Still new to PE, and I got a hardcoded model from a sell-side advisor. They have a linked model (i.e. they broke the links and gave us the resulting output) but will only release the linked version to those who make it past NBO stage. 2 questions occurred to me: Is this a common practice based on anyone's experience? And if so, what's the rationale? For context, I'm based in Asia. How do folks here deal with such models? Do you re-build your own linked version, or try to link the version you got?

This is common, and it's to "limit information flow" so you don't get the finer details about the actual model drivers and how they flow through. The only practical effect of this is that it makes your life as an associate harder and makes your NBO less informed.

Models from advisors that aren't linked

Still new to PE, and I got a hardcoded model from a sell-side advisor. They have a linked model (i.e. they broke the links and gave us the resulting output) but will only release the linked version to those who make it past NBO stage. 2 questions occurred to me:

Is this a common practice based on anyone's experience? And if so, what's the rationale? For context, I'm based in Asia.
How do folks here deal with such models? Do you re-build your own linked version, or try to link the version you got? If you're doing the latter, any advice on doing so efficiently, especially for models that are detailed?

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chihayafull

PE

2y

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This is common, and it's to "limit information flow" so you don't get the finer details about the actual model drivers and how they flow through. The only practical effect of this is that it makes your life as an associate harder and makes your NBO less informed. That being said, if I was the CEO of the Company I also wouldn't wanna blast out a fully detailed business plan to 30+ sponsors, so I get it.
If the business model is straightforward (e.g., limited segments, MRR bookings flows down to revenue, etc), then it should be simple to re-link, you probably have to build your own KPI drivers tab with implied metrics and then flow it through the sell-side model. If it's a super detailed hard-coded model (even if not hardcoded), then I tend to re-build the whole thing and collapse detailed line items into groups.
1. Example 1: Company operates on subscriber-based MRR model, you only know current subscriber count, but you get hardcoded svc revenue projection. You now have a proxy for ARPU, and you can make assumptions around ARPU growth, use that to imply net subs growth, and you can take a stab at gross adds versus churn. It'll never be clean or exact but it's a good proxy.
2. Example 2: Company projects out 5 business segments with 10 SKUs each and you don't know the difference/won't get that detail in a first round. Just rebuild and collapse into a blended business segment-level view first with implied KPIs as noted above. Should give you a good high-level "what do you need to believe" without getting yourself lost in the sauce

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Authored by: Certified Private Equity Professional - 2nd Year AssociateCertified Private Equity Pro

IB

Analyst 1 in IB - Gen

2y

This is helpful thanks

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Authored by: Certified Private Equity Professional - 1st Year AssociateCertified Private Equity Pro

pierheld

?

2y

Cheers, very helpful. Just bugs me cos it doesn't feel like a good use of one's time to have to re-link or re-build a model.

When you started out in PE, were you given guidance on when to relink/rebuild, or was it a sense you built up yourself over time/based on your banking experience?

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OverlyAdjustedEBITDA

PE

2y

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Authored by: Certified Private Equity Professional - PrincipalCertified Private Equity Pro

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Models from advisors that aren't linked

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