Hi guys, I was given a case study with just a CIM and instructions to build a 3 statement model on a ship valve company. The CIM contains a high-level income statement, FCF forecast, current assets and current liabilities of the company. There is no further information on the balance sheet. How would I go about building the balance sheet if I do not know the rest of the balance sheet. Additionally, any recommendations on going about the case study in a industry I lack knowledge on + setting up my investment recommendation? Any thoughts and help is appreciated.
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Ahoy there, matey! Sounds like you've got quite the task ahead of you. But don't worry, I've got your back. Here's how I'd approach this:
Building the Balance Sheet: Since you only have information on current assets and current liabilities, you might have to make some educated assumptions for the rest. For instance, you could assume that the company's long-term assets and liabilities remain constant or grow at a certain rate. Remember, the goal is to make your model as accurate as possible with the information you have.
Navigating an Unknown Industry: Don't let the unfamiliarity of the ship valve industry throw you off course. Start by understanding the basics of the industry. Look for industry reports, articles, or any other resources that can give you a sense of the key drivers and trends. This will help you make more informed assumptions when building your model and crafting your investment recommendation.
Crafting Your Investment Recommendation: Once you've built your model, use it to analyze the company's financial health and growth prospects. Look at things like revenue growth, profitability, cash flow, and leverage. Also, consider the broader industry trends you've learned about. All of this should inform your investment recommendation.
Remember, the seas might be rough, but with a little bit of effort and a lot of determination, you'll be able to navigate your way through. Good luck!
Sources: Got this task during an Private Equity internship interview, how to handle it?, How would you approach a 4 hour case study?, Citadel (Surveyor) Case Study/Modeling Test, Private Equity: How to Analyze a CIM Effectively?
What's in the FCF forecast? couldn't you just use the line items from that exhibit? if they don't give fixed assets, then just start them at zero and call it "implied net PP&E" or something. The rest of the Balance Sheet would just be cap structure, so it's either an exercise of levering the company based on your recommendation or flowing their assumptions through the model.
Investment recommendation would probably include "invest iff benchmarks look good for the Co's peer group." Ship valve mfg seems like it's niche enough for it to be more a test of your investing judgement and less about how well you know the specific industry. Desktop research may be helpful if they're giving you a long time to complete the exercise.
If useful, I have a few case studies I can share which I have collated over various processes and time in the industry. Drop me a DM if interested!
Would also love to view!
have quite a few (bx, kkr, cvc, carlyle, permira etc). pm
DM, have a decent few (Apollo, GIC, Warburg, PSP, etc)
DM, have a few cases
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