Deal Discussion in PE Interview

Merry Christmas guys...

For all you that have gone through PE interviews (or give PE interviews), what is generally expected when discussing deals? What is appropriate to list on your resume for deals that have been done?

For example, I have worked on two IPOs, a FO, and two M&As. One of the M&As and one of the IPOs were the same deal (dual-track), and the company ended up going public, but it was in a dual-track process from beginning to final bids (two final bidders) before the co went public... It was a cool experience but pretty much torture for about six months... But I was on it from start to finish and did a bunch of modeling (merger, DCF, LBO in addition to the IPO valuation). Is this acceptable to put down?

My other M&A deal was a buyside deal with a PE firm. We got engaged when the PE firm entered into exclusivity, and the definitive agreement was signed less than 40 days later. Didn't do a whole lot on this deal, but I did run an LBO with a few different scenarios and ran a DCF for the target.

So that sort of strays away from the purpose of this post, but are those two deals good to list, and what should I expect to discuss in an interview? Thanks a lot guys.

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Suppose I can help you. In terms of what to put on your resume, almost every IB resume I've seen included a "transaction experience" section. In the section, usually its 1 sentence per deal, and sometimes analysts will include their specific roles, and some will just list the deal. If the deal is closed or announced, list who the seller / buyer were, and which one you represented. If the deal value was announced, I'd suggest putting that in as well. It's also nice to provide a 5 or so word description of the company. Note that it is acceptable to put "Company A" or "Buyer A" if the transaction is pending or not announced. So, any example may look like the following:

Acted as the analyst on the sale of Acquired Company, a global manufacturer of widgets for the telecomm industry, to Buyer, for $x.x billion.

If you were unlucky enough to work on a transaction that died, I've seen people list the deal but put "Busted Process" in parenthesis after the sentence. Note that there really is no set format as long as the reader can more or less understand what the deal was.

As for your question about what you are expected to discuss during the deal, ANYTHING is free game. You will not be expected to share confidential information, but by now you should be capable of "talking around" confidential info to still get your point across. I'd say there are really two areas you should make sure you know cold for each of your transactions, which include: (A) Deal Dynamics & Your Role, and (B) Industry / Company Dynamics.

Deal Dynamics & Your Role: Obviously we're going to want to know what specific tasks you worked on for the deal. You may be asked if there were any key models you built, including high level assumptions you may have made. These might include "Why did you project the top line growth you did? -- what are typical margins for this type of company? -- etc." Don't spend a ton of time memorizing your models though, these types of questions are rare. One area that is likely to be probed is your level of client interaction. I often ask individuals: "If I called up the CEO right now, would he know who you are?" If the answer is no -- you lose major points (note, this is more common for MM IB shops and less so for BBs). In addition to your role, you want to be able to articulate high level knowledge of the deal. This may include things like: "Why did Company A ultimately acquire your client?" -- "Why would it not be a good fit for Company B?" -- "Why might a PE shop be attracted to this investmenT?" etc.

Industry / Company Dynamics: This should be easy to articulate if you played a role in writing the offering memorandum. Basically, you may be asked to articulate what made the company a good investment. Be ready to discuss key characteristics of the company, including things such as: "Low CapEx/WC requirements, recurring revenue stream, dominant market share, etc. etc." In addition to all the company specific questions, they may branch out and speak to the industry. I remember getting asked: "Name an industry that you think would make for a good investment. What about this industry is attractive? What keeps you up at night?"

Honestly, most of my PE interviews did not dive too deep into my closed transactions. Most of them would give me a fresh scenario (typically relating to one of their recent investments) and ask me to think through that.

The best advice I can give you, besides from "know your deals cold," is to make sure you have an opinion on things. If someone says: "What multiple would you pay for Company A," the last thing you want to do is shrug and say you don't have enough information. Tell the interviewer what information you would need to properly analyze the situation, and then give a recommendation based on the limited data that you have.

Hope this is helpful -- let me know if there is a component of it you would like more detail around.

CompBanker’s Career Guidance Services: https://www.rossettiadvisors.com/
 

Glad I could help. There does not seem to be a strong presence of PE professionals willing to share their experiences on this board. Everyone is probably busy stressing out over their MBA apps (as I should be) -- and unfortunately I can't put "WSO Contributor" on my resume. Would certainly improve my community service section!

CompBanker’s Career Guidance Services: https://www.rossettiadvisors.com/
 

Looking to dig a little deeper into this topic...

One specific deal I am having difficulty describing is a dual-track deal I worked on when I first started. To date, it's the best M&A experience I have had, but it ended in the client choosing the equity offering side of the dual track (IPO vs. sell-side M&A). It was a full-blown dual-track, and I was on the deal from the start... I drafted all the marketing materials, modeled multiple scenarios (had to re-build the company's model from scratch to make it presentable because the client had an awful model) including detailed merger models and multiple-case LBO models, was part of due diligence calls, etc. As mentioned, this was a full dual-track process right through final bids, when the client decided to fully pursue the public markets. The deal was for a security software client and the deal would have been somewhere between $180 - 200 million (good size MM deal).

How would I go about putting this on my resume/is this a deal I can use as part of a discussion? The only thing I did not see in this deal from an M&A perspective was the actual execution. Thanks guys.

 

It certainly sounds like something a PE fund would be interested in hearing - when it comes to the resume you should probably frame it something like this - particularly if the deal was executed

  • Raised $XXX MM public equity / debt financing on behalf of XYZ Corp x Performed financial and business due diligence, collaborated with management in construction of financial model x Drafted marketing materials for financing option as well as managed dual-track M&A sell-side process x Some discussion about the types of analysis performed for the M&A (e.g. returns, ability to pay, what have you)

When actually discussing a deal, you would definitely want to take the more narrative approach. You should definitely have an opinion as to which option the company should have taken, and be able to have a discussion around that. Since you did do a lot of the analytics, the firm would want to poke around your knowledge of the company, deal rationale, and LBO returns for a hypothetical deal.

