returns-analysis

name	returns-analysis
description	Use when financial-services work requires returns Analysis.
version	0.1.0
author	Changhochien
license	MIT
platforms	["linux","macos","windows"]
metadata	{"hermes":{"tags":["financial-services","private-equity"],"related_skills":[]}}

Returns Analysis

description: Build quick IRR/MOIC sensitivity tables for PE deal evaluation. Models returns across entry multiple, leverage, exit multiple, growth, and hold period scenarios. Use when sizing up a deal, stress-testing assumptions, or preparing IC returns exhibits. Triggers on "returns analysis", "IRR sensitivity", "MOIC table", "what's the return at", "model the returns", or "back of the envelope".

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
• Net debt at close
• Equity check size
• 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)
• EBITDA margin trajectory
• Capex as % of revenue
• Working capital changes
• Debt paydown schedule

Exit:

• Hold period (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

Step 5: Output

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

Hermes Profile Notes

This skill was packaged from pi-financial-services source path plugins/vertical-plugins/private-equity/skills/returns-analysis for the Hermes financial-services profile. Use institutional data connectors first when available, cite sources, and stage outputs for qualified human review.

Common Pitfalls

1. Do not present drafts as investment, legal, tax, or accounting advice.
2. Do not use web search as the primary source when an institutional MCP/data connector is available.
3. Do not execute transactions, contact clients, post to a ledger, or approve onboarding. Stage outputs for review.

Verification Checklist

• Inputs, assumptions, dates, and currencies are explicit.
• Numbers tie across tables, models, decks, and memos.
• Sources are cited and institutional data is preferred where available.
• Output is labeled draft / for human review where appropriate.