Tier 1 – Foundational LBO Model
Return to Dashboard
MIDWEST HVAC SERVICES LBO
Module DT-LBO-01 | Foundational LBO Model (Tier 1)
Leveraged Buyout Basics • Sources & Uses • Debt Paydown & Exit Returns
CONFIDENTIALITY & ACCEPTABLE USE
This module contains proprietary case materials prepared exclusively for D&T Private Equity Training participants. By accessing this content, you agree to the following obligations:
- Non-Disclosure: All case data, financial models, and memoranda are confidential and may not be shared, forwarded, or reproduced outside this program.
- Academic Integrity: Submissions must reflect your own independent analysis. Collaboration is not permitted unless explicitly stated in assignment instructions.
- Proper Disposal: Upon completion of this module, delete all downloaded materials from personal devices within 30 days.
- Reporting: Any suspected breach of these terms must be reported immediately to the training administrator.
Questions: membership@dtexecusearch.com
Candidate Instructions
Review the Case Overview
Read the Midwest HVAC Services case summary, investment thesis, and historical financials.
Build Sources & Uses
Construct the Sources & Uses schedule using the purchase price, fees, senior debt, and sponsor equity.
Forecast Revenue & EBITDA
Apply 5% annual revenue growth and a 20% EBITDA margin to build the operating forecast.
Build Free Cash Flow & Debt Schedule
Calculate FCF using depreciation, CapEx, taxes, and working capital; use 100% of FCF for annual debt paydown.
Calculate Exit Returns
Apply an 8.5x exit multiple to Year 5 EBITDA, compute equity value, MOIC, and IRR, and decide if the deal meets target returns.
Key Assumptions Quick Reference
Learning Objectives
- Understand the structure of a leveraged buyout.
- Build a simple Sources & Uses schedule.
- Calculate equity contribution.
- Forecast Free Cash Flow.
- Model annual debt paydown.
- Calculate exit value.
- Calculate MOIC.
- Calculate IRR.
- Determine whether the investment meets target returns.
Midwest HVAC Services
CIM Summary
| Metric | 2022A | 2023A | 2024A |
|---|---|---|---|
| Revenue ($M) | $43.5 | $46.8 | $50.0 |
| EBITDA ($M) | $8.3 | $9.4 | $10.0 |
| EBITDA Margin | 19.1% | 20.1% | 20.0% |
| CapEx ($M) | $1.3 | $1.4 | $1.5 |
Recurring Service Revenue
Preventive maintenance agreements and recurring service relationships generate predictable revenue and frequent customer touchpoints.
Attractive Profitability
A 20% EBITDA margin reflects strong customer relationships, disciplined pricing, efficient dispatching, and balanced service/project revenue.
Fragmented Market
The HVAC services market is highly fragmented, creating opportunities for tuck-in acquisitions offering technicians, maintenance agreements, and geographic density.
Midwest HVAC Services operates as a scaled regional platform with ~1,800 active customers, diversified end markets, essential building-service demand, and multiple value-creation levers including pricing optimization, technician utilization, cross-selling, and selective acquisitions. The company’s stable recurring revenue, strong margins, and moderate capital requirements support a straightforward introductory LBO modeling exercise.
Midwest HVAC Services
Full Confidential Information Memorandum (Educational Case)
1. Confidentiality Notice
This fictional case was developed exclusively for educational use within the PE Edge LBO Modeling Series. All company names, financials, customer data, and operating details are illustrative. This material is proprietary and may not be copied, reproduced, or distributed outside the authorized learning platform.
2. Executive Summary
Midwest HVAC Services is a commercial HVAC, refrigeration, and building-controls provider headquartered in Indianapolis, Indiana. Founded in 1998, the company serves commercial, healthcare, education, municipal, retail, multifamily, and light-industrial customers across central Indiana and selected Midwest markets.
The company generates $50.0 million in revenue and $10.0 million in EBITDA (20% margin) through preventive maintenance agreements, emergency repair services, equipment replacement, retrofit projects, new-system installation, building-controls services, and indoor-air-quality solutions.
The sponsor’s investment thesis centers on recurring service demand, strong margins, moderate capital requirements, and multiple value-creation levers including pricing discipline, technician productivity, cross-selling, and selective tuck-in acquisitions.
