I have a 2nd round interview coming up with a secondary PE fund. They do mostly LP secondaries of funds that are majority invested.
I'm still trying to understand exactly how they value these LP interests. In the round 1 interview, they told me that they do a bottoms up analysis on the underlying portfolio companies, and then assume a rate of return on the unfunded portion, which dilutes the value.
Can someone explain this in some more detail? What exactly goes into the bottoms up analysis? Does this mean modeling each company with an, assuming a target for the entire portfolio, and backing into a purchase price for each company, then summing them up? Do they use only equity for the purchase since the portfolio companies will already have debt?
If anyone can explain the mechanics in more detail or perhaps even have a sample model to share, that would be greatly appreciated. I'm also expecting a pen/paper/calculator case study, so if anyone has any insights on that, would be useful. I know how to do a normal paper LBO but not sure what to expect on this one. Thanks in advance!