Help! Private Equity interview in three days! PE Interview adivce?
I am an undergrad and after some cold calling and networking have been invited for a private equity interview with a middle market pe firm for a summer position. I finally got back home and some time to let of steam after finals and basically hell week(s). I am trying to prepare but this I feel like this will be substantially different from my earlier equity research and investment management interviews.
I have been trying to prepare but am still not sure if I fully understand how to do an LBO properly, I think I got a DCF down. Also, I had a college class which had me do myriads of case analysis but not sure if I could handle something like that or prepare in the short term.
----message from WSO below----
My PE interviews were more specific and related to practice than my BB IBD interviews. I interviewed at a restructuring PE fund and was asked how I would cut costs at a specific company in a specific industry. I also got a case on which items on a balance sheet would be possible to cash out immediately after purchase e.g. Accounts Receivable.
Thanks but I am still an undergraduate. I don't have any IB experience and limited understanding of P.E. I have done some research on the firm and P.E. in general over the last few days. I never really expected to get this interview and am not entirely sure what to expect due to that. I hear most interviews are based on past IB experience.
PE funds also appoint managers to the acquired firms, so they are also interested in people with consulting experience or ex-managers. But this differs from fund to fund.
You should think about why they gave you the interview and play your strengths in the interview. I wouldn't expect too many technical questions in case you've no IB experience.
And don't forget that the business is about streamlining, cutting costs, negotiating haircuts etc.
Preparing PE interview (Originally Posted: 09/06/2009)
Yesterday the PE firm I will be interviewing with called to tell me my interview will be from 9-5, and also include talks with an MD who is flying in. From my consulting standpoint, the interview process sounds a bit ludicrous...but for all you PE guys, could you just give me some info on what such a long interview might entail. I know there is going to be an Excel modeling test where I create an LBO. Btw, I'm pretty good at the Excel shortcuts but are they a fundamental necessity for the Excel test.
An 8 hour interview, I would say you're pretty much guaranteed to get a modeling test. They're probably trying to consolidate 4 or 5 rounds of interviews. My longest interview was 9AM to 2PM. They kept asking me if I had time to meet with another team member, I kept saying yes. Finally I had to say no, since I had to get back to work for a meeting and they had only mentioned a morning interview. That was a banking interview though.
Not to get away from the point of the thread, but how do you guys get away from the office for the interviews? Do you just say you have a dentist appointment or something, because I can't imagine leaving my office for that period of time, without a good excuse.
In reference to what grandpabuzz said,
I'd just be honest. I told my supervisor I was interviewing at a Private Equity fund. I think its best to be honest and respect your current employer. There have been occasions where partners have gotten honest analysts more interviews at top PE/HF shops just by making a call.
Best regards
Mmonkey
MM PE Interview Questions (Originally Posted: 02/19/2008)
I have an interview coming up at MM fund ~300mm AUM.
What type of questions should I expect to be asked?
What is the best way to prepare for these types of finance interviews?
Thanks in advance.
btw, that is small-cap, not middle.
It's a smaller PE fund no doubt, but I was under the impression that MM would be in reference to the size of deals, not AUM. For instance, the fund where I'm at may be considered small-, or even micro-, cap by AUM, but our deals are in the $100M-$300M+ range with our largest portfolio company at $1.4B equity.
Are you at a fundless sponsor?
any insight to the original questions about what to expect/prepare for in interviews?
Def. know your way around financial statements (that should go unsaid). (THIS IS AN ABSOLUTE)
Aside from that, I think I would prep for the following when interviewing.... (these are not in order of importance)
Know recent LIBOR trend and be able to discuss how it affects a prospective investment. Know ebitda multiples for industry that the company deals in. Know industry trends / players for the focus of the firm. Be able to discuss the lifecycle of an investment (leveraged buyout, portfolio company, various exit ops, and time frame over which this occures) and how the firm will increase its equity value. If you've modeled an investment before, I would prep to walk people through the model. If you've only done Wall Street Prep, be prepared to walk through that. Either way, be prepared to discuss what sorts of companies a private equity firm would want to invest in (LBO's require firms with cash flows to service debt) If you invest in stocks, be prepared to discuss the fundamentals of the company (solid management, solid cash flows, product suite, e.t.c.).
