Helping a buddy prepare for an upcoming interview with an LBO shop that focuses on enterprise / vertical software and tech-enabled services. I was wondering if people have come across any particularly informative or helpful materials on software investing / interview prep or any case studies (with worked solutions) they might use in an interview. It seems the shop has a history of hiring folks with LevFin experience so resources on levering software companies would also be helpful.
Anyone go through the process with Vista (or similar firm) and be willing to share what that was like? The types of questions they asked, etc.?
We have accounts to WSO and BIWS, but don't think there is anything specific on enterprise software. Please correct me if I am wrong! Happy to give back to the forum and let everyone know what were the best resources.
Is this internship/analyst/associate recruiting?
Good question - this is for an associate role.
I would recommend looking at the Hg Capital website. Their funds are mostly pan-European, but they focus on enterprise software, SaaS, etc and pursue more mature, LBO-able companies. There are plenty of case studies and other useful information on their website. They have a permanent capital vehicle listed on the stock exchange, so Hg's disclosure is unusually good compared to other PE funds.
Good luck!
Thanks, this is very helpful! Any idea as to what their interview process looks like? Are there tablestakes interview questions that pretty much all software/tech-enabled services investors like to ask.
Unfortunately, I don't have any idea myself but hope the community will help.
apart from HG, Francisco partners also does very similar deals but focuses on smaller deals in mid market.
As for tablestakes questions, apart from your traditional paper LBO ones, software ones will definitely be: - how to analyse components of revenue retention bridge in detail (upsell, cross sell, down sell, price increase, gross volume churn, gross volume increase) - Customer Cohort analysis (kind of related to rev retention bridge but different) - Payback period analysis (in short, how long does it take for your customer to generate revenue = the cost to acquire that customer. shorter better) - related to payback period and more useful in the very high growth VC world is LTV/ CAC which is a metric that’s loved too much imo - Bolt-on impact on the deal returns (IRR/MoM) is a must know, especially for vertical software, where scale is everything - Qualitatively, why is software biz model the ‘best LBO candidate’ vs other industries? (google what founder of VISTA said)
I’m sure I must have missed something but I can’t imagine someone going through the final round and not getting asked one of these.
good luck!
Can you speak to the "Bolt-on impact on the deal returns (IRR/MoM) is a must know" - unsure how to think about this
bolt-ons are effective multiple arbitraging as scale demands higher multiples (larger is safer than smaller), so you can pay 8-10x for a bolt-on and it becomes 12-14x as part of your platform.
besides that, enterprise software specifically benefits from up/cross-selling to bolt-on/platform client bases. the market fit of the bolt-on matters a lot because of this.
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