i have a few questions about modeling tests in private equity invterviews. could those who have actually taken one please send me a private message? i am already in private equity - I was not required to take a test in my interview since I came out of undergrad.
i realize that there is another thread on this, but i have some specific questions.
Sure...send me a pm if you would like to discuss
I'm sure you already have many more relevant skills than I did when I interviewed for PE -- the types of tests I had to do were building basic LBO and cash flow models from scratch and I'd be allotted anywhere between 1.5-3.0 hours. But if you have any specific q's just let me know
Most likey you will be given 3 years of historical financials with a set of assumptions and asked to project out the various financial statements. Upon completion you will probably be asked to value the company on a DCF or LBO basis (most likely the latter) to determine whether or not the opp would be a good investment and meet the partner IRR threshold.
Numi,
I would be interested to hear more about your experience as well. We should keep the conversation on the board (and not PMs) if possible so as to educate other members as this is a highly relevant question.
jbs,
appreciate the insight. by valuing on an lbo basis, do you mean using a multiple of ttm ebitda? dcf tends to be a bit speculative if you're working with a private company.
on a side note - the reason i asked for PMs is because i wanted to make sure that only those already working in private equity provided answers. i'm all for a better wso community; that said, many members respond to questions they aren't necessarily qualified to answer. subsequently, many threads can get encumbered with information that isn't 100% true.
-m
LBO valuations require to project unlevered cash flows over a period of time, then structure an appropriate acquisition debt (which depends on the firm, sector, risks, sensitivity analysis and of course market conditions). From there, depending on the returns you expect on your equity, you can determine how much you are ready to pay for the asset, usually assuming an exit multiple equal to the entry multiple.
I think you should keep it in the public arena if you wouldn't mind. Like the previous poster, I would appreciate reading any information provided.
As a side note, wouldn't it be possible for someone with no knowledge to just PM you? Unless you are asking for background info, I would think PMs might be equally problematic.
Regards,
Chris
please read my OP. i am already in PE and am familiar with how an LBO is structured. my question is more centered on what is expected when preparing a model for an interview since there's limited time (2-3 hours)
what i was trying to ask jbs is if it would be okay to simply use a ttm ebitda multiple in the modeling test to arrive at ev, or if a more in-depth analysis would be required.
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