Question - What is the complete list of technical skills / financial techniques used in PE and HF?

For PE: (not a “complete” list - no such thing)

Financial Modeling:

Simple LBOs, 3-statement LBOs: * Operating builds for revenue – by customer, by cohort, by product, ramps etc. * Scenario building (base, downside, upside, add-ons, other bespoke) * Debt and cash flow schedules * Tax modeling – NOLs, DTLs, DTAs * Unique capital structures and cap tables – other debt tranches, PIK, preferred equity, seller notes etc. * Covenant analysis * Management equity incentive plans – earnouts, EIPs, rollovers + wealth waterfall * Accretion / dilution (add-ons, major M&A) * Sensitivity analyses (what-if, solver) * Funds flow (at closing)

Financial Analysis (“QoE”-like, help from QoE vendor such as EY, PwC):

Accounting:

• Revenue recognition – incl. new rules such as ASC 606 etc.
• Cash proof (discrepancies between books and bank/cash statements)
• Classification of expenses
• Compensation policies (base, bonuses, commissions, benefits)
• Meaning of unique line items – bad debt, goodwill etc.

Adjustments – assessment of validity

• Simple
• Pro Forma (for acquisitions etc.)
• Run-Rate (for rest of year)
• Fully ramped (for ramping contracts)
• COVID (?)

Net Working Capital – fluctuations/volatility, debt vs. debt-like items, cash vs. cash-like items, negotiating how much NWC to have at close

Ratios and metrics – margins, spreads, CAGRs, EBITDA/Revenue bridges

Company Data Analysis:

Fundamentally dealing with large, complex, sometimes unclean data sets – clean up, restructure, organize and convert into meaningful insights that tell a story.

Increasingly also modern large-data and visualization tools that are not Excel/Powerpoint – Power BI, Tableau, PowerPivot/pivot tables, Domo, Sisense.

• Customer rollbacks/rollforwards
• Cohort analyses
• Revenue segmentations
• LTV/CAC analyses
• Attrition/retention rollforwards, curves
• ACV realization
• Pricing analyses
• Contribution analysis
• FTE trends – employee turnover etc.
• Unique operational KPIs – efficiency, processing times

Market Data Analysis (help from consulting vendor such as McKinsey, Bain):

• Market sizing: top-down, bottoms-up
• Competition mapping
• Survey / interview design, Net Promoter Score

Legal Analysis (lots of help from law firm such as Ropes & Gray, Skadden):

• NDAs / joinders – terms and negotiations
• Writing bids and offer letters
• Negotiating and understanding the Stock Purchase Agreement (SPA)
• Customer contracts and terms (and implications for business/model/thesis)
• New employment agreements for management
• Anti-trust/HSR fillings

(“Technical”) Communication and Organizational Skills:

• Writing a concise, thoughtful, and well-organized investment memo (need to believes, identifying key risks, asserting an evidence-backed thesis)
• Communicating complex, technical ideas in effective slides – clean and concise charts, diagrams, tables
• Workplan and timeline planning
• Managing various third-parties and internal investment team’s pressures, commitments, skills and personalities to achieve execution