
| Management rollover (Example) | 20.0 | 0.5x | ||
| Total uses | 392.0 | Total sources | 392.0 | 9.8x |
Example check: 180 + 162 + 30 + 20 = 392 = 380 + 12. Equity of EUR 212m is 54.1% of total sources. A revolving credit facility of [EUR amount], undrawn at closing, supports working capital.
3. Investment thesis
| ID | Thesis point | Evidence | Value creation lever | Link to returns bridge |
|---|---|---|---|---|
| PET-001 (Example) | Mission-critical software with 96% gross revenue retention | Cohort analysis in QoE | Organic growth | EBITDA growth |
| PET-002 (Example) | Price below peers by about 15% for comparable functionality | Customer interviews, price benchmarking | Pricing programme | EBITDA growth |
| PET-003 (Example) | Fragmented market with ten identified bolt-on targets | Market study | Buy-and-build | EBITDA growth (not in base case) |
| PET-004 (Example) | Strong cash conversion supports deleveraging | Cash conversion above 80% for three years | Debt paydown | Deleveraging |
| [PET-NNN] | [Point] | [Evidence] | [Lever] | [Bridge component] |
Explain why the fund has an edge (sector experience, relationship with management, operating partners) and why the opportunity is available at this price.
4. Market and competitive position
Describe market definition, size and growth, segmentation, customer buying behaviour, competitive landscape and structural trends. Cite the commercial due diligence provider and the date of its report.
| Metric | Value | Source | Date |
|---|---|---|---|
| Serviceable market (Example) | EUR 1.8bn | Commercial DD bottom-up model | YYYY-MM-DD |
| Market growth (5-year CAGR) (Example) | 8% | Commercial DD | YYYY-MM-DD |
| Company share (Example) | 8.9% (EUR 160m / EUR 1.8bn) | Calculation | YYYY-MM-DD |
| Top three competitors' combined share (Example) | 31% | Commercial DD | YYYY-MM-DD |
| Competitor | Positioning | Relative strengths | Relative weaknesses |
|---|---|---|---|
| Competitor A (Example) | Global platform | Breadth, brand | Price, slow mid-market service |
| Competitor B (Example) | Low-cost local player | Price | Limited product depth |
Test the market numbers against the company's own data: if the company grows faster than the market, the plan must explain which competitor loses share and why. In the example, 8% market growth against a 6.7% base-case revenue CAGR means the sponsor case assumes a slight loss of share, which is deliberately cautious because price increases (PET-002) may raise churn among the smallest customers. | [Competitor] | [Positioning] | [Strengths] | [Weaknesses] |
5. Company overview and business model
Cover history, products and services, customers and concentration,
revenue model (recurring, re-occurring, project), pricing, go-to-market,
operations, technology and people. For software and subscription
businesses, show annual recurring revenue, retention and customer
acquisition metrics; see Unit Economics Analysis
(finance/unit-economics-analysis).
| Revenue stream | LTM revenue (EUR m) | Share | Recurring? | Gross margin |
|---|---|---|---|---|
| Subscriptions (Example) | 128.0 | 80% | Yes | 82% |
| Hardware and installation (Example) | 20.0 | 12.5% | No | 25% |
| Professional services (Example) | 12.0 | 7.5% | No | 35% |
| Total | 160.0 | 100% |
Largest customer (Example): 4.5% of revenue; top ten: 21%.
6. Management and governance
| Person | Role | Tenure | Assessment | Plan |
|---|---|---|---|---|
| [@ceo] (Example) | Chief executive, founder | 14 years | Strong product and customer leadership | Stays; rolls EUR 17m of about EUR 228m sale proceeds (7.5%) into TopCo; the CTO and two senior managers roll the other EUR 3m |
| [@cfo] (Example) | Chief financial officer | 2 years | Solid controller, no sponsor experience | Hire a sponsor-experienced CFO within 6 months |
| [@cto] (Example) | Chief technology officer | 6 years | Credible platform roadmap | Stays |
| [Name] | [Role] | [Years] | [Assessment] | [Plan] |
Summarise management references and background checks, the management incentive plan (pool size as a share of equity, vesting, leaver terms), board composition after closing, reserved matters and the reporting pack the fund will require.
