I have an interview coming up this week and they said there will be a technical portion with a pen and paper. Any insight as to what sort of questions may be asked (outside of the typical paper LBO)?
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Probably some more complex sources & uses / cap structure stuff (e.g. purchase price is X, mgmt wants to roll 10%, and has 10% options, whats the sponsors PF ownership at exit).
Also maybe some exit math stuff (e.g. You bought company at x EBITDA, y multiple, z multiple of debt and exit at b EBITDA and c multiple, what's your MOIC? How much $ gain was driven by multiple arb vs. growth, what happens if you change x assumption, etc.)
There's probably more as well, but those are common.
Would exercise of management options dilute the original management rollover stake?
For the top question about mgt options - is the below correct?
Assume purchase price is $100. Sponsor equity is 50% and there's a 10% mgt rollover. Therefore entry sponsor equity is 50 and mgt roll is 10. And there is the 10% option pool. Assuming exit equity value is 500.
Sponsor ownership pre-option pool = 500 * 50% = 250
Management roll/ownership = 500 * 10% = 50
Management options = 500 (closing equity value) - 50 (initial sponsor equity investment) * 10% = 45
Sponsor equity at close = 250 - 41 = 209
Is this correct?
Where did you get the 41 from?
Sorry. 45
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