Growth Equity Model Test

Based on the most helpful WSO content, here’s what you need to know about preparing for a Growth Equity (GE) model test like the one you described:

1. Key Components to Focus On:

   • PnL (Profit and Loss Statement): Be prepared to build this from scratch using high-level assumptions. Ensure you understand revenue drivers, cost structures, and how to calculate EBITDA and net income.
   • Balance Sheet: You’ll need to balance it and build it using Net Working Capital (NWC) drivers. This means understanding how changes in accounts receivable, accounts payable, and inventory impact the balance sheet.
   • Cash Flow Statement (CFS): Be ready to link the PnL and balance sheet to create a dynamic CFS. Pay attention to operating, investing, and financing cash flows.
   • Minority Transaction with Structure: This likely involves modeling a partial equity investment. Be familiar with terms like preferred equity, liquidation preferences, and how to calculate ownership percentages and returns.

2. Timed Test Strategy:

   • Time Management: With only 2 hours, allocate time wisely. For example:
     • PnL: 30 minutes
     • Balance Sheet: 30 minutes
     • CFS: 20 minutes
     • Minority Transaction: 30 minutes
     • Review: 10 minutes
   • Simplify Assumptions: Don’t overcomplicate. Use straightforward assumptions to ensure you complete the model within the time limit.

3. Practice Resources:

   • Modeling Tests/Case Studies: A WSO thread suggests practicing by building an LBO model from scratch using a public company’s 10-K and research reports. While this isn’t exactly a GE test, it’s excellent for honing your modeling speed and accuracy. (Source: https://www.wallstreetoasis.com/forum/private-equity/modeling-testscase…</a">Modeling tests/case studies to share?)
   • Granularity: Another WSO thread emphasizes being as granular as possible with topline, costs, and cash flow items. Focus on backing up assumptions and ensuring your valuation makes sense from a Free Cash Flow (FCF) yield perspective.

4. Additional Tips:

   • Excel Proficiency: Ensure you’re comfortable with Excel shortcuts and formulas to save time.
   • Minority Transaction: Review how to model equity splits, calculate IRR/MOIC for minority stakes, and incorporate any structural elements like preferred returns or convertible features.

If you’re looking for specific case studies or templates, the WSO community often exchanges resources. You might consider reaching out on threads like the one linked above to see if anyone is willing to share relevant materials.

Sources: PE Case Study 48h, Modeling tests/case studies to share?, Modeling tests/case studies to share?