Example: the management incentive plan is a sweet equity pool of 10% of ordinary equity (section 11), with 60% allocated at closing and 40% held back for the new CFO and later hires. The founder's rollover is modest against the proceeds, so retention rests on the sweet equity and on a two-year non-compete; the committee should weigh whether a larger rollover is a condition worth negotiating.
7. Historical performance and quality of earnings
Present three years of history plus LTM: revenue, gross profit, EBITDA, capital expenditure, working capital and cash conversion. Then show the quality of earnings bridge.
| EUR m | FY2023 | FY2024 | FY2025 | LTM |
|---|---|---|---|---|
| Revenue (Example) | 124.0 | 138.0 | 152.0 | 160.0 |
| Adjusted EBITDA (Example) | 29.0 | 33.5 | 38.0 | 40.0 |
| EBITDA margin (Example) | 23.4% | 24.3% | 25.0% | 25.0% |
| Capital expenditure incl. capitalised development (Example) | 6.5 | 7.0 | 7.5 | 7.6 |
| Cash conversion (EBITDA minus capex) / EBITDA (Example) | 77.6% | 79.1% | 80.3% | 81.0% |
| QoE bridge (LTM) | EUR m | Source | Accepted? |
|---|---|---|---|
| Reported EBITDA (Example) | 37.2 | Management accounts | Yes |
| Founder costs above market salary (Example) | 0.9 | Seller | Yes |
| One-off litigation settlement (Example) | 1.4 | Seller | Yes |
| Run-rate savings from office closure (Example) | 0.5 | Seller | Yes (lease ended) |
| Capitalised development reversed (Example) | 0.0 | QoE provider | Reviewed, no change |
| Adjusted EBITDA | 40.0 |
Example check: 37.2 + 0.9 + 1.4 + 0.5 = 40.0. Note any adjustments proposed by the seller and rejected by the team, with their value.
Review points for the QoE bridge: every add-back has cash evidence or a signed document; run-rate savings are accepted only when the cost has already stopped (the office lease in the example has ended); recurring "one-off" items (litigation, restructuring, recruitment fees that appear every year) are challenged; and capitalised development is reviewed so that EBITDA is not flattered by moving costs to the balance sheet. The entry multiple applies to adjusted EBITDA, so each EUR 1m of accepted add-back adds EUR 9.5m to the price paid.
8. Business plan and value creation plan
8.1 Cases
| EUR m | LTM | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|---|
| Revenue, sponsor base case (Example) | 160.0 | 171.0 | 182.0 | 195.0 | 208.0 | 221.0 |
| EBITDA, sponsor base case (Example) | 40.0 | 43.0 | 47.0 | 52.0 | 57.0 | 62.0 |
| EBITDA margin (Example) | 25.0% | 25.1% | 25.8% | 26.7% | 27.4% | 28.1% |
| EBITDA, management case (Example) | 40.0 | 45.0 | 51.0 | 58.0 | 65.0 | 72.0 |
| EBITDA, downside case (Example) | 40.0 | 41.0 | 43.0 | 45.5 | 48.0 | 50.0 |
Example check: base-case EBITDA CAGR is (62 / 40) to the power 1/5 minus 1 = 9.2%; revenue CAGR is (221 / 160) to the power 1/5 minus 1 = 6.7%.
8.2 Value creation initiatives and 100-day plan
| ID | Initiative | Owner | EBITDA effect by year 5 (EUR m) | One-off cost (EUR m) | First milestone (within 100 days) |
|---|---|---|---|---|---|
| VCP-001 (Example) | Pricing and packaging programme | [@cco] | 6.0 | 1.0 | New price list approved |
| VCP-002 (Example) | Shift hardware to partner model | [@coo] | 2.5 | 0.8 | Partner selected |
| VCP-003 (Example) | Sponsor-grade finance function | [@cfo] | 0.0 (enabler) | 1.2 | CFO hired, 13-week cash forecast live |
| VCP-004 (Example) | Bolt-on acquisition pipeline | [@deal-partner] | Upside only | n/a | Two targets approached |
| [VCP-NNN] | [Initiative] | [@owner] | [Value] | [Cost] | [Milestone] |
Detail the first 100 days in the M&A Integration 100-Day Plan
(finance/m-and-a-integration-100-day-plan).
