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Return analysis for US-based private equity firm

Client

A US-based infrastructure fund.

Opportunity

The client was looking to sell one of its levered investments in the construction space and needed to understand the sale's implications. SG Analytics supported the Managing Partner assess the deal by creating a financial model, help evaluate the property, and analyze the returns to the investors at the time of exit.

Solution

SG Analytics adopted a sequential approach to support the client:
  1. Analyze the business model and research on the business segments, key drivers, competitive landscape, growth trends, regulatory framework, and industry outlook.
  2. Create a scenario-based projection model for 5 years using different KPIs such as the number of rooms, types of rooms, tariffs/room, occupancy rates, etc.
  3. Run a sensitivity analysis on different scenarios.
  4. Develop a what-if analysis to analyze the returns in case of a deal closure and investor exit after 10 years.
  5. Create a 3 tier return scenario after applying different hurdle rates for each tier along with a waterfall return schedule for each tier.
  6. Provide both levered and un-levered IRR to the investors.

Value Delivered

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1
SG Analytics' trend analysis helped the client evaluate the entry price of the property and project the optimal exit timing.
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2
Our team submitted a comprehensive report containing exit recommendations, expected IRR, and detailed investment recommendation and analysis, supported by a comprehensive market study.
 

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