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How do you model an earn-out in an LBO model?Not necessarily. Depends how you fund it. If you raise debt or fund the earn out off a revolver for example, you trade that liability. maybe you generate some cash and fund the earn out that way too. Worth noting, if it's a material earn out, be sure to get your taxes right. I.e. if allocating... 1 month 3 weeks
Waterfall modeling question - promotesNot sure I understand your question. Just think about it as a pool of proceeds and who gets what cut of the proceeds. If the hurdles are 8% and 14% IRRs, I'm not sure what you mean by "equity" and "paying down the balance" 3 months 2 weeks
Choosing banks summerPretty good group in NYC; recently poached three top MDs from CS which used to have one of the better power groups on the street http://dealbook.nytimes.com/2012/05/16/bank-of-america-hires-3-power-specialists-from-credit-suisse/?_r=0 4 months 1 week
Accept Megafund Offer or MBAIt sounds like your current shop is a nice gig if you see a real path to partner. Promotion? Getting PE to pay for your MBA? Strong fund performance? That's all pretty great and not easy to come by. But are you underpaid? 2x your comp is a big move from MM to Megafund. What about carry? Going back... 4 months 2 weeks
Am I getting hosed on PE associate comp? Do you have any insight into your funds' economics? For your size fund there should be enough to pay you more than that assuming a 1.5%-2.0% fee. Do the partners own 100% of the GP or did another fund or LP help seed your firm and own a big piece of the pie? I would say as a general matter,... 5 months 1 week
Entry Multiple in Case Study / PE Modelling TestRun the cash flows. Do a quick levered DCF assuming 20% hurdle. It's essentially what the LBO is anyway. Get to a multiple that works without any expansion at exit. Then sanity check. Typically you get an industry and should have a view on valuation. 7 months 1 week
URGENT: Need help with case challenge that's...Not sure I understand #1. Take the comps for 2014E and 2015E (use research consensus estimates) then compare these multiples to your forecast for your company and pro forma for the merger candidate and synergies. You should consider a control premium for the business you are acquiring Also not... 7 months 1 week
Can someone explain to me what this is?It is just a model / waterfall for depreciation of forecasted capital spend. If you buy something, you will have to depreciate it over its useful life, both for book and tax purposes (which are different and have implications on cash flow, probably beyond this discussion) You will have the D... 7 months 1 week
Good questions to ask in a PE interview?Generic questions you should ask either way (in no particular order) How are deals typically staffed? Walk through the existing funds - what kind of MOIC/IRR for each? If you get an offer, ask for their valuation material or a summary of their portfolio, valuation marks, etc... Are you a more... 7 months 1 week
Dividend Recap Modeling QuestionI would guess that this questions is meant to be in the context of the initial investment. Otherwise the MOIC would be infinity since a dividend recap you lever up the balance sheet with 100% debt (typically) and take out a dividend. So cash equity in for the re-cap = 0 but money out = $100 (for... 9 months 1 week