If you haven't worked in prviate equity, these may not come to you off the top of your head, but those would be points I would definately touch on in my interview whether I was asked a specific question or not (i.e. I would make sure to work those points in). That being said, I am talking about more of an entry level interview i believe.
PE interview for undergrads (Originally Posted: 09/18/2009)
What tends to be the composition of FT PE interviews for undergrads? What level of technical knowledge is expected (assuming previous SA IBD)? Are case studies emphasized as much (or at all) as they are for associate-level positions? Many thanks.
I'm curious about this too
In my experience, PE interviews have been more focused on brain teasers and case studies. This is for UGrad. Not as much the traditional IB interview questions.
NEVER lose your BlackBerry www.conveniencesoftware.com
Private Equity Interviews (Originally Posted: 03/01/2015)
2nd year analyst here prepping for PE interviews. In my research thus far one thing I have seen is that in PE interviews you may be asked behavioral questions like:
Is this really the case? Somehow I don't see PE guys giving a crap about stuff like that, or does anyone have experience of being asked those sorts of questions in their PE interviews?
bump
PE Interviews - How technical do they get? (Originally Posted: 07/23/2009)
I'm particularly concerned with middle market funds. Just how technical do PE interviews get? I ask because I of course studied my technicals to death before IBD interviews, but I feel unsure as to how/why a middle market PE interview would get overly technical when the focus is more on deal experience and analyzing companies.
If anyone with a good deal of PE interviewing experience could chime in on what I ought to expect, I'd greatly appreciate it. Thanks in advance.
Totally depends on the firm. I had friends who had to answer extremely technical questions on the spot. Personally, most of my interviews were very high level. Most of the technical aspects related to LBO modeling. Note: This is all for Middle Market firms.
~~~~~~~~~~~ CompBanker
PE Interview help (Originally Posted: 06/04/2015)
Hey so I have an interview coming up in a couple weeks at a new Private Equity fund in CT for a spot as their junior analyst. I won't lie, went to a pretty mediocre school (Class of 2015), even though I have two good internships under my belt, and got the interview through a friend. The fund is small ($120mill) and I would be interviewing in front of their partners (5), all of which have very impressive credentials. I was just wondering if anyone has any advice, anything that could be helpful really. I graduated as an Economics major so I never really got the "real finance" classes so I feel like I'm at a disadvantage with regards to the other kids. Thanks!
Be prepared to answer: Why private equity? Why this group/industry? Anything on your resume. Be able to explain LBOs from a high-level Know macro trends and industry trends your fund invests in And fit questions, since you're talking to partners.
Mega PE Shop Interview (Business Case) (Originally Posted: 12/07/2009)
Have an interview coming up with mega PE shop (Carlye, KKR likes) where I have been told that post an hour long phone call about my "story" they want to run a business case including a very back of an envelope LBO. My background is IBD for almost 2 years but have almost no exposure to LBOs. Mostly focussed on IPOs etc. Any leads on where/how I can prepare? Many thanks
Not to advertise another site (of which I have no affiliation); but I found this (see below) a while back when searching for the same back-of-an-envelope type exercise. Very basic, but might get you pointed in the right direction.
Keep it simple and be sure to make an actual recommendation at the end, as Dosk has said in his various PE-preparation posts. What good is an insanely detailed and complex model if it doesn't back up an action?
Best of luck to you; hope this helps.
http://www.wallstreetprep.com/blog/?blog_id=36
MBA PE Interview (Originally Posted: 12/06/2013)
Hello WSO readers,
I would appreciate interview preparation advice from the veterans here who were in similar/same situation before.
my background -MBA pursuant from very reputable school -strategy background from consulting -No prior banking experience
I have an interview coming up at a PE firm, and I was told to complete some psychometric online test. How did you guys prepare for this? This testing is not as common in the U.S. as is in other parts of the world so I have no idea what to expect. Are there good websites/books that can you guys can recommend that will prepare me for the test within a short period of time?
Also is pre-MBA associate interview different than MBA level interview? if so how? Any other tips/advice on what to know cold/etc would be really helpful.
Thank you so much
I had to do that for my current job. From my experience the psychometric stuff isn't really something that you can prepare for. It's more of just an IQ test. If you're from good schools and did well on your GMAT's and all that you'll likely be okay. The one wildcard is the visual side of it (identifiying patterns and weird shapes and all that garbage), that's not really correlated to your scholastic abilities as much I think... some people are just better at it than others...
