How much detail on CF/BS when discussing deals in an interview?
Going to start recruiting soon as a second year analyst in IB M&A. I'm at a boutique, and we mostly do buyside advisory deals. I closed 2 deals recently (~$250mm) as the sole analyst on a 4 person team, so I was the one building the whole model and running diligence, etc. The issue is while I understand the deal rationales and actual numbers pretty well, the models we build....were honestly not the greatest.
One deal was a weird carve out situation, so we literally put in an LOI knowing only LTM revenue and gross margin. Over the course of diligence, we slowly got target projections for the rest of the income statement, but nothing in the way of cash flow or balance sheet, so we made some broad assumptions and never bothered to do a full 3-statement, esp. because this target was tiny relative to our client.
The second deal was a super straightforward acquisition from a PE seller. This was legit probably the easiest deal I've ever seen in my life. Everything about the target was picture perfect for our client and purchase price was easily negotiated because we had no real competing buyers. Consequently, our client didn't even really care about our model beyond what the revenue and EBITDA projections are.
So basically, 2 very interesting deals with really good P&L projections, but we skimmed SUUUUPER hard on the CF and BS stuff....(also because items like capex, and NWC, etc. were not that impactful)
In PE interviews, will this raise eyebrows? Or is this kind of par for the course in buyside advisory roles in IB?
bump
I don’t think this is an issue. Case studies which ask you to forecast a full balance sheet are not frequent. You should focus on knowing how to forecast the following: - Accounts receivables / payables / inventory - Capex - D&A: existing asset base + new capex D&A
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