All - I'm currently working as an associate in private equity and wondering if any of you have tips for remembering and regurgitating key stats on active deals / portfolio companies.
I'm not sure if it's just me, but I find myself struggling to remember financials as well as my VPs and MDs, who presumably spend less time looking at the same documents as me. While things like CY revenue and EBITDA are obvious ones that everybody will know and flag while reading a CIM, other examples like SG&A in 2022 vs. 2021 or management's projection for 2027E revenues (or pick any other number from the CIM) are where I struggle, whereas other seemingly don't.
It hasn't impacted my performance so far, however I imagine it will become increasingly important once I take on a bigger speaking role and move up the ranks. If any individuals struggled with this and figured out ways to perform better in this regard, would love to hear them. Of course preparing the night before a big meeting / IC is one thing, but looking for a way to stay on top of this more regularly / consistently. Honestly, I often feel like I'm surrounded by individuals with near-photographic memories at my firm.
Don't have any advice lol but I have the exact same feelings as you... hopefully someone fills in
Bump. This is very relatable
It's easier for a VP and MD because they're thinking more high level than you are and aren't bogged down with cleaning data and formatting slides. I think also because Associates are close to the model and see the projections constantly changing it seems useless to memorize projections. You may find a bust when triple checking ahead of sending to a partner and now Year 5 EBITDA is slightly different. Partners see the model in snapshots of completed states and focus more on the headline results so it's easier to internalize those numbers.
But you can still do it. You can make a template with lines for common stats and qualitative information to remember and fill it in when you're ramping up on each new deal. Having it all on one page helps memorize. You can look at the page in bed at night. Or look at the page, quiz yourself with your eyes closed, and then check the page to see if you were right. I think you should keep the number of items on the sheet focused - you don't need to memorize everything.
I think it's also helpful to think in round numbers. EBITDA you should know to the decimal point but if the growth rate is 4.8%, just round to 5%. If margins are 20.4%, just memorize 20%. Certain numbers you can just round to the nearest 5 if it's purely for memorization. If revenue grows to $127mm in year 5, just think $125mm - easier to remember and that's generally what your MDs are doing. You've never heard them off the cuff say "revenue is 127.3mm by year 5, a 13.7% CAGR" - they speak in more round numbers.
Why is this an important skill? Why do you have to memorize key stats? I don’t think this necessary, since you can always just check or say “let me check” if someone asks a question.
Could be wrong though - maybe existing PE associates can chime in let us know if this actually a needed skill.
I think it's questionable whether it's valuable in an intrinsic sense, but Partners will sometimes ask you about basic information on the fly and judge you if you don't know. Even if you think it doesn't make sense, it benefits you to play the game
Super helpful points, thank you! I'll play around with reviewing a one-pager / cheat sheet and rounding more strategically.
I am...skeptical of the utility of this unless this question is sneakily asking for a way to remember stats for idk a "paper" / verbal LBO during an interview. For that, Amalgamation's comment is gold.
If you're in the model, there's certain numbers that will be singed into your brain just through muscle memory and versioning up--certain dollar amounts of EBITDA in certain years, certain margins or expense % of revenue--just by doing turns and constantly messing around with model mechanics. If it's a real concern about citing numbers in meetings, I suggest printing out an "output" version of the model on one page; in fact, my VPs / principals would always ask for a version of this before full team meetings for easy reference, and I'd obviously print myself a copy too to follow along or to answer questions.
I'm all for cynicism, but this has nothing to do with paper LBOs. In my experience, you're typically writing down the numbers for a paper LBO during an interview so I'm not sure why you wouldn't be able to reference those with them right in front of you. I always viewed that as part of the exercise when interviewing
Not unheard of to have a granular "tell me about this resume deal" line of questioning basically turn into a "verbal" LBO test more than a paper LBO. At the very least testing recall of key stats re: value drivers. In any case I won't die on this hill
As someone mentioned above, the hard part is that the Associate is dealing with all of the nitty gritty math / figures, while the VPs / MDs are looking at the high level outputs.
I would try to step back and think about key numbers in the context of driving returns - what revenue CAGR / $ figure needs to be hit to make XYZ model case? What exit gross / EBITDA margin? What are the big drivers / KPIs for those figures? I know what we put in our IC materials, and now mgmt. is showing us different numbers post-close - how did those specific key drivers change?
I guarantee you that your colleagues are not quizzing themselves on specific numbers or have photographic memories.
Appreciate the response. Helpful to see how you think about it. I'm appreciating how easy it is to get caught in the weeds of data and formatting as you and others have noted. Will push to think about drivers.
And haha ya fully agree on others not quizzing themselves - I couldn't see my partners / MDs doing something like that! That's why I figured I must be missing something obvious / tactical
Same struggle here...
This used to bother me when I was a younger professional - but I have realized it has gotten much easier over time.
I think the main thing to keep in mind here is:
Remembering details without good context is hard. For instance, if you try to memorize: what year was D-Day? - that's hard.
If you remember it as, D-Day was 1 year before the end of WW2 (presumably you already know WW2 ended 1945, ie it has already "stuck") - then that's a lot easier.
So, for your work - for the details you're trying to stay on top of - the more you can remember them in the context of something that has already stuck in your mind - the easier it will be.
For instance, if you're trying to remember how many people work at your portfolio company - put it in relation to the # of ppl at your firm. If there's 1,000 ppl at your portco and 50 at your firm, then you just remember its 20x larger in ppl than your firm. You're much more likely to remember it that way.
It's should not be a surprise that these details stick more with the more senior guys. They have a lot more context to apply the numbers to...and eventually you will too.
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If you are a sector specialist, it also gets easier to remember some numbers over time because you know what the number is "supposed" to be, and if a company is far above or below the norm, that sticks out.
It is critical as it gives you a much better holistic sense for the deal. Also being in the nitty gritty is no excuse I was able to do this from my second year as an associate
I unfortunately said the wrong EBITDA metric for a deal I had worked on. I listed the EV instead and spent the entire interview bullshitting on why what I said made sense. Towards the end, the MD seemed to be skeptical but somewhat convinced that I knew what I was talking about. Knowing now that I misstated the EBITDA stat which governed the rest of the conversation including my defense on why the (wrong) EBITDA was so high, would you recommend that I email the MD and come clean or just leave it be and let him figure? B
Btw, the company is private so there is not much information out there for him to fact check. Unless, he reached out to my previous employer. The company was involved in merger of equals deal where a public target was taken private. So, there is EBITDA of the target pre merger but not the company itself. Any advice on what to do will be much appreciated!
Come clean or leave it be?
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