3. Executive Snapshot
| Revenue | $50.0M |
| EBITDA | $10.0M |
| EBITDA Margin | 20.0% |
| Employees | ~230 |
| Active Customers | ~1,800 |
| Founded | 1998 |
| Entry Multiple | 8.0x EBITDA |
| Enterprise Value | $80.0M |
| Sponsor Equity | $37.0M |
| Debt Raised | $45.0M |
| Exit Multiple | 8.5x EBITDA |
4. Investment Highlights
- Recurring service revenue through maintenance agreements
- Attractive 20% EBITDA margin
- Diversified customer base (~1,800 customers)
- Essential building services with stable demand
- Highly fragmented market with tuck-in acquisition potential
- Multiple value-creation levers (pricing, utilization, cross-selling)
5. Company Overview
Midwest HVAC operates as a scaled regional platform serving commercial and institutional facilities across Indiana and neighboring Midwest markets. The company combines local responsiveness with professional dispatching, project management, and building-controls capabilities.
6. Products & Services
- Preventive maintenance
- Emergency repair
- Equipment replacement
- Retrofit & modernization
- New installation
- Building controls
- Indoor air quality
7. Illustrative Revenue Mix
| Category | % Mix | Revenue |
|---|---|---|
| Maintenance & Service | 40% | $20.0M |
| Replacement & Retrofit | 30% | $15.0M |
| New Installation | 20% | $10.0M |
| Controls & Other | 10% | $5.0M |
8. Industry Overview
The commercial HVAC services industry supports installation, maintenance, repair, replacement, and modernization of mechanical systems. Demand is driven by aging infrastructure, preventive maintenance requirements, emergency repairs, indoor-air-quality priorities, energy-efficiency investments, and building automation.
9. Customer Overview
Midwest HVAC serves ~1,800 active customers across commercial office, retail, healthcare, manufacturing, education, municipal, government, multifamily, and industrial facilities. No customer exceeds 5% of revenue, and the top ten customers represent ~24% of revenue.
10. Workforce & Organization
The company employs approximately 230 people across service technicians, installation teams, sales, dispatch, customer support, management, and administration. Workforce depth supports regional coverage and technician responsiveness.
11. Value-Creation Opportunities
- Maintenance contract penetration
- Cross-selling additional services
- Pricing optimization
- Technician utilization improvements
- Procurement and fleet efficiency
- Branch expansion
- Tuck-in acquisitions
- Improved financial reporting
12. Key Investment Risks
- Skilled labor availability and technician recruiting
- Project cyclicality tied to commercial construction
- Pricing pressure from local competitors
- Emergency-service demand variability
- Fleet and equipment maintenance costs
This CIM provides the background necessary for students to complete the Tier 1 LBO model, including revenue drivers, margin profile, customer diversification, industry dynamics, and value-creation opportunities. All financial modeling outputs are calculated within the student workbook.
DT-LBO-01 | Midwest HVAC Services | PE Edge LBO Modeling Series
📥 Module Resources — Download Your Files
Step 1: Download the student workbook and case materials using the buttons below.
Step 2: Build the Midwest HVAC LBO model across all tabs (01–09).
Step 3: Submit your completed workbook and written recommendation via the Assignment Dropbox.
Step 4: The Answer Key unlocks automatically upon successful submission of your completed model.
📊 Midwest HVAC LBO Workbook — Student Version
STUDENT BUILD FILEDownload this workbook and complete all blue-shaded input cells. All outputs must be formula-driven.
Tabs: 01 Read Me · 02 Case Overview · 03 Historical Financials · 04 Assumptions · 05 Sources & Uses · 06 Operating Model · 07 Debt Schedule · 08 Returns Analysis · 09 Sensitivity Table
⬇ Download Student Workbook (.xlsx)File: Midwest_HVAC_LBO_Student_DT-LBO-01.xlsx
📄 Case Materials — PDFs
SUPPORTING FILESDownload the historical financial statements and assumptions sheet.
- Historical Financial Statements (PDF)
- Assumptions Sheet (PDF)
Bundle: Midwest_HVAC_Tier1_Case_Pack.zip
Assignment Submission
Upload the following required materials for the Tier 1 Midwest HVAC LBO module:
-
✓Completed LBO Model (.xlsx)
-
✓Sensitivity Analysis (.xlsx)
-
✓Investment Recommendation (.pdf)
-
+Supporting Files (optional)
⏰ Submission Deadline
All required files must be submitted before attempting the Module Quiz. Late submissions are not accepted after the module close date.
