LBO model example: an $8.4 billion take-private

Permira and Warburg Pincus took Clearwater Analytics private on June 25, 2026, at $24.55 a share. The merger proxy prints management’s forecast to 2030 and the financing terms. This model runs the deal twice: on management’s plan, and on an outside-in case built only from what Clearwater had reported. The operating history comes from the three-statement model.

Three things decide the return. Organic growth matters most: every 2 points a year moves the IRR by about 3.5 points, and Clearwater’s core ARR grew 17.7% in 2025 while the acquired base grew 8.5%. Exit multiple comes next, because the sponsor paid 25x forward EBITDA and the model assumes the next buyer pays the same. Margin matters least of the three: 2 points move the IRR about 2 points, and the Enfusion and Beacon integration is where the expansion has to come from.

The purchase price

The $24.55 offer buys 311.1 million fully diluted shares for $7.64 billion; with existing debt net of cash, enterprise value is $8.38 billion, 25.0x outside-in 2026 EBITDA and 29.9x the last twelve months. $7.44 billion is paid at closing; $198 million of unvested awards is paid in cash as they vest.

The share and award counts are from the merger agreement’s capitalization representation at December 15, 2025 (proxy Annex A); the agreement sets how each class is paid, and when:

• Class A shares, 288.6 million, each converted into $24.55 in cash.
• OpCo units, 4.5 million, exchanged one for one into Class A just before closing; the paired Class B shares are canceled for nothing, so they are counted once.
• RSUs, 8.5 million, each converted into a $24.55 cash award. Vested RSUs and directors’ RSUs are paid at closing; unvested ones keep their vesting schedule and are paid in cash as they vest. About 5.1 million vested before closing and were paid as shares; 3.4 million are paid later.
• PSUs, 4.0 million, counted at the maximum performance level, which the merger agreement deems achieved (110% of target on the executives’ Form 4s). All are unvested, so all are paid as they vest.
• Options, 7.6 million at a $9.09 weighted average strike, cashed out at the $24.55 offer less the strike. That cash equals 4.8 million shares at the offer (7.6 million × ($24.55 − $9.09) / $24.55), the treasury stock method. Using the average strike assumes every option is in the money; any option struck above $24.55 is canceled for nothing. Options are paid at closing whether vested or not.
• Enfusion awards, 0.7 million, $16.7 million of awards promised before signing, which the merger agreement treats like RSUs; the model treats them as unvested.

The split between closing and later matters for the financing. By May 4, 2026, Class A and Class B shares had risen 5.3 million from December to 298.5 million, mostly as RSUs vested and were released as shares (Q1 2026 10-Q); those holders were paid at closing like any other shareholder. The awards still unvested at closing, $198 million, are not funded at close: the company pays them in cash over about three years, out of the stock-based compensation the model already treats as a cash cost. Equity granted after December 20, 2025, such as the executives’ February 2026 RSUs, is outside the count; the proxy leaves its treatment to the company and Parent, so the model treats it as post-closing compensation.

Sources and uses

Equity is two-thirds of the capital: $5.74 billion against a $2.7 billion term loan, which is 9.6x trailing EBITDA but 32% of sources. The closing 8-K reports about $7.4 billion paid to shareholders and about $5.7 billion of equity; the model’s $7.44 billion and $5.74 billion are within that rounding.

• Term loan, $2.7 billion, sized in the amended debt commitment letter of January 21, 2026 and fully drawn at close. Priced at SOFR + 4.50% with a 0.50% floor; up to half the margin, plus 0.25%, can be paid in kind until June 2028, and the model assumes it is. The margin steps down 0.25% once first-lien net leverage is at or below 7.50x. Seven-year maturity, no amortization, 1% prepayment premium in the first year.
• Delayed-draw term loan, $500 million, for acquisitions and capex after close, on the same terms, available until December 2028. Undrawn; the model assumes no further acquisitions.
• Revolver, $325 million, of which $81 million is usable at close, with a 0.50% fee on undrawn commitments. Undrawn in both cases.
• Equity, $5.9 billion committed across four letters (Permira $2.58 billion, Warburg Pincus $1.83 billion, Francisco Partners and Temasek $750 million each), funded at $5.74 billion, leaving $168 million undrawn.
• Merger costs, $124.1 million, the company’s own estimate in the proxy, of which $105.8 million is financial advisory fees. The buyers’ own fees are not disclosed; financing fees and OID are assumed at 2.0% of the term loan.

