Modelling Help for Interview
Hey guys,
University year: Freshman
I have been looking for an M&A summer internship in my home country (Scandinavia). I finally manage to convince an MD to interview me. He liked my story but he is not sure about my modelling skills. He asked me to create a detailed financial model (with scenario analysis), Merger Model & an lbo model. I have studied from various materials (internet & books) so I am not really scared of making one. However, I haven't really sat down to build one from scratch.
The thing I am confuse is which company to pick. He mentioned that I should try to pick a simple company. And for Merger Model & an LBO Model, he was like be creative and impress me. So basically his guidance were very vague. Do you guys have any idea which company I should pick up? (Really not looking for something which is complicated)
For Merger Model & LBO Model should I just pick a company and do the modelling? Or should I pick a recent deal and create a model on them.
He mentioned that I should not spend more than 20 hours on it (more like between 10-20; since he knows I haven't made one from scratch).
His focus was also on "detailed complex model" like as much as possible; since he wants to see how much can I break down in simple terms. Any suggestions that could help me?
You should pick a company with relatively simple financials. Apple is a good example (most modeling courses use Apple). Create a three-statement operating model. Make sure that it's a real model (i.e. build the CF statement yourself). You could then go above and beyond and pull together some comps and precedent transactions (the latter might be tough to do without a database like CapIQ). Then, create your LBO. Keep it simple (e.g. have two tranches of debt, no dividend recaps, etc.). For your merger model, I would find a smaller public company for Apple to acquire. Make it logical (i.e. don't choose something unrelated like Apple to acquire GS).
I hope that helps. Take a look at Macabacus.
Thanks for the advice Sil. At the risk of sounding a rookie/dumb; do I create an LBO on Apple or the target?
Yeah I have actually learned modelling by going through models on Macabacus. The site is extremely helpful.
I would assume that Apple is the one acquiring another company. So, pick a company and create an LBO on that.
Sil is right on point. The only thing I would add, if you don't want to do Apple, is to look for something simple with maybe one or two revenue streams and their balance sheet simple. Try to get a company that condenses their balance sheet so that you don't get down into the detailed, unique items (e.g., three different accounts payable line items). If he said to impress him, a simple model might not do that, but that's a risk we're willing to take. If he does give you the impression that he's not impressed, I might even add "I wanted you to get a quick turnaround, so I kept it simple, but I also meticulously checked it for errors."
Yeah that's what I was thinking as well. The reason I would prefer not picking Apple is that you easily find information on it all the web. So basically, he might be able to pick up my errors relatively easily than let's say, I pick, a company which is not a household name. But if I do go with Apple, I will also tell him that I chose Apple because he can easily check out my assumptions and verify it. As I am not afraid of making mistakes since I am very eager to learn and get his constructive criticism. It feels like a double edged sword.
Go to macabacus.com you will find some models there that will be very detailed and in depth. Don't worry about trying to understand everything, instead I want you to use it as a guide for how you can make your presentation look well formatted and organized.
Then go to http://aswathdamodaran.blogspot.com and read one of his valuations. (He is a pretty good professor and a member on WSO) Try to follow his examples by looking at how they work. Choose one that is simple and then get to work building your own.
Great advice. I actually learned modelling by going through the models at Macabacus. You are right that understanding everything in them has been really difficult for me till date. However, I do feel that I have absorbed majority of the main content and the rest I will be able to learn better through real work.
I will surely check out Damodaran's blog; I saw them before but never sat down to read them properly. I will get on it. Appreciate the help
FinanceBrah @RobberBaron123" Sil
Hey guys, any idea how much time do you think this should take me? From reading 10k to completing the model. Would just like to know the norm/ average time for first timers so that I am better aware where I stand and how much do I need to improve on in terms of speed.
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