PE Analyst Interview (Originally Posted: 04/24/2010)
I have a PE interview on tuesday for a analyst position. There is going to be a 1 hour 30 mins excel test and meeting with a senior associate and MD. What should I expect and how should I prepare? Thanks primates.
be natural and don't pretend you know more than you do. if you're background is consulting, think about why that equips you better than someone from M&A, or vice versa. we're always looking for range of people, who we would like to work with, normally everyone is highly competent.
hope that helps. this is for PE in london, it might be different for US.
thx goldmansachs101... i have a year of vc experience. how can i tie that into pe and what should i expect from the excel test?
i would really lile to hear from PE guys on here
excel will probably be a quick modelling test. They will give you summary financials and you'll have to build a model making your own assumptions in terms of entry/exit multiples, debt structures, etc.
Just a check to see if you know what is an LBO. Best way to prepare tis to grab a few financial, and building a model yourself. Have a friendly monkey check it for you.
Got an interview at PE boutique - advice needed (Originally Posted: 02/07/2015)
Hey guys,
So I cold emailed an MD at a PE firm telling him I'd like to call him to talk about potential internship opportunities. He said he wasnt sure if they were hiring SAs, but to call him on on Tuesday and gave me his number. This may not be an official interview, but if he told me to call him that means I have an opportunity of closing him (Right?).
My question to you is how do these calls normally play out? Do I like get to know him? (i.e. ask how he is doing and how deal flow is and how is the general business is going) or do I get straight to the point? How would you guys play this?
Thanks
I went through a similar process last year as a Sophomore, the call was pretty much a casual first round interview. MD introduced himself, spoke some more about the firm, and then asked me some questions. Tell me about yourself, why PE, asked about my finance experience (non-finance major), etc. and then some basic technicals to see if I understood LBOs. 30 minute call all in all, nothing too difficult.
Cool - how did the call startout? I figured since I contacted him and he told me to call him, I should be leading the conversation?
I was thinking of starting by thanking him for taking the time to take my call and then introducing myself and asking him questions.
I called him by his first name in emails - do I do the same for phone call?
PE Interview Tomorrow - HELP!!!! (Originally Posted: 06/20/2013)
I'm a strategy consultant and just got notified that I'll be having an interview with a MM PE firm specializing in tech. They focus on buying equity portions of companies from stakeholders who want out or stock from companies who need more runway before IPO. Hopefully that narrows down the list of models I'll need to memorize for this interview.
I work at IBM so I get the tech aspects to the job, but outside of that I need a crash course on the financials used in PE. Reverse-DCF, WACC, what else? Anyone have any cliffnotes links or resources they can email me? Example spreadsheets? I am a novice in the finance areas of valuation. While I have done valuations before for my own startup, it's obviously different here.
Maybe a divestiture model? Anything else?
What does your work consist of in IBM?
You could get through the BIWS IB interview guide in a few hours. This covers the basics of how to value a company, how to answer basic accounting questions, etc. Since you come from a consulting background this should probably be sufficient on the finance technical side as they don't exactly expect you to be able to bang out an LBO model with that experience. They're probably more there to hire you for your strategy/operational insights you've gained from consulting so speak well to that.
Hahah I'm afraid they're going to bring up things and I won't even be able to pronounce EBITDA properly in real life. I'm fairly confident in my background experiences, it's just the financials that scare me.
Also...What is the difference between “as-is" and "where-is” for stock purchases in a buyout deal?
Help - PE Interview (Originally Posted: 08/24/2007)
I need some help. I know very, very little about finance, and I have a PE interview in two weeks. Straight out of undergrad, internship experience is in consulting. Are there any guides I can read to get myself up to speed about PE / the interview process?
Thanks!
interviews will be different depending on the size and what kind of shop it is. Nevertheless, if this is for a position straight from u-grad, I would imagine the technical questions would be similar to i-banking interviews and they may throw a case at you which you should be used to with your consulting background.
If its straight out of undergrad, I think you're more likely to get asked how good you are with a telephone...
Yeah, I'm not sure why they are even interviewing me, as I don't know the first thing about finance - no finance/accounting classes and my experience has all been applied economics / public policy economics. Is there a general guide that could help me identify what kind of shop it is, how well regarded it is, etc?