Keep the sponsor base case below the management case and explain the gap line by line. In the example, the base case reaches EUR 62m of EBITDA against EUR 72m in the management case: the difference is a slower pricing programme, a later hardware partner model and no bolt-ons. The identified initiatives (VCP-001 and VCP-002) add EUR 8.5m by year 5, and the rest of the EUR 22m EBITDA growth comes from organic volume at the current margin, which the commercial diligence supports.
9. Valuation and entry price
| Method | Basis | Implied EV (EUR m) | Implied multiple of LTM EBITDA |
|---|---|---|---|
| Trading comparables (Example) | Peer median 11.5x LTM EBITDA, less 15% private company and size discount | 391 | 9.8x |
| Precedent transactions (Example) | Median 10.8x LTM EBITDA, eight deals 2022 to 2026 | 432 | 10.8x |
| Discounted cash flow (Example) | WACC 9.0%, terminal growth 2.5% | 380 to 440 | 9.5x to 11.0x |
| LBO affordability (Example) | 20% target gross IRR at 10.0x exit, same debt and fees | 383 | 9.6x |
| Proposed price | 380 | 9.5x |
Example check: 11.5 x 0.85 = 9.775x, x 40 = 391; 10.8 x 40 = 432. LBO
affordability: the base-case exit equity of EUR 535m (section 10.3)
discounted at 20% for five years is 535 / 1.2^5 = EUR 215.0m of entry
equity; plus EUR 180m of debt less EUR 12m of fees gives EV EUR 383.0m.
The proposed price sits below every method; record why the seller
accepts it (here, the price chip is tied to diligence findings).
Methods and inputs are documented in the Valuation Report
(finance/valuation-report) and the Comparable Companies Analysis
(finance/comparable-companies-analysis). Where the fund reports fair
value to its investors, state the valuation policy and guidelines that
will apply after closing (for example the IPEV Valuation Guidelines,
2025 edition, effective for reporting periods beginning on or after
2026-04-01, named only).
10. Financing structure and returns analysis
10.1 Debt terms
| Facility | Amount (EUR m) | Leverage | Pricing | Tenor | Amortisation | Covenants |
|---|---|---|---|---|---|---|
| Unitranche term loan (Example) | 180.0 | 4.5x | 3-month EURIBOR + 5.50%, floor 0%; all-in 7.75% assumed | 7 years | Bullet with cash sweep | One leverage maintenance covenant, 35% headroom |
| Revolving credit facility (Example) | [Amount] | n/a | [Margin] | 6.5 years | n/a | Springing at 40% utilisation |
Example check: year 1 interest of EUR 180m x 7.75% = EUR 13.95m; EBITDA interest cover = 40.0 / 13.95 = 2.9x on LTM EBITDA.
10.2 Returns formulas
Multiple of invested capital and internal rate of return for a single entry and exit:
where is equity value, interim distributions and the holding period in years. With interim cash flows, IRR is the rate that sets the net present value of all equity cash flows to zero:
10.3 Base case returns
| Item | EUR m |
|---|---|
| Exit EBITDA, year 5 (Example) | 62.0 |
| Exit multiple (Example) | 10.0x (equal to entry) |
| Exit enterprise value (Example) | 620.0 |
| Net debt at exit after EUR 95m cumulative repayment (Example) | 85.0 |
| Exit equity value (Example) | 535.0 |
| Entry equity (Fund III, co-investors and management) (Example) | 212.0 |
| Gross MOIC (Example) | 2.52x |
| Gross IRR (Example) | 20.3% |
Example check: 620 minus 85 = 535; 535 / 212 = 2.524x; 2.524 to the power 1/5 = 1.203, so IRR is 20.3%, above the 20% target. No interim distributions and no exit costs are assumed; show them when the model includes them. The exit multiple of 10.0x is half a turn above entry: it stays below the precedent median of 10.8x and rests on scale, since EBITDA above EUR 60m opens the larger secondary buyout market (section 15). With exit equal to entry (9.5x) the base case returns 2.38x and 18.9%, so the hurdle depends on that half turn; say so to the committee.