Ownership at close

Permira holds 44% and Warburg Pincus 31%; management rolls no equity, so its upside after close comes only through an incentive program whose size has not been set.

• No rollover. The consortium raised a rollover with the CEO, Sandeep Sahai, on the day of signing; he declined to discuss it then, and the proxy records no further talks. The executive officers’ Form 4s filed at close show every share, RSU, PSU and option cashed out at $24.55 and nothing left held; Sahai alone sold 1.4 million shares.
• Management incentive program. Parent agreed to set up “a customary long-term equity-based incentive program” for key employees after close; the proxy says its terms, including who participates, have not been determined. The model shows returns before any dilution from it.
• Cash retention. Separately, a cash retention program pays half at close and half a year later; the five named executives’ awards total $12.6 million.

Management’s plan against the outside-in case

Both cases start in the same place, but the outside-in case grows 10% to 14% a year instead of 17% to 18%, and its margin reaches 38.8% instead of 42.2%; by 2030, cash flow before interest is $364 million against $580 million.

The outside-in case starts from 2025 revenue of $817 million pro forma for a full year of Enfusion and Beacon. Organic growth of 14.6% in 2026 blends the 10-K’s two ARR growth rates, 17.7% for the core business and 8.5% for the acquired one, then fades a point a year to a 10% floor. The margin adds Clearwater’s 2021 to 2025 average gain of 1.3 points a year, capturing less of it each year, plus half of the roughly $20 million Enfusion cost target. Stock-based compensation stays at $128 million through 2027 as the unrecognized RSU expense runs off, then grows at half the rate of revenue, and is treated as a cash cost.

Deleveraging

On management’s plan, leverage falls from 8.1x to 2.4x by 2030; on the outside-in case it only reaches 4.2x, and interest coverage stays under 3x through 2030.

The first two years are the tightest in either case: coverage starts at 2.1x, and the PIK lifts the term loan to $2.74 billion before the sweep begins in 2027. Cash taxes stay low because Clearwater’s $702 million deferred tax asset shelters income, within the 30% cap on interest deductions.

Returns

At the offer, the outside-in case returns 21.1% and 2.37x by 2030, against 32.4% and 3.56x on management’s plan; at a 22.5% target, a sponsor on the outside-in case would pay $23.59, 4% below the offer.

Almost all the value comes from EBITDA growth in both cases: $7.5 billion of the $7.9 billion gain on the outside-in case, $13.8 billion of $14.7 billion on management’s plan. Debt paydown adds $0.3 billion on the outside-in case, because its cash flow mostly services interest, and $0.8 billion on management’s.

Sensitivities

Growth moves the return most: 2 points of revenue growth a year is worth about 3.5 points of IRR, more than 2 turns of exit multiple (2.6 points) or 2 points of margin (1.9 points).

On the outside-in case, the deal needs the exit multiple to hold: a 2-turn de-rating takes the IRR to 18.5%, and paying 1 turn more at entry takes it to 19.6%.

Growth and margin together: missing both by 2 points takes the IRR to 15.6%; beating both by 2 points gives 26.4%.

The DCF values management’s plan at $19.78 a share with 2.5% perpetual growth after 2035. The LBO clears 20% at $24.55 only because it sells in 2030 at the 25x multiple paid. The sponsor’s return rests on the next buyer valuing Clearwater as a growth software business.

Methodology. The purchase price, financing terms and management’s forecast are from Clearwater’s merger proxy (DEFM14A, April 8, 2026) and the commitment letters it describes; the outside-in case and the historicals are from the 10-K and 10-Q filings and the Enfusion investor presentation. Where the filings are silent, the model’s assumptions are labeled in the workbook: the outside-in growth fade and margin capture, the payout of unvested awards evenly to June 2029, financing fees and OID of 2.0% of the term loan, $75 million minimum cash, SOFR held flat at 3.53%, and management’s plan extended to 2031 at 16% growth. The model was built in Compound; it rebuilds work a deal team could have done and is not the buyers’ model.

The download is Compound’s completed workbook from this run, with Clearwater’s figures and every formula live.

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