Thanks again!
Hi all,
I also have a FoF interview coming up in a few days - and am fairly ignorant about the process. Can anyone tell me what to expect?
Many thanks.
Meeting with some PE guys (Help) (Originally Posted: 03/25/2008)
Hi,
Im a ugrad, and Ill be meeting with some FoF PE guys tomorrow (going to their firm). I dont know a whole lot about PE other than some basic knowledge. I'd like to come off as intelligent and well-informed but not to much as it could possibly come across as me being "too cocky" or overconfident. Anyways, here some of the questions/discussions subject I wanted to bring up:
Since they are a FoF, I'm not sure how some of the above questions would apply, any thoughts?
So (to the PE guys here), if a ugrad were to come into your office, what could they talk about/discuss that would make them come off as well-informed and knowledgable?
Thanks for the help!
BTW, they asked for me to bring my resume...who knows!
For those who are interested, it went really well. We discussed an internship possibility.
What were the topics of discussion? Good luck on the internship.
We talked a bit about their line of work. They told me how they operate as a FoF, and they also co-invest along side other funds. We also discussed deal flow/size in Canada with the current credit crisis in the states. One of the guys told me that they really havent been affected too much since they are mid-market players. We touched abit on valuation, and some other small topics. They were also nice enough to walk me through a little "PE 101" crash course.
You know, I walked into there VERY intimidated. I was thinking "these guys will look down upon some ugrad 20 year-old"...I almost felt unworthy. But they turned out to be SOOOOO down-to-earth; always smiling, informative, never made me feel stupid when I asked a basic question. All-in-all, a great experience.
Which firm was this, if you don't mind my asking?
Sent you a PM
Sounds like a good meeting, glad it went well. Keep after the internship as it sounds like they would be a good bunch to work for in terms of educating you and walking you through their process.
I'll keep you updated on what happens!
well done buddy - stay in contact with those guys.
Even if the internship doesn't work out, I am sure that they will go up to bat for you when the time comes, seeing as how you made such a great impression. Good luck!
I hope! Thanks for the words of encouragement :)
MM PE Interview - Advice (Originally Posted: 10/13/2010)
I have an interview coming up with a solid private equity firm that focuses on MM firms. I have had a fair amount of ib interviews in the past, but I was wondering if anybody had any specific advice concerning how I should prepare. I'm planning on brushing up on the usual valuation, markets etc. Also, if anybody has any good articles or websites that might be helpful to me for this interview please send along. Thanks
Probably want to think about how you would look at the value of a firm from a high level. For example focusing less on "oh they have grown revenues at 6.2% for the past 3 years" but rather looking at macro things like market size, pricing power, industry growth, etc. Also probably want to be familiar with how an LBO works if you don't already know. They may throw a case study at you as well.
Thanks for the feedback. I forgot to mention that this position is entry level for recent graduates, so I highly doubt there will be a case study or a test assessing my knowledge of a LBO model. Any more thoughts?
My knowledge of LBO was tested by two different ibanks, and I dont even have LBO on my resume.
Why would MM PE hire someone who has 0 knowledge of LBO?
How much detail were they looking for in your LBO questions, The Phantom?
I mean, were they just looking for you to discuss the economics of an LBO (stable FCFs are used to pay down debt, magnifying equity, all the while increasing multiples), or were they looking for more?
MM PE Fund Interview (Originally Posted: 11/11/2012)
Hey everyone,
I have an interview lined up with a MM PE Fund. I already went through the first rounds, which went pretty much how I expected them to go (Fit questions, general accounting, LBO modeling, consulting type questions).
I am wondering though: What do you guys think will be in the final round? What should I expect? Does anyone know from experience in what direction final rounds at PEs go?
Thanks
if you said which fund..
you could get anything, what kind of question is this there is no way someone could tell you based on info you provided mate
more specifics please bra
Sure, sorry guys.
Middle Market Fund, concentrated solely on one specific region, with a specific focus on companies that allow not only for returns based on financial engineering (apparently they keep leverage at 2-3x EBITDA at max) but also on operational engineering (internationalization, consolidation etc.). Strong track record in Education and Health Care.
Does this help? If this is still too vague, please let me know if I can PM you.
So the LBO modeling test was done in the first round? Did they give you intentions of another test for the final round?
