Industrials Case Study Help

Hi guys,

I have an upcoming 6-hour Industrials case study for an M&A role. The exercise involves building a 3-statement operating model from scratch for a listed company, along with a short slide deck presenting the investment case and key findings.

To prepare, I’ve been repeatedly building the Mergers & Inquisitions 3-statement model from scratch and can now complete it in around 90 minutes.

My question is around the appropriate level of detail for the model given the time constraint.
For example:

*How detailed would you make revenue assumptions?

*Would you forecast working capital using or % revenue?

*For capex, would you build a full PP&E schedule link, or is the % revenue approach generally sufficient?

*How much attention would you give to debt schedules, and interest calculations?

*Are there any common pitfalls candidates fall into by making models either too simple or too complex?

Any thoughts from people who have completed similar case studies would be greatly appreciated. Resources or examples would also be very helpful.

Thanks!

7 Comments
 
Most Helpful

Here is what I would do:

  • Revenue Assumptions / COGS Assumptions
    • If they give you a CIM or have clearly laid out several different operating divisions, I would make sure you forecast each division as a separate entity. Take in to account the faster growing end markets and apply a higher growth to those segments. Units that are not not key focuses can be grown at Inflation. 
    • COGS can be left at historical averages or have slight margin improvement. But I would show that there are different division with different margins if applicable. 
  • Capex
    • I don't think anyone will ding you for using % of Revenue, but you do need to think if it is an asset heavy business model and make sure there Capex is accurately reflected. If you have time, a PPE schedule can be good, but if you build a busted PPE schedule, that can ding you more. 
  • Debt Schedules
    • I would not put a ton of effort into this portion. You are probably going to be able to hold debt same as historical levels. 
  • Tips:
    • I would make sure everything is clean and flows nicely. I would also not down play the PPT. Make sure the investment highlights are well thought out. You can even cater a few investment considerations to platform vs. add-on depending on size of the investment. 

Happy to answer any additional questions. 

 

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