Hi guys,
I recently interviewed for a tier 1 bank in a regional office for an internship position. The interviewing process was:
1 interview with HR
1 interview with sr analysts, associate and VP
1 interview with director and VP
HR asked me the classical fit-questions
First technical (sr analysts, VP and Associate)
- how do you build financial projections for a business plan from scratch? which info do you need? Asked me to explain basically every point and how do I compute it
- which multiple do you use to valuate an airlines company?
- What's leverage? Why is it so important? When a company should use leverage?
- LBO Model? Difference between IRR and Money on Money?
- asked me a small case about an LBO - the answer was to change the exit multiple
- When should a company use equity rather than debt ?
- EV --> how do I compute it? what minority interests and investments in associates are? generically speaking, which is the difference between them? Should I include severance pay? Why?
- Do you know the different types of leasing? why are they different? How can I understand if it's a financial or an op. leasing? Should I consider them when I compute NFP?
- DCF, walk me through it. How can I compute TV without perpetuity formula? CapEx, NWC, growth rate in retail
- How do you valuate an high growth company? Tell me about PEG multiple
- DDM, when can I use it?
- WACC, CAPM, FCFF, FCFE
- DSCR and Interest coverage ratio
- Beta L and U, how do I pass from L to U and why is it useful in private company valuation?
- CAGR
- a lot of questions about margins and how to increase them
Second technical (vp and director)
- sell-side pitch
- Accretive/dilutive merger - definition.
- Two company - buyer P/E=15 target P/E=20 is Accretive or dil? which is the Ke of the buyer? How can I make a dil merger become accreitive?
- two stocks: one in telecomunication and one in luxury, Tel: EV/EBITDA x5 EBITDA Margin: 40%, Lux: EV/EBITDA x11 EBITDA Margin: 20% - why is L's ev/ebitda higher despite ebitda margin is lower? why is EBITDA a FCF proxy?
- market cap, rev and NI of the firm, market cap of an automotive firm
- Is TV always present in DCF? Why?
- Why should I add Min Int and substract investments in associates when I compute EV? Where do I find Investiment in Associates's "contribution" in the financial statement?
- do you know in which percentage of the total EV, computed through DCF, does TV account for in a well-established company? and in a start-up?
What do you think about it? Don't you think it's too technical for an internship?
Yea that's excessive
They told me in the P/E question I should use debt to make an dilutive merger become acretive, but I didn't understand why.. any idea?
Well assuming it is a 100% all stock deal, in the example he provided initially (buyer with lower p/e), the deal would be dilutive unless enough synergies are realized.
Regarding the second part of the question, I'm not sure that it is always the case. However, the idea there is that by using debt financing, it effectively becomes a 100% cash deal instead of stock. As a result, the buyer's share count would remain the same.
Accretion / dilution would therefore be based only on the numerator of the EPS calculation. So it would depend on whether or not the Net Income post transaction would be greater than pre transaction which, holding everything else equal, would seem to be an appropriate assumption.
Make sense?
The fundamental point of that question is to compare the effective weight cost of capital to finance the acquisition vs. return on equity of the target. Noting that cost of equity is just the inverse of the buyer's P/E ratio or EPS/P, which makes intuitive sense. You're receiving $X of earnings per share for every $Y cost of a share.
In the first scenario for buyer's P/E is 15x and seller's P/E is 20x all it's asking is compare the cost of equity of buyer (1/15 = ~6.7%) to the return on equity of the seller (1/20 = ~5%). Because your cost of equity is higher than your expected return, it's a dilutive transaction.
In the second scenario, using debt reduces your WACC because most of the time debt has a lower cost of capital (due to seniority and tax shield). For example, if it's 100% debt at 5% interest and 40% tax rate, your WACC would be 3% (5% * (1-40%)). So your 3% cost to finance the transaction yields a 5% return, which would make it Accretive. Same exercise if it was 50% debt and 50% equity (or whatever ratio of debt to equity). All you're is doing take the actual WACC and comparing it to the yield of the target's stock.
This assumes no synergies, but even if you included synergies into the equation, the framework is still the same.
Back to the original question, the interviews do seem more technical than what you'd ordinarily get at a BB, but not entirely out of line with what you might get at an EB. And don't think any of it isn't covered in some kind of interview guide. Interviews have gotten increasingly more technical over the years as availability of guides have also become much more accessible.
Was this for 2018 SA?
Just had first round interviews with a regional IB (Originally Posted: 01/17/2013)
How long do you think it will take to be contacted about round II?
Looking through his profile he is currently pursuing a Master's degree...
Nope.. this was for an off-cycle.. Hope for summer internship will be simpler!
It will depend on the bank's hiring timeline and how busy they are. If this is for a lateral position then they will likely schedule the next round solely around their workload. On the other hand, if it's for a SA position that has a more standardized recruiting process you'll probably hear back within a week or so.
you should typically hear back same day or within a week. however like the above poster says it's not unusual to hear back much later if the team is busy.
Regional bank/middle market interview? (Originally Posted: 06/15/2015)
I've collected a list of some regional/middle market banks, and they usually have 10-50 employees. If I go to interview with such banks, will they focus more on technical questions than fit? How are the interviews different from those at big banks?
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