If the first round was heavy modeling/testing then expect the final round to be meeting the rest of the team and maybe talking more about your resume/background. Basically more fit than anything. However it's weird for PE shops not to do a full blown case, especially if operationally focused. If you got the job through a headhunter, I would just ask him/her because they usually let you know what to expect in each round.
Yeah, they did an LBO test in the first round. I sent them an email asking what the final round will entail. In the first round, they had me do an LBO Modeling Test, as well as a Consulting Type Case Study.
Okay great then I think the final round is definitely less technical and will involve repeating your story to different members of the firm. In my experience (3 rounds of interviews) the first two were technical/case/tests and the final one was just a "fit check" to make sure you are a fit for the firm and good to work with. I usually meet a lot of seniors/partners in the final round so it's a lot of repeating your story and most of the time the job is yours to lose at that point.
Best of luck.
Yeah, makes sense. Thanks a lot for your input.
PE Interview with Partners (Originally Posted: 12/16/2009)
Hi guys,
Going to the second interview round for a lower mid-market buy-out fund. Was explained that I had to go through three interview each with different partners.
They basically said that I wouldn't have to do any cases or so. But what could I expect? Would the partners still make use for technical questions or would it be more fit questions?
Also do you know where I can find any PE specific questions especially minded on market and competitor research? Found a lot regarding LBO modelling - but looking for more "analysis and research" questions. For instance "What would you do if I (the investment manager) asked you to research the fashion industry for potential candidates?" Of course this is a really basic question, so looking for a bit more difficult questions
Thanks!
Depending on the size of the group and the fund I would imagine that most of the interviews will be conversational and culture oriented. I assume your first round interview included some technical questions and background discussion to ensure a level of competency? The partners just want to make sure that you are capable, driven and motivated to work hard. From my experience, these types of interviews come down to can this guy do the work, can this guy be an asset to the group and would I be comfortable having a beer with this guy?
I wouldnt worry too much about industry specific research (but if you tell me the PE shops focus I can direct you) but I would reco that you read WSJ, FT, The Deal to ensure that you have a high level understanding of what factors are driving the PE business. For example, a recent article that was very interesting was KKR's discussion regarding becoming more like Berkshire.
The keys in PE right now are the continued absence of financing, general absence of investment exits (although I suspect that IPOs will heat up in 2010), depressed IRRs due to less leverage and longer hold times, most PE shops are focused on cost-cutting and refinancing debt and stewarding their portfolio companies
If you have specific questions let me know. Good luck.
Thanks for your answer!
Yeah got a few technical questions during the first round as well as fit questions. So it is also my impression that the chance of getting more tech questions is slim.
Is it "normal" in a smaller PE firm that you almost meet all the partners during the interview process? Guess the personal relation means a lot. Right now I am working in Fortune 500 company, so its quite different from what I am used to.
The PE firm has just closed its last fund, so it has actually managed to get investors to commit enough funds despite the crisis. What are good questions to ask the managing partner? Guess they should be pretty high level - could I ask something about the investment ethics?
Yes, it is very normal for a candidate to meet everyone of a small PE shop. It is almost given that most candidates would be competent workers so there is tremendous on culture and fit.
As far as questions to ask the partners, it's always helpful to scan their website and learn about their portfolio companies, take detail as to how much they invested, how long they've held the company for, etc. Frame your questions around the homework that you've done so that they know you are for real and notice something unique about the firm that others may have overlooked.
Good luck!
Interview with MM PE Firm (Originally Posted: 07/15/2011)
I have an interview with $2B MM firm in Denver, CO that is approaching soon and would appreciate any thoughts/points you can give me on the following questions. This is for a pre-MBA analyst role. My worry is that I don't have the traditional background that PE firms seek, namely IB experience. I have two years of financial analysis experience at a mid size company- $300MM in revenue.
1) I assume if they bring me in for an onsite interview, at least I have some of the basic qualifications for the position. Do you feel that is the righ attitude or do they interview a bunch of people that aren't fully qualified?
2) How different is PE interviews from IB? I have done quite a number of interviews with IB firms in the midwest with no offers
3) What is the most useful skillset for a pre-MBA position?
4) What is the compensation range for this position (Midwest).
