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[QUOTE="Forza Azzurri, post: 5599203, member: 1452"]
That assumes that revenues stay flat in perpetuity.

The entire reason (or sales pitch from the PE side) is that private equity will help Utah to grow revenues, by finding new sources of revenue and/or increasing the revenues from existing sources.

Providing a simple theoretical example:

Assume Utah's revenues are 100MM per year.  Assume the PE firm bought a 50% stake for 500MM.  Assume a 10 year time horizon and I will not PV the cash flows for simplicity sake.

With no PE, Utah earns 100MM a year,  With PE, Utah earns 50MM a year from the upfront payment and, if revenues stay flat, 50MM a year from the revenue split.  So they break even on the deal for ten years and then start losing to the tune of 50MM a year in year 11.  Bad deal.

However, if the PE is able to increase Utah's revenues by 20% a year (so 20MM - I will not compound the growth for simplicity sake), Revenues would grow to 300MM by year 10.  Total revenues over the 10-year period would be 2.1 billion.  Utah would get 50% of that: 1.05 billion plus the 500 MM upfront payment for a total of 1.55 billion.  Divide that by 10 and you get 155MM a year. In year 11, they would earn 160MM (300MM + 20MM increase in revenues times 50%).

The question really boils down to whether the PE firm can help Utah increase their revenues enough to offset the fact that they are giving 50% of them to the PE firm.  How much the PE needs to help Utah increase the revenues by depends on the percentage stake that Utah has sold to the PE firm for 500MM.

Without those details, not possible to understand how high the revenue bar is.
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