I know how to do a paper LBO but I tend to notice that I’m not as quick as interviewers would like. I would assume this has to do with quickness of doing mental math or maybe doing certain parts that isn’t necessary.
I’m curious what yall thoughts are on this. Thanks!
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To speed up your paper LBO process during interviews, consider these strategies:
Memorize Key Formulas: Ensure you have all the necessary formulas memorized to avoid wasting time trying to recall them during the test. This includes formulas for calculating free cash flow, net debt, and enterprise value.
Use Rounded Numbers: When possible, use rounded numbers to simplify calculations. This can significantly speed up your mental math without substantially impacting the accuracy of your LBO model.
Focus on Essential Elements: Concentrate on the most impactful elements of the LBO model. Typically, these include purchase price, financing structure, exit multiple, and key operational metrics like EBITDA growth. Avoid getting bogged down in less significant details unless they are critical to the investment thesis.
Practice Under Time Constraints: Regularly practice paper LBOs with a timer to simulate interview conditions. This will help you get accustomed to working under pressure and improve your speed.
Leverage Mental Math Tricks: Improve your mental math skills by learning shortcuts and tricks. For example, learning to quickly calculate percentages or compound growth can save valuable time.
Prepare a Mental Checklist: Have a mental checklist of steps you need to cover in the LBO model. This ensures you remain organized and can swiftly move from one calculation to the next without omitting crucial steps.
By implementing these strategies, you should be able to increase your speed and efficiency in constructing paper LBO models during interviews.
Sources: Paper LBO Model for SA interviews?, Private Equity Recruiting Process (From Banking), Business School Case Books, Private Equity Recruiting Walkthrough – My Experience, An ex-Goldman Sachs insider’s 10 tips on how to sail through investment banking interviews
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