Good morning everyone,
As many people have pointed out on this site over the past several weeks, we are thick into recruitment season by this point. Love is in the air, neuroticism is brewing in the hearts and minds of college juniors and seniors everywhere, and at some point over roughly the next two months, many of us will be crowned with that coveted investment banking offer that we've been waiting for for so long.
So far I have had a several first-round interviews as a write-in candidate (I am not in school anymore and thus not available for OCR interviews). I wanted to share my observations with you guys, though they are not yet extensive, but maybe they'll help someone out there better prepare for phone interviews, as well as first-round interviews in general.
1. The technical portion
For me, this was the boogeyman. Coming from a liberal arts background and also being a few years removed from school, it makes sense that interviewers would be more likely to grill me on technicals to make sure I'm up to snuff. I prepared exhaustively with respect to technical materials, going deeper into technical knowledge than is necessary for Analyst interviews at most firms -- I believe this was a detriment.
First of all, it's very difficult to truly prepare for every technical question. I suppose it is conceivable, but in many ways it can do more harm than good, causing you to either freak out because the amount of material you need mastery over is extensive, or confuse a few things because you don't really KNOW the material that well because you crammed it en masse. During interviews, there is a certain element of luck -- there are questions you know REALLY well, and ones that you are not 100% clear on...sometimes you have to hope they ask you ones that you know well. And if you think you know everything, you don't -- an interviewer can always pull a rabbit out of a hat to really test you.
In my experience so far, at least in phone interviews, technical questions have been extremely basic and consisted almost exclusively of:
1. $100 CapEx with straight-line depreciation over 10 years -- what happens to the financial statements in Years X and Y?
2. Walk me through a DCF, with follow-up questions about WACC (how do you calculate C-Equity, etc.)
3. Three methods of valuation, which gives highest
You should certainly be able to rattle off answers to these in your sleep, and prepare far beyond these questions, but for most interviews (also having spoken to lots of friends in IBD about this), technicals don't get a lot more nuanced than the above at the first round.
2. Behavioral questions are important
Hey, you know what's worse than stumbling your way through a technical question that you kinda sorta don't know? Rambling incessantly through a behavioral question that you didn't prepare yourself carefully for. Mostly because when you do this, even if you're being honest, it sounds like you aren't.
Ah yes, people always say that the "walk me through your resume" question is by far the most important interview question you will face. That one is pretty easy to nail down though -- keep it to 3 minutes and 30 seconds, recite it to the mirror 20-30 times, and make sure that you monitor your speech and pace during the real interview. Close that story out with why you're the right guy or gal for this firm and position, and you've set the interview up to already be in your favor.
But how about if the interviewer
Remember: concisely explain the situation, what actions you took to make sure that the results turned out great, and explain the results to close the question out. Think of good examples for an array of behavioral questions BEFORE the interview so you can go to your bucket of examples when asked a specific question.
3. Be pretty chill
I have the misfortune of sounding extremely serious when I speak on the phone. I have a deep voice, and because you can't see my facial expressions, it almost always sounds like I'm under some great duress. Over the past few interviews I've had, I've noticed myself sounding too serious and did by best to lighten the mood of the conversation a bit (this can often be done through the questions you ask).
Remember, the people interviewing you in the first rounds are usually junior bankers, and the last thing they want to see is someone who is way too stiff and serious (because let's face it, they want to have at least a tiny bit of fun at work too).
Remember, don't stress too much over technicals, don't ramble during behaviorals, and try to be as relaxed as possible -- you should be fine. What do you guys think? What would you add to this list for taking down first-round interviews?
There is little benefit to memorizing any technical question answers, aside from "walk me through a DCF." Otherwise, you have no idea what to expect - it's not like the questions are coming out of a list somewhere. Study the concepts, practice them with all of the sample questions you can find, and make sure you a) get it, and b) can perform under pressure. This will make you not only a better interviewee, but also a stronger performer once you land the job.
tl;dr - Don't pull a Stern and think you can Korean your way into a job. The surest way is to work smart, not just hard.
What type of questions have you asked to lighten the mood of the conversation?
aqueductracetracks. Hah, you're Russian, aren't you? You guys always sound like the world is crashing down around you, especially on the phone when you can't see the silent laughter in the eyes.
Okay, mostly, it's that your user name sounds Russian to me. But when you said, "great duress" (not just regular duress), it reminded me with incredible and instantaneous clarity of the three Russians I've been privileged to work with closely.
For instance: direct quote from the Russian guy who sat behind me one year in BB. It's 2:00 AM. I have my headphones in and am jamming to music. Suddenly the track switches to a quiet one and I hear Ivan's deep, thickly-accented, dolorous voice from the cubicle behind me.
"...and I cannot understand how they can expect me to work, all day I work, just as you work, Bankerella, without even five minutes to eat or to piss. How do they expect this? Yes, they pay me, but even money cannot turn a man into a machine. There is a great sadness in me, Bankerella. I have a great sadness. I do not know now what I can do."
I responded with something like, "Dude, that sucks, but we're gonna make it if we just keep our heads down and our noses clean." And that must have been enough for him, because he was off for another thirty minutes of rambling.
In my experience there are three modes: great duress, great dolor, and drunk at a party. (Drunkenness not at a party seems to fall into one of the other two modes.) But always, always, if you look in the eyes, they are laughing at the world even as everything falls apart around them.
I would hazard a guess that this is a survival trait instilled from childhood, or a result of too intensive a study of the national literature.
sorry to interrupt this brewing eastern european romance... but it's not difficult to guess where one's from, when they clearly have an ethnic name and it's the inverse of their username
I've had interviews where they ask technical questions that I had never heard before and aren't in any prep books. I got them right because I understood the theory behind everything and could figure it out.
Memorization can get you past the easier interviews where they ask the same stock questions but understanding the "why" of everything makes it easier to do well when they press in for more detail or ask more unconventional questions.
If I have 6.0x EV to Revenue, 5.0x EBITDA, and 4.0x EBIT, what can you conclude about my company? If you just memorize, your answer isn't gonna sound pretty.
Was crushed by a question like this back in the day:
"I'm going to give you three figures - you may write them down: 2x Firm Value to Turnover 3x Firm Value to EBITDA 5x Firm Value to Operating Profit Which of these do you think is wrong?"
I thought I was slick because I knew Firm Value = EV, Turnover=Revenue, and Operating Profit=EBIT. Didn't bother to think about the question. The worst part is, when he was correcting me, I cut him off and finished his sentence.
Ended up getting the offer, somehow. No idea how that happened. Moral of the story - know your fundamentals, and practice.
How to walk through a DCF...
1) The purpose of a DCF is to calculate the discounted present value of its expected future cash flows.
2) We can do this by starting with EBIT * (1-tax rate) + Depreciation + Amortization – CAPEX – Net increase in working capital. These are the current free cash flows.
3) You must predict future free cash flows for 5-10 years into the future and then discount them with WACC (avg. cost of equity and debt capital).
4) WACC = cost of equity (derived from capital asset pricing model) * equity:capitalization + cost of debt (interest on debt & market value of debt) * debt:capitalization * (1- tax rate).
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