Thanks in advance
Learn. DCF and LBO and brush up on your accounting. Get the job first then worry bout compensation. Expect technicals on valuation, accounting and fit, I think the fit questions are the most important.
understand returns and simple cash-on-cash return metrics. know what makes a good company. what diligence questions would you raise. what's a good LBO candidate. etc. etc.
i think the basics would be DCF and LBO... although i could be wrong. I'm just speaking from pre-MBA associate PE recruiting experience
I went through a very similar process of interviewing at IBs and then interviewing and eventually taking an offer from a PE firm (I was a consultant).
1) This is the right attitude. You have to assume this is the case and at least act confident that you are qualified to be interviewing there. I think it would be apparent to the interviewer if you thought yourself unqualified.
2) I think the important thing is to have a well thought out answer to the very basic "why PE/why our firm/why Denver" type of questions. Presumably you had similar answers for investment banking interviews, but your answer for wanting to go into PE will be different than IB.
Ask them if there will be a modeling test or case. No sense in assuming there isn't and then being blindsided. If there is a test, be sure to practice putting together a very simple, accurate model. The two keys here are that the model is right and that you can defend or explain your assumptions. If there is not a case, I would echo the sentiment of the guys above that you should still have a good understanding of what is happening in an LBO, what type of companies make a good candidate, and what the buyer is looking to get out of the investment.
3) The skill set you need is very similar to investment banking (go figure). More than just knowing how to put together a financial model, you need to have a very analytical, inquisitive mindset to evaluate deals. Throughout the deal process, you will be in the nitty-gritty details of data about a company's operations, customers, vendors, industry, whatever, and you have to be able to analyze all that information to try and get a clear picture of how the company will perform going forward.
You will be expected to just get your work done without anyone babysitting you. The ability to pick things up quickly, be proactive and anticipate what your superiors will be looking for, and multitask will be important. Also, your work always has to be right.
So In your interview, try to communicate that you are very analytical and can be trusted to own something.
4) It varies.
Read this: http://mba.tuck.dartmouth.edu/pecenter/research/pdfs/LBO_Note.pdf
Thank you everyone. Greatly appreciate your input!
PE Valuation Interview with 0 Experience (Originally Posted: 04/11/2012)
Hello all,
I have an interview coming up for a summer valuation internship at a massive PE fund in NYC. I have no finance work experience, albiet a PWM internship in my Soph. year. I've taken intro to finance and intro to accounting, and haven't really even touched DCFs as of yet.
So my question is this: with the interview coming up, what are some things I should absolutely know? I'm going to be researching LBOs and DCFs, but wouldn't know how to use them in a model - only the theory behind them. What are some valuation techniques I should know inside and out? What should I learn about multiples?
Basically, I have a couple of days to cram in as much as I can about PE, how should I prioritize?
Thanks WSO
Edit: I have a near 4.0 GPA and my referrals were very strong.
Lol this is the exact question I just posted except for IBD instead of PE
Just know the usual questions. Walk me through a DCF. Walk me through an LBO. How do the financial statements link together?
P.S. - Don't sweat it TOO much. If you're just interviewing for an SA position, chances are the interview won't be overly technical. If you have a great GPA and the firm is really tight with the people who referred you, then I figure that as long as you seem like a smart kid they can enjoy working with, the job's as good as yours.
I'm trying my best to avoid "choking" during the interview since I'm cramming everything and b/c it's not second nature to me yet.
I would start with talking theory (you need to know the equations if asked). So start with discussing how the theory of valuing a company is the present value of the future cash flows. The create the model you project out FCF, discount at WACC, which is weighted debt, equity, which you get from CAPM model, etc (obviously talk in much more detail than this). Where knowing the formulas is important is when you get a follow up, "How would you calculate the cost of equity for _______). Then dive into the formula and how the cost of equity is calculated and why.
Get the guide for sure.
Once you've done that, the interviewer will start asking the more detailed questions that they want answered (how to calc FCF, what is WACC, tell me about the terminal year, etc...).
what is a valuation internship exactly? are you basically on the deal team?
Undergrad -> PE full time interview (Originally Posted: 10/08/2011)
All,
Was lucky enough to secure a final round w/ a decent PE shop for a FT analyst position. Did IBD last summer at a BB and have no idea what to expect from the interview (first rd all fit). Any help?
pm me, might have some insight
xyz: sorry to hijack your thread, but I have a second round coming up at a PE firm for an Analyst position (undergrad) and am supposed to take a modelling test. Any idea on how to prepare? Have never built an LBO model in my life b4!!
