Talltree has just made a Series F investment in Newco. The details of the Series F and all prior rounds are given below.

Series A: 10M shares of CP ($5M APP)

Series B: 10M shares of CP ($8M APP)

Series C: 10M shares of CP ($10M APP and a 2X liquidation preference)

Series D: 10M shares of PCPC ($10M APP), with liquidation return capped at 4X APP and a QPO at $5 per share.

Series E: 10M shares of CP ($12M APP).

Series F: 10M shares of PCP ($20M APP) with a QPO at $6 per share.

These venture investors all have 20 percent carried interest, $250M in committed capital, and $50M in lifetime fees. In the event of a liquidation, the preferred stock is redeemed in reverse order of investment (i.e., the Series F has a preference to the Series E, which has a preference to the Series D, and so forth). In addition to these investors, the employees have claims on 10M shares of common stock.

Now, we add two other features to this capital structure. First, the investors create a management carve-out for 10 percent of the first $50M in exit proceeds. Second, Newco acquires a smaller competitor, Subco, with the owners of Subco receiving 10M shares of common stock, with a further payment of 20M shares of common stock if the merged company has an exit exceeding $805M.

(a) Compute the breakeven valuation for the Series F under base-case assumptions.

(b) Given this breakeven valuation, compute the implied valuation for the management carve-out.

(c) Given this breakeven valuation, compute the implied valuation for Subco’s stake.