This week Graham and Debs give Claude Fable a first-year private equity associate's job: take a real deal document, digest it, pull out the risks and highlights, write the investment committee memo and build the indicative returns model.
The prompt was a few lines. The output is a seven-page IC memo, executive summary, entry valuation, investment thesis, operating cases, sources and uses, returns analysis, diligence items, with a working LBO model behind it, including the returns attribution analysis Claude added without being asked.
The document itself is a rarity. CIMs stay confidential, Graham has read thousands and doesn't have a single one, but a Massachusetts rule forced this sale process into the open when a not-for-profit hospital was converted to for-profit in 2010. That makes it a genuine test: a real CIM, the way an associate would actually receive it.
The hosts then push the model the way an investment committee would. The EBITDA bridge runs from $4.5M actual to $9M normalized, which is the quality of earnings question that decides whether you're paying 4.7x or 10.4x for the same business.
Base case returns come out at 2.3x and an 18% IRR. Debs challenges Claude to rerun the deal as a platform build, and the rerun jumps to 2.7x and a 27% IRR on $7M of synergies, with one misread the hosts catch immediately and a reprompting lesson attached.
Along the way: what a CIM actually is, how investment committee works stage by stage, and what happened when this deal traded in real life, an ending none of the models saw coming.
Timestamps:
00:00 — Cold open
00:37 — This week: Claude does an associate's job
02:50 — What a CIM actually is
09:20 — Finding a deal document that's actually public
11:33 — A word from Wall Street Prep
12:04 — The seven-page memo and the simple prompt
14:20 — The EBITDA bridge: $4.5M or $9M?
16:36 — Entry valuation and the returns math
22:48 — Key risks and mitigants
26:07 — Challenging Claude: rerun it as a platform build
27:01 — Inside the LBO model
33:01 — Operating cases and debt mechanics
38:25 — Returns, and the attribution Claude added unprompted
41:45 — The platform rerun and the reprompt lesson
46:05 — What actually happened to this deal
50:24 — End
Topics:
→ Giving Claude a real CIM and an associate's screening job
→ The prompt that produced a seven-page IC memo and LBO model
→ What a CIM is and why these documents stay private
→ How investment committee actually works, stage by stage
→ The EBITDA bridge and quality of earnings
→ Entry valuation, sources and uses and the returns math
→ Challenging Claude to rerun the deal as a platform build
→ The returns attribution Claude included unprompted
→ What actually happened to this deal
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