Case Studies in PE
First year analyst here who sat out the first round of interviews: I wanted to know if anyone could shed some light on what case interviews look like aside from the LBO modeling portion. Is it normally something along the lines of you are presented a company and their products and then you have to continually ask questions. Or do they just say here is a company, and then you have to make assumptions about the 1.competition 2. market, etc. Any light into a sample of how these go or good ways to prepare would be super helpful!
Think of it as basically being presented a CIM and being asked to evaluate it. As a banker, you produce an over-polished, glamorized CIM and your job is to show the company in the best light. As a PE investor, your job is to be skeptical and ask the questions that matter about what is great / what could go wrong.
In formal case study interviews, many PE firms will actually give you a (usually old) CIM. In shorter discussions, they will give you a short prompt about the company (think the CIM's exec summary) or a public company/major private company in the sector that you may know about already.
If it accompanies a model, you have to incorporate the CIM's story into the operating build and ask the incremental questions that the CIM doesn't answer (e.g. what is the real competitive advantage? what is the quality of the management team? what are the trends and unit economics at a more granular level (by customer)?). If it is a general conversational prompt, you should seek the major information that a CIM will present (company - growth, scalability, margins, recurring/non-recurring, market/competition etc.)
To prepare, look at CIMs and formulate critical theses (pros and cons of the investment). Ideally, think of these in conjunction with the model (if the pros outweigh the cons, how much am I willing to pay for the company so that it earns the appropriate return?).
Super helpful. Thank you!
Be prepared for many different scenarios. Could be a minority or majority case study. A PIPE or secondary transaction or pro rata reinvestment on an existing company. Could also be full or partial sell side on an investment. Not all cases are CIM based so be ready for trick questions. Someone gave me this advise and it saved my ass when I was interviewing for an internship. They were expecting me to fail! Got the full time offer too.
Thanks for the advice! A quick followup, how did you prepare differently for these types of questions versus a classic CIM/LBO type?
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