How to choose a company to analyse given 0 assumptions?
Hi all! Per my title above, would love to get some insights / validate my train of thought from PE/modelling experts.Apologies if that’s something stupid - this is my first PE interview, so I want to get it right.
I was given a set of public companies from which I have to choose one and prepare an LBO model. My understanding is that I need to choose a company that fits the most the investment thesis (growing company, focus on revenue expansion rather pure debt math)
But this is for me the trickiest part: I quickly analysed every company and got stuck because there is none that would fit the thesis.
> 2 of them had stable/stagnant revenues in the past 3 years, OK profit margin, one operates in a segment with more barriers to entry than another one. However the one with less barriers to entry seems to be more promising
> 2 of them have great growth but are enourmously overpriced. I struggle to see how this can be grown further and sold down the line at the same multiples.
>1 seems ok but it’s a very small company with almost no financial information publicly available (float c. 5%), and esp not established enough
Question is: how do I get out of the weeds ? I don’t want to choose a random company out of 5, I get a feeling that I will be judged on my choice too.
So right now I thought to go with one of the first 2 (not so much growth, ok margins, not that overpriced). Am I doing it wrong ? Or should I just go randomly with the one where I have the most info available lol
On top of that, I need to create my own assumptions about the transaction & Debt structure. I thought to check what was the leverage level in the sector, but how should I go with the pricing?
Apologies again if that’s noob, but i would be glad to receive any guidance and help. Thank you!
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