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WSO Free Modeling Series - Now Open Through
April 30, 2024
9 Free Financial Modeling Lessons
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
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+Bonus: Get 27 financial modeling templates in swipe file
All of the above. Sometimes you can enlist bankers to do comps for you.
agreed. all of the above. however, one thing i've found is that until a deal gets serious, all we use are summary 1 page lbo models with high level assumptions. once it gets real, then you go heavy into the modeling, the heaviest at the revenue and gp build for sure
I have a one page LBO model I can do in about 5 minutes. If we get serious I have a 12-15 tab full LBO model that I can do in around 20 minutes. If I decide to do a revenue build and put all the data in there from all the customers, it takes a great deal longer. I have a friend at an equity research company who can look up comps for me
I 100% confirm this - I get "enlisted" from our PE clients regularly! haha
Is Modeling necessary for PE job? (Originally Posted: 01/14/2014)
Hi, I am currently working as a Credit Risk Analyst for a financial firm but willing to switch career towards PE. Don't have an MBA but working on getting one as well. Now I wanted to know is Financial Modeling absolutely necessary to get a job in PE? I mean consider it a post MBA PE job, maybe an associate or senior associate.
To be honest I have done a lot of modeling in my life but they are all complex Statistical models (Multiple Regression, Time Series, ANOVA etc.). I am also well aware of the Financial Modeling needed for the I-Banking jobs (did a crash course by Wall Street Prep) and still not sure why it is called "Modeling". There is no rigorous Mathematical/Statistical model there. For me it seems more like Accounting. And honestly I am not a big fan of those.
So my query might sound like a little bit naive. But what I wanted to know is whether I have to deal with those Financial/lbo models if I enter PE after my MBA. I know if you enter an analyst you most likely going to spend a lot of time on those. But even if you enter a PE firm as Post MBA Associate whether you still have to develop or review those models. If yes, then what percentage of your time you need to spend on that.
Any suggestion/query is more than welcome. Thanks a lot in Advance!!
Not sure if this is a serious question or not... but given that a PE investment decision boils down to the return metrics that come out of a well-made and well-informed lbo model, the answer to your question is that YES, modeling is a necessary skill set at all levels of a PE deal team.
So is accounting.
My thought was it has to be a troll...
LOL 'willing to switch' hahahah.
both are modelling .. one is statistical (econometrics) and the other is financial modelling .. though I can understand why individuals with backgrounds in math and stats might not necessarily see financial modelling as modelling ... http://www.macabacus.com/ is a good website
but what confuses me is this.. First you say "...willing to switch career towards PE" and then you say "...For me it seems more like Accounting. And honestly I am not a big fan of those." ... then why switch? ... the amount of modelling will depend upon the role/position that you will get in PE.... check this link http://perecruit.com/ for learning more about careers in PE
Since when is doing a multiple regression in Excel difficult?
Even if you aren't the one actually making the model, you will still need to be intimately familiar with its functionality in order to properly review it. I'd argue if you don't have the capability to construct it yourself, you won't be able to properly review it for errors.
Honestly though, modeling isn't going to be your biggest barrier to getting a job in PE. Your lack of work experience will be much harder to overcome. I suggest you spend a lot of time reading this website to better educate yourself on the PE career path.
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