Thanks!
Breaking into wall street
You don't need to know very technical stuff I guess and go hard in the details of a full-fledged 3 statements model. Try yourself at building a simple income statement + Sources and Uses based model that would answer the question :
"We buy a company with €100m of EBITDA at 8 times. We sell it back next year. Give me your assumptions and what the IRR would be on that transaction."
apparently, it's going to be a reconciliation between 3 financial statements, a DCF and some comps. I don't need to build it from scratch and the exercise would take an hour.
Any idea as to how to practice for this? I suppose for comps I could get some public company's accounts and calculate some multiples. What abt the reconciliation bit? In fact, what does that even mean??
They just mean that they want you to build a 3 statement model (IS, BS and CF). The reconciliation just refers to how the three statements link up (i.e. net income on the IS links into the top of your CF statement, CF calculations come from your changes to the BS, and then your cash on the BS links from your ending cash balance on the CF statement etc.) You'll also (likely) need a schedule tab for PP&E, retained earnings, any debt etc, and then you'll need to build an assumptions tab to project out their financials going forward.
As Simple as said, sign up for Breaking into Wall Street. If you don't have to build the model from scratch and it's only a 3-statement, then you're essentially just creating an assumptions tab and filling in templates (probably far more simply than I described above). BIWS will get you well set up for this.
They just want to make sure you know how to tie 3 financial statements together...
i think that just means to link the 3 statements together. Sounds like a bit too simple to be a modeling test
BIWS is a bit expensive tbh....
Define expensive...it's $197 for the excel and modeling fundamentals (which I'm guessing is all you need), and what you gain from the course could ultimately decide if you get an offer for a PE gig which is probably going to pay $100k+ your first year.
I'm sure you could find something through google on how to build a 3-statement model, but personally, I think $200 for a clear, concise course is well worth it.
As an aside, when asked questions like "where would you invest in?", how should you approach it? I've been scoring the web for recent PE deals to pick an industry that seems popular right now..... but haven't really got hold of a trend (although consumer/retail seems pretty active).
Also, once you think of an industry, how do you narrow down a company? Do you have to walk them through how the company fits the usual characteristics that PE firms look for? How in-depth should we go?
Many thanks!
Healthcare and healthcare IT seem to be pretty hot sectors right now. As for a specific deal, check out the Emdeon/H&F/BX and PPD/H&F/Carlyle deals. For healthcare IT deals, multiples are highly attractive, there's a lot of bullish sentiment regarding the baby-boomer population coming "of age" for Medicare, and federal healthcare reform is calling for meaningful use of healthcare IT which is expected to further fuel demand.
This being said, you should also get a grasp (if you haven't already) of the specific areas that the PE firm you're interviewing with focus on. It's good to know the general market and not show like you're just pandering to them, but see what sectors they focus on (if they have a page showing current or past portfolio companies then do some digging into each company) and then go and research at least a few of these industries to see what the general market looks like.
Without FactSet or CapIQ, it might be harder to narrow down specific deals. However, the information is out there, so you just have to look. Without access to Bloomberg or research systems, I'd start with the WSJ.
Hope that helps.
These guys tend to focus on telecoms, media and transportation. so, talking abt an investment in another industry might show a lack of interest/commitment etc. But at the same time, they'll prolly know more about the industry than I, thus follow-up questions can be nasty.
It's certainly good to know about the industries they focus on, but I think it's also important to show you know about the rest of the market. If you went in there and only talked about Qwest/CenturyLink, Time Warner/Insight and United/Continental, you run the risk of looking like you only researched one small part of the market in order to pander to them, instead of knowing general trends in the m&a/pe markets.
Definitely brush up on recent deals in their sectors of interest, but have a couple of other attractive/interesting deals in other sectors.
PE Interview - EBITDA (Originally Posted: 03/04/2013)
Hi all,
Assuming that a company can generate 10% EBITDA growth in 5 years, (with Entry multiple = Exit multiple), should the PE firm invest in this company given that the PE's IRR has to be 20%?
Thanks.
I think you need to ask some more questions:
What kind of debt can you put on this company? What kind of rate can you get on that debt? What are the capex requirements? Working Capital? How much debt is there on the balance sheet initially?
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