10.4 Value creation bridge
| Component | EUR m | Calculation |
|---|---|---|
| EBITDA growth (Example) | 209.0 | (62 minus 40) x 9.5x entry multiple |
| Multiple expansion (Example) | 31.0 | (10.0x minus 9.5x) x 62 |
| Deleveraging (Example) | 95.0 | 180 minus 85 |
| Fees and expenses at entry (Example) | minus 12.0 | Leakage from equity paid in |
| Equity value gain | 323.0 | 535 minus 212 |
10.5 Sensitivity: gross IRR and MOIC
Net debt at exit held at EUR 85m for simplicity; the model recalculates it per case.
| Exit multiple \ Year 5 EBITDA | EUR 56m | EUR 62m | EUR 68m |
|---|---|---|---|
| 9.0x (Example) | 1.98x / 14.6% | 2.23x / 17.4% | 2.49x / 20.0% |
| 10.0x (Example) | 2.24x / 17.5% | 2.52x / 20.3% | 2.81x / 22.9% |
| 11.0x (Example) | 2.50x / 20.2% | 2.82x / 23.0% | 3.13x / 25.6% |
Also report the downside case (EUR 50m EBITDA at 9.0x gives exit equity of EUR 365m if net debt stays at EUR 85m, a 1.72x MOIC and 11.5% IRR; Example), the minimum exit multiple that returns the equity (1.0x: (212 + 85) / 62 = 4.8x on base EBITDA, 5.9x on downside EBITDA; Example), and net returns to limited partners after fees and carried interest if the committee requires them.
11. Legal structure and key terms
| Term | Position | Comment |
|---|---|---|
| Price mechanism (Example) | Locked box, permitted leakage listed | Interest on equity price from locked-box date to closing not agreed |
| Warranty and indemnity insurance (Example) | Buy-side policy, limit 10% of EV | Known issues excluded |
| Specific indemnity (Example) | Open tax audit in Germany | Escrow of EUR 3m |
| Conditions precedent (Example) | Merger control and foreign investment screening (see 11.1) | Long-stop date 6 months |
| Management equity (Example) | Sweet equity pool of 10% of ordinary equity, good and bad leaver terms | Vesting over 5 years |
| Governance (Example) | Fund appoints three of five directors; reserved matters list | Information rights monthly |
11.1 Regulatory approvals and fund-law obligations (as of 2026-10; check local law)
| Area | Reference | Relevance |
|---|---|---|
| EU merger control | Council Regulation (EC) No 139/2004 and national merger control regimes | Check turnover thresholds for each jurisdiction |
| US merger control | Hart-Scott-Rodino Act premerger notification | Thresholds are adjusted annually; check the current FTC figures |
| EU foreign investment screening | Regulation (EU) 2019/452, to be replaced by Regulation (EU) 2026/1386 (OJ 2026-06-26, in force 2026-07-16, applies from 2028-01-17; check the number on EUR-Lex), and national regimes (for example the German foreign trade rules) | Software and data assets may fall in screened sectors |
| UK national security | National Security and Investment Act 2021 | Check mandatory notification sectors for the UK subsidiary |
| EU AIFMs acquiring control (and non-EU AIFMs marketing in the EU under Art. 42) | AIFMD (Directive 2011/61/EU) Art. 26 to 30, as amended by Directive (EU) 2024/927: notification of control, disclosure, and Art. 30 limits on distributions and capital reductions ("asset stripping") for 24 months after control | Plan dividend recapitalisations accordingly |
| US private fund advisers (if the manager or a co-investor is SEC-registered) | SEC Private Fund Adviser Rules (2023) vacated by the Fifth Circuit on 2024-06-05; Advisers Act fiduciary duty and Form ADV disclosure still apply | Fee and expense allocation per the limited partnership agreement |
12. Due diligence findings
| ID | Workstream | Provider and report date | Key finding | Disposition |
|---|---|---|---|---|
| DDF-001 (Example) | Commercial | [Provider], YYYY-MM-DD | Market growth 8%; churn concentrated in smallest customers | Base case uses 6.7% revenue CAGR |
