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 (CrowTech deals typically $25M–$250M EV)
• Net debt at close
• Equity check size (CrowTech typical check $15M–$100M)
• 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) — for multi-site healthcare services, decompose into same-store, de novo, and M&A
• EBITDA margin trajectory (flag reimbursement / rate pressure and clinical labor inflation where relevant)
• Capex as % of revenue (maintenance vs. de novo build-out)
• Working capital changes (days in A/R, payor aging for healthcare services)
• Debt paydown schedule

Exit:

• Hold period (years; CrowTech typical hold 4–6 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

For healthcare services deals, the bear case should explicitly stress: CMS rate cuts / reimbursement pressure, payor mix deterioration, clinical labor inflation, slower de novo ramp, and regulatory disruption (CON, corporate practice of medicine, Stark/AKS).

Step 5: Output

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