Trying to figure out what people might be thinking on the other side.
Why would a firm test you on building LBO/DCF model when the firm is M&A focused firm...?
Would appreciate any insights & thoughts.
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I am going to keep my answer and examples very simple as I get the feeling you do not quite understand M&A.
DCF is a method of valuation. You would be required to know that in M&A. Lets say you are advicing the company being acquired. You have to put a value on it, right?
When you work in a M&A focused firm many transactions will involve taking on debt. Say you are advicing company A's acquisition of company B. There are many ways for comapany A finance this acquisition, one would be to leverage company B.
Which one would you say is more important to know how to do or which is stressed more in interviews for summer analyst positions? LBO or DCF Modeling? At my current internship my boss volunteered to help me at some point before I left to either walk me through and teach me DCF or LBO modeling, but not both. I'm stuck as to which one to ask for his help with.
DCF more relevant.
understand the theory behind both... it should be relatively easy to talk through the principles even if you haven't done it before
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