| DDF-002 (Example) | Financial (QoE) | [Provider], YYYY-MM-DD | Adjusted EBITDA EUR 40.0m confirmed; net working capital seasonal peak in Q4 | Normalised working capital target in locked box |
| DDF-003 (Example) | Tax | [Provider], YYYY-MM-DD | Open German tax audit for FY2021 to FY2023 | Specific indemnity and EUR 3m escrow |
| DDF-004 (Example) | Legal | [Provider], YYYY-MM-DD | Change-of-control clauses in two of the top ten contracts | Customer consents as signing deliverable |
| DDF-005 (Example) | Technology and cyber | [Provider], YYYY-MM-DD | Platform scalable; penetration test found two high findings | 100-day remediation |
| DDF-006 (Example) | ESG | [Provider], YYYY-MM-DD | No material issues; no emissions baseline | 100-day baseline project |
| [DDF-NNN] | [Workstream] | [Provider, date] | [Finding] | [Price / Structure / Condition / 100-day / Accepted] |
Give every finding a disposition and show the price effect where there is one. In the example the tax audit (DDF-003) and the change-of-control clauses (DDF-004) were the reasons for the reduction from 10.0x to 9.5x; the escrow and the consent condition then protect against the residual risk. A finding that is accepted without a price, structure or condition response should say why it does not matter.
13. Risks and mitigants
| ID | Risk | Probability | Effect on base IRR | Mitigant | Owner |
|---|---|---|---|---|---|
| PER-001 (Example) | Pricing programme meets churn | Medium | About minus 3 points (EBITDA EUR 56m case) | Phase by segment, track churn monthly | [@cco] |
| PER-002 (Example) | Exit multiple compression | Medium | Minus 2.9 points at 9.0x | Entry at peer discount, deleveraging | [@deal-partner] |
| PER-003 (Example) | Key person dependency on founder | Low | Hard to quantify | Rollover, incentive plan, hire successor bench | [@chair] |
| PER-004 (Example) | Interest rate rise | Medium | Minus 0.5 points per 100 bp unhedged | Hedge at least 50% of term loan for 3 years | [@cfo] |
| [PER-NNN] | [Risk] | [Low / Medium / High] | [Effect] | [Mitigant] | [@owner] |
14. ESG and sustainability
Cover the screening against the fund's exclusion list, material
sustainability topics for the sector (for example data privacy and
security, energy use of hosting, labour practices), governance
improvements, the data the fund needs to report to its investors and,
for EU funds, how the investment fits the fund's sustainability
disclosures under the SFDR as currently in force. Link the
Responsible Investment Policy (finance/responsible-investment-policy).
| Topic | Finding | Ownership action | KPI | Deadline |
|---|---|---|---|---|
| Data privacy (Example) | Telematics data includes driver location | Data protection review and retention limits | Zero reportable breaches | Year 1 |
| Climate (Example) | No emissions baseline | Measure scope 1 and 2, estimate scope 3 | Baseline published | Day 100 |
| [Topic] | [Finding] | [Action] | [KPI] | [Date] |
15. Exit strategy
| Route | Likely buyers | Plausibility | What must be true |
|---|---|---|---|
| Sale to strategic (Example) | Global fleet and telematics platforms | High | Above 30% EBITDA margin, cloud migration complete |
| Secondary buyout (Example) | Larger mid-market funds | High | EBITDA above EUR 60m, clean reporting |
| IPO (Example) | Public markets | Low | Scale above EUR 300m revenue |
| Continuation vehicle (Example) | Fund III LPs and new secondary investors | Medium | Strong performance with further runway |
Test the exit multiple against the buyers named. In the example a secondary buyer at 10.0x on EUR 62m of EBITDA pays EUR 620m, which a mid-market fund can finance at today's leverage; a strategic buyer could pay more but is not assumed. State what happens to returns if the exit slips by one year on the same EBITDA trajectory: the IRR falls whenever the extra year adds less than the current IRR (20.3% in the example) to exit equity value.
