How long to model from scratch for On-cycle
Hi all, so looking into the on-cycle process and very interested in participating, and have been actively prepping. I can definitely do a model from scratch, no problem, but it takes me a long time (last timed model was PF level 4 from scratch in exactly 3 hours). I know this isn't good enough (I think I spend too much time on formatting), but I was wondering what's the benchmark I should go for is - 90 mins from scratch? What level of PF should I be at for on-cycle?
Also, for MF growth firms (e.g., GA, TPG growth), how different are the on-cycle processes? Are the models you do fundamentally different (i.e., are they more minority investment focused, etc.)?
Any help appreciated - thanks!
bump
For 90-minutes: Extremely basic 3-statements from scratch with no bells or whistles (2 tranches of debt, no mgt incentive pool, simple P&L, etc). The thing that will take you the longest / most brainpower is doing the PF balance sheet quickly and not fucking it up so you don’t waste 5 minutes wondering why your BS doesn’t balance. In fact, aim to do the bulk of modeling done in 60-minutes to leave yourself time to review if shit gets fucked up.
If there’s a case write-up involved in the 90 minutes: simple LBO with no B/S, just a simple NWC assumption and either make D&A = CapEx, or make your CapEx assumption slightly higher than D&A. Save 30 minutes to review and type up bullets.
What about for more complicated models including management pool, revolver, PIK toggle, dilutive securities and more complicated working capital protections?
You should have a revolver no matter what
Mgt pool should take 5 minutes - assume 10% option pool at cost. They receive 10% diluted equity share if exit equity is above cost. Or you can just assign them 10% of “profits” above cost or a certain hurdle.
PIK toggle should take a few min. If toggle is on: add back to cashflow statement and add to debt balance. If off, leave it in interest expense, don’t add it back, but increase your debt balance.
Each subsequent “complication” should only take a few minutes in an isolated instance. Suggest putting together the basic LBO first, then layer on the “complications” sequentially so that at a baseline, you have a fundamentally working model and you can easily check if the things you’re adding on are working correctly or not.
On this note, anyone have formatting tips / cheat sheet? I can run through from scratch but making it look like PF can be quite difficult for me, would appreciate any insight but maybe just need more reps. Good luck everyone.
Quick access toolbar. Don’t use color shading just use bold underline to indicate main things (dividing off the income statement like last net income or EBITDA line and B/S) and thin lines for things like subtotals.
are we going to be able to use our own excel? will the firms provide a laptop
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