Big 4 M&amp;A Integrated Financial Model - interview Help!

10y

You've answered most of your own questions. I would argue, though, that you're not just connecting a 3-statement... that's a little too easy. And the raw data you'll get will probably be in the form of some key 3-statement lines anyways. You'll probably be asked to complete an X-year projection (X is usually 5, because anything further out isn't worth it).

Since the company is a gym, I'd take care to pay attention to the metrics involved with any service-based product. Customer attrition (how many people will buy a subscription and then drop out before the reporting period is over), customers who forget to cancel subscriptions (thus leading to increase in revenue for a short period of time), service upkeep vs. user fees (for example, if I bought a gym membership and went every day of the week, that's a lot of upkeep costs for the gym but I still pay a flat rate), etc.

It's a lot to think about, but just realize that a lot of these are assumptions. As long as you can justify your assumptions, you'll be fine.

Currently: future neurologist, current psychotherapist Previously: investor relations (top consulting firm), M&A consulting (Big 4), M&A banking (MM)

swissstud

King Kong

10y

Thanks for your response.

So if X is 5, I'll receive 5 years worth of data, correct? Sorry but I'm really new to this.

Do you know where I can find a template that I can hopefully memorize for the interview day? That would help me a lot I think. I really haven't got a club how to build this thing..

I don't get the assumptions part. I thought I was only going to receive numbers.

10y

Best Response

No, you'll probably receive current year data and then data from 1 or maybe 2 years back. You'll be in charge of projecting revenues, costs, etc. for the next X years (where X is usually 5, but can range anywhere from 3 to 10 depending on your industry).

You'll look at historic data and add in your own assumptions for growth rates to project a 3-statement for the upcoming years.

For example: say that the customer attrition rate has been decreasing the past 3 years. For example's sake, let's assume that in 2011 the attrition rate was 10%, in 2012 it was 8%, and in 2013 in was 6%. What would be a reasonable rate to use for 2014? The attrition rate affects your revenue growth rate year-to-year (if 10% of your new customers during a financial period are not coming back for the next one, then your growth rate is hindered by these lost potential customers). So you would solve for a reasonable revenue growth rate and use that to estimate a revenue for 2014. Since revenue is tied to other lines on the balance and income sheets, you now have another piece of the puzzle.

Do you have access to BIWS or Wall Street Prep? Go through some of their modules for projection-building.

I don't work in the finance industry and it's been 2 years since I've touched the nitty-gritty of these models, so maybe others could chime in on this?

Also keep in mind I have no idea what firm you're interviewing for, so this could be totally off. PM me with your firm name and I might be able to help more.

Currently: future neurologist, current psychotherapist Previously: investor relations (top consulting firm), M&A consulting (Big 4), M&A banking (MM)

swissstud

King Kong

10y

Thanks man! Really helpful stuff

I just need to find a template or something I can memorize. I only have a day to learn this, at least the basics.

Unfortunately I do not have access to BIWS or Wall Street Prep...

10y

Is there a reason you waited until 2 days before to learn this stuff.....?

Currently: future neurologist, current psychotherapist Previously: investor relations (top consulting firm), M&A consulting (Big 4), M&A banking (MM)

swissstud

King Kong

10y

chicandtoughness:

Is there a reason you waited until 2 days before to learn this stuff.....?

14 hours work days and 4 other interviews to prepare for.

10y

swissstud:

chicandtoughness:

Is there a reason you waited until 2 days before to learn this stuff.....?

14 hours work days and 4 other interviews to prepare for.

You and the rest of the candidates. Not sure this a legit excuse. Either way, listen to what @jbone24 said. I was in your boat my junior year interviewing for IB positions, and memorizing screwed me over. If you don't understand how the statements and year-to-year growth rates integrate, you're going to be fucked when they throw you a curveball question like, "Okay, now how would my balance sheet change in Y2 if I were a gym that has a ton of debt?" To answer that question, you need to know how debt integrates into your important line items (and ideally how it flows through the other sheets). You're not going to get that by just memorizing something like Profits = TR - TC.

Currently: future neurologist, current psychotherapist Previously: investor relations (top consulting firm), M&A consulting (Big 4), M&A banking (MM)

StaphyBone

Senior Neanderthal

10y

Natus sed est accusamus dignissimos. Tenetur recusandae beatae ut quis quae ut. Qui non omnis inventore. Delectus et praesentium aut excepturi molestias cum. Dicta aut eveniet quisquam vel maiores voluptates autem eaque. Labore rem enim fugiat est sed earum totam.

Officia eum qui accusantium consequuntur quasi dignissimos voluptatem. Magni error similique quo laudantium quas nihil ut. Alias rerum doloribus dolorem magni sed error blanditiis voluptatem. Eligendi hic ex laborum doloremque.

Reprehenderit nobis eaque non aut ullam et. Excepturi et aspernatur in dolor vel. Minima similique ratione porro et provident quam.

Quasi hic est ut perferendis similique placeat. Fugiat animi aliquam earum occaecati voluptatum laudantium. Optio libero illo delectus odio dolores eos. Dolores qui quia temporibus totam. Doloremque consectetur totam magni repellat repudiandae. Voluptatem est magnam magnam et nesciunt qui non occaecati.