Secondaries Modelling
Hello WSO
I have a modelling test soon for a secondaries firm. Does anyone know where I can get some info / more prep for LP modelling - thank you
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For secondaries modeling, particularly LP modeling, here are some resources and recommendations based on the most helpful WSO content:
WSO Elite Modeling Package: This includes courses like Excel Modeling, Financial Statement Modeling, and Valuation Modeling, which can provide a strong foundation for any modeling test. Check out the package here: WSO Elite Modeling Package.
Private Equity Master Package: This package focuses on LBO modeling and the PE deals process, which could be relevant for secondaries modeling. It’s a great way to understand the nuances of private equity transactions.
Live Public Training: The Modeling & Valuation Bootcamp (2-Day) covers Excel, M&A, 3-statement modeling, DCF, Comps, and LBOs. This could be a great way to sharpen your skills quickly.
Additional Reading:
Focus Areas: For LP modeling, ensure you’re comfortable with:
Case Studies: Review notable transactions like BC Partners’ continuation fund for Springer Nature or Hellman & Friedman’s transfer of portfolio companies to continuation vehicles. These examples can provide insights into real-world applications.
Good luck with your test!
Sources: please help Invited to Lateral On-Site Modeling Test. How To Prep for Op. Model/M&A/DCF?, Secondaries PE - Any insight on work and lifestyle?, Learning recs for secondaries, How do I prepare for Insight Partners FT recruiting process?, PJT Secondary Advisory Super Day (Modeling Test)
Bump
At the simplest level, you’ll be projecting an outcome for a fund. You’ll need to assume fees & carry for the original GP and then fees & carry for your secondaries firm to arrive at a net multiple and IRR.
You’ll want to make assumptions on the upside of the fund and liquidity timing (ex - when you expect the cash flows)
Modelling for LP leds? Usually never a model for these
Probably going to be a simple waterfall, there’s an example floating about on asimplemodel
Lol, no modeling for an LP led deal? thats not correct
My bad, assumed he was going for a PCA secondaries group
This only applies to the sell-side. You obviously cannot confidently underwrite to a return on the buy-side without at least some high level modeling on the assets and fund.
Gonna give you 2 perspectives on how the modelling works for a LP deal - (i) Actual modeling on the job (ii) what a case study model will look like
(i) Actual modeling
You need to essentially think about cash proceeds and contributions. In a LP purchase the proceeds are going to come from the exits of the remaining portcos in the fund. This is typically modeled in 2 ways. For the larger portcos, you'll build out a proper IS and CFS, apply an exit multiple and determine which year the exit will happen. You'll then net out the debt from the exits TEV and multiply that value with the funds ownership of the asset to determine how much money the fund will get at the exit (mini LBO model with not as much detail as you'd expect from a buyout LBO model). For the remaining smaller portcos, you'll assume a reasonable proceeds number based on where the asset is currently marked by the fund. You'll then aggregate all these cash flows and then net out management fees and carried interest (a simple model has a good video detailing how the carry waterfall works). There are also certain nuances for the management fees (invested capital vs committed capital). After you arrive at the net proceeds number, you back into a purchase price (the contribution) based on your return target. For e.g. if your net proceeds are $160mm
and your return target is 1.6x, your purchase price is $100mm. Pricing in LP deals is always quoted as a % of current NAV. Continuing the same example, if your fund NAV is $120mm, your pricing for the fund will be 83.3% of NAV.
(ii) Modelling from a case study POV
Most case studies will not expect you to model what I described above. They'll have very similar tests as buyout funds. They'll provide you a CIM and ask you to build a full fledge 3-statement model. Model will be judged on accuracy and quality of assumptions. Some may ask you to build a rudimentary carry waterfall (a simple model should suffice).
Let me know if you have any questions.
Source: currently work at a secondaries shop and interviewed at multiple.
I have a case study interview scheduled with a top secondaries shop. What kind of models should I be studying to prepare?
Would anyone be willing to share any case studies they have? I have infra case studies I could trade
Looking for an infra secondaries case study. Are you able to share?
Hi! just checking in if you got your hands on a sample case study?
Anyone have a GP led case?
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