16. Fund fit, conflicts and approvals
| Check | Limit or rule | Position | Result |
|---|---|---|---|
| Single investment concentration (Example) | 15% of commitments (LPA), measured on initial cost plus follow-on reserve | 12.4% ((EUR 162m + EUR 24.3m) / EUR 1,500m); initial cost alone 10.8% | Pass |
| Geography (Example) | Europe at least 70% | Germany | Pass |
| Follow-on reserve (Example) | Fund policy 15% of initial equity | EUR 24.3m reserved | Pass |
| Co-investment allocation (Example) | Co-investment policy, pro rata to LPs that opted in | EUR 30m invested alongside at closing, same terms, no fee or carry differences beyond the policy (section 2.1) | Pass |
| Conflicts (Example) | No other Morrow Fell fund holds a competitor | Confirmed | Pass |
| LP advisory committee consent (Example) | Required only for affiliate transactions | Not required | n/a |
Example check: 15% x 162 = 24.3; 162 + 24.3 = 186.3, which is 12.4% of 1,500. Record the committee vote,
recusals and conditions as in the Investment Committee Memo
(finance/investment-committee-memo) section 12, and the post-closing
monitoring cadence (monthly board pack, quarterly valuation, annual
review against the value creation plan).
17. Glossary and references
17.1 Glossary
| Term | Meaning |
|---|---|
| LBO | Leveraged buyout: acquisition financed with a large share of debt |
| EV | Enterprise value: value of operations before deducting net debt |
| LTM | Last twelve months |
| QoE | Quality of earnings review of reported profit and adjustments |
| MOIC | Multiple of invested capital: total value returned divided by equity invested |
| IRR | Internal rate of return: discount rate at which the net present value of the cash flows is zero |
| Locked box | Price fixed by reference to a historical balance sheet, with no post-closing adjustment except leakage |
| Unitranche | Single senior loan combining senior and junior risk at one blended price |
| Sweet equity | Ordinary equity held by management at a lower entry cost to create leveraged upside |
| W&I insurance | Warranty and indemnity insurance covering breaches of seller warranties |
| LPA | Limited partnership agreement governing the fund |
17.2 References
| Reference | Version or date checked | Use |
|---|---|---|
| Directive 2011/61/EU (AIFMD), Art. 26 to 30, eur-lex.europa.eu | Consolidated text, check current version | Control notifications and asset stripping |
| Council Regulation (EC) No 139/2004 (EU Merger Regulation), eur-lex.europa.eu | Check current version | Merger control |
| Regulation (EU) 2019/452 and Regulation (EU) 2026/1386 (OJ 2026-06-26, applies 2028-01-17) | Checked 2026-10-25 (secondary sources; confirm on EUR-Lex) | Foreign investment screening |
| US Hart-Scott-Rodino Antitrust Improvements Act, ftc.gov | Annual thresholds, check current | Premerger notification |
| National Security and Investment Act 2021, legislation.gov.uk | Check current version | UK notification |
| IPEV Valuation Guidelines, 2025 edition (named only) | Effective for periods beginning on or after 2026-04-01 | Post-closing fair value |
| ILPA Principles 3.0 (named only) | Check current version | LP governance expectations |
| [Model file] | [Version] | All numbers |
Standard and licence note
Based on common private markets practice and on public law cited by number: EU legislation on EUR-Lex (reuse authorised with acknowledgement), US statutes and UK legislation. Industry guidelines (IPEV Valuation Guidelines, ILPA Principles) are named only; none of their text, structure or templates is reproduced. Morrow Fell Partners, its Fund III and Heron Fleet Systems are fictional, and nothing here is investment advice. This template is original text written for this collection; check the current official versions of every cited law and guideline before use. Template licence: MIT.
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