 

Thanks very much, aranaxon. One question related to your post... what is an "ability to pay" analysis? I have never done (nor heard of) such an analysis -- is it simply an analysis at various prices ("AVP")? Can also include various transaction structures (debt v. equity v. cash) and other variables.

This leads me to my next question... is it more appropriate to list a single line for a deal as CompBanker listed above, i.e.:

"-Advised Microsoft on $2 billion acquisition of Salesforce"

or should I expand upon my role in sub-bullets, as aranaxon laid out in his post?

CompBanker:
Honestly, most of my PE interviews did not dive too deep into my closed transactions. Most of them would give me a fresh scenario (typically relating to one of their recent investments) and ask me to think through that.

CB, was re-reading through your post and thought this could be quite helpful... As a banking analyst, I think this could be a pretty difficult question. I guess it shouldn't be too hard to formulate a thought process around this question, but since I have the opportunity to get actual advice from someone who has interview experience (not to mention real experience analyzing potential investments), what is the general approach to an investment? I would guess that the #1 thing before diving into the company is understanding the industry and the comps, but where do you go from there?

Thanks for the assistance.

 
jimbrowngoU:
Thanks very much, aranaxon. One question related to your post... what is an "ability to pay" analysis? I have never done (nor heard of) such an analysis -- is it simply an analysis at various prices ("AVP")? Can also include various transaction structures (debt v. equity v. cash) and other variables.

This leads me to my next question... is it more appropriate to list a single line for a deal as CompBanker listed above, i.e.:

"-Advised Microsoft on $2 billion acquisition of Salesforce"

or should I expand upon my role in sub-bullets, as aranaxon laid out in his post?

CompBanker:
Honestly, most of my PE interviews did not dive too deep into my closed transactions. Most of them would give me a fresh scenario (typically relating to one of their recent investments) and ask me to think through that.

CB, was re-reading through your post and thought this could be quite helpful... As a banking analyst, I think this could be a pretty difficult question. I guess it shouldn't be too hard to formulate a thought process around this question, but since I have the opportunity to get actual advice from someone who has interview experience (not to mention real experience analyzing potential investments), what is the general approach to an investment? I would guess that the #1 thing before diving into the company is understanding the industry and the comps, but where do you go from there?

Thanks for the assistance.

Sure - sometimes ability to pay refers to accretion/dilution analysis (for whatever reason, at least among the people that i work with / have worked with), but that's not really what I had in mind - ability to pay would most certainly involve analysis at various prices (to see what a seller would get, what multiples/premia are being paid), but that's just math - what is really interesting is having an opinion about when people become sellers and buyers right ? which multiples and premia can help inform to some extent, but having an opinion about availability of cash, ability to finance via debt/equity... blah blah blah for various consideration mixes lets you know where a transaction is executable rather than a pipe-dream. getting a feel for terms, investor sentiment, etc. will come with some experience, so listening to what your MDs have to say when solicited by the client is a great opportunity.

re: investment - there is really a wealth of books out there that can describe key principles to investing much better than we can in this forum, but it seems like you're approaching it the right way - at the highest level, you want to understand the business, and once you've determined that and there's a deal to be had, whether you're acquiring it cheaply (and accordingly, the expectation of profit / gains)

ideally, you buy a great business at a cheap price... but unfortunately, the world is getting crowded and the supply of great businesses is greatly outstripped by the supply. Most of the time, you'll probably be looking at an Ok business (someone is looking to get rid of it, afterall) - and you're job will be to figure out just how ok it is, and what you should pay to achieve some expectation of return.

 

agreed, in some cases it can even hurt you for recruiting. if you're staying until 3am on the Dell buyout everyday, you're probably gonna have to skip interviews and not be on your best behavior on the ones you do make. meanwhile the guy working on only pitches can spend his free time crafting a good story and refining his technical questions and get the megafund offer over the first guy. firms know that deal experience is often luck of the draw, and doesn't reflect on analyst quality as much as you think it does

 

I've always thought that the emphasis on dealflow at the analyst level is silly. As long as you understand what you worked on, I couldn't care less as an interviewer if it was a live sellside or a bake off. If you're that worried about it, just make it sound like a live deal that died; nobody would be any the wiser.

And I agree with wso3, the last thing you want is to be working on a live deal during/around recruiting time.

 

Errr. As someone thats been through the trenches of PE recruiting, more deal experience = better positioned.

Its not about putting X number of deals on your resume and its not about telling interviewers you were on Y # of closed deals. Its about what that deal experience lends to your qualifications. In fact that I think more deal experience can only work against you if you've listed 10 deals on your resume... guess what, you now have to know each and every one of those cold. Which is a fuck load of work if you're like me and have a 2-4 week deal memory. If you have more deal experience, most likely you've got the same number of deals as everyone else on your resume... but where you stand out is in your interview when you draw on your experience murder the interview.

Every deal (assuming you're getting good experience) is different and nuanced and getting that incremental experience REALLY goes a long way in your technical, fundamental and practical skills. It actually reduces the need for interview prep if you ask me, because your technical and fundamental skills are that much better. It also translates very well to the case parts of the interviews (not the modeling case study) but actual case questions you'll get in interviews which are not easy.

Hard technical skills are great but what PE professionals are looking for is raw business acumen, confidence and dynamism; given the choice between getting move live deal experience and less time to prep for interviews, I'll take more deal experience every time.

 

I got two megafund offers without closing a single deal.

Deal experience is great, but dealflow is definitely not as critical as people think when it comes to PE recruiting

 

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