got PE interview ; interviewer asked to build LBO model in 3 hrs

macabacus has a good LBO model tutorial.

I agree similar situation.

Let me give you some advice... you've only got a week to prepare and are likely spending the bulk of your time working as well... so focus on the big picture LBO and don't get too bogged down in the details. Keep everything as simple as possible the last thing you want to do is be sitting 2 hours into the case study and not be sure how to deal with an assumption.

Also, what is your background that you've never done an LBO model and still managed to get a PE interview?

Bring a flash drive with one on it and upload it. Or if you have a smartphone save one on it for reference - it's not cheating its being resourceful.

If your not crazy about that adivce. I too agree with what Marcus had to say.

Ummm... no don't do that at all. This guy is just trying to get a referral bonus.

WSP may be useful for college kids or summer analysts. If you need to learn how to build an LBO model in a flash, build your integrated financial model and canvass it with a LBO financing/equity through the PF balance sheet, purchase adjustments (goodwill, asset write up) and sources and uses. Make an assumption on exit timing (exit multiple should be purchase multiple) and calculate IRR net of net debt.

pm me if you're interested in a simple tutorial

I know some ppl may laugh at me, but what's the difference between an LBO model and M&A model; like I know they're used by different teams in an IBK, but what makes them so different?

Sorry to hijack the thread but I'm hoping to start building my own models soon and want to know what the big differences are so I can target the easier one. Thnx!

LBO model is one kind of a M&A model.

In LBO, you are just assuming a lot debt coming into the target company and wiping out the existing equity. You will have the debt repayment table and different assumptions for your 3 statements to project out your cash in order to figure out how much debt is repaid say 4-5 years down the line. Then you get the IRR to see what multiples you should sell/buy it with

Another form of the M&A model is the Accretion and Dilution model, where you basically calculates if your combined EPS decrease or increase. You wiill use stock, debt, or cash or sometimes combination of the methods to finance your transaction. In there, you are taking adjustment for taking cash/stock/debt to finance the deal (lose of income on cash, FDSO being higher, debt interest expense, etc.) The A/D model tells the owner of the company whether it is a good deal to proceed or not. However, if you work in the industry long enough, you will realize accretion/dilution of EPS doesn't mean jack shit. It's just the statistics that CEO wanna give to investors who only know EPS as one of the ratios to measure a company's financial strength.

Thank you everyone. appreciate all the feedback.

I'm leaving tomorrow. Int. is on Wed. Meeting another associate, who will give me "an investment book" and then put me in a room for 3 hrs. I should come out with a "buy or no buy" decision. How much can u jack up the b/s with debt ; valuation.

in email he said, "nothing fancy, just want to make sure core modeling skills are there, lbo, m&a model and do some write up on your assumptions, whether they're defensible or not".

Then I meet 2 other partners. If things go well, recruiter said, they'll make an offer on the spot, so come prepared to take it or leave it. apparently they need someone right now as some of the guys left for b-school.

Marcus : McKinsey consultant / Council of Foreign Relations / Kissinger & Associates. Excuse my lack of modeling chops.

never built LBO before, but I've got a good grasp. For practice, I pretend to be Henry Kravis and did a LBO model on Dell then emailed it to my ex-boss (working with Carlyle now) and he pointed out some technical mistakes. did OK.

Will let you guys know how I did. And I'll make sure I bring the case study with me, just in case you guys need it for practice :p

Thank you again