Analyst's model building

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To your first point, how to build a model is not something can be answered via a forum post. I recommend Dealmaven or another IBanking prep program to learn this skill.

Every BB bank and I assume most boutiques have model templates that analysts will often use when they begin a model. Of course, a model can't be built to accommodate every company that one wishes to analyze. So, even with a template, expect to be making additions and changes.

Finally, I guess it depends on what you deem 'long', but experienced bankers can build entire models in about 1/2 day. Like anything, it just takes practice.

there are model templates, but when there's time you learn the most and have the most grasp over the model built from scratch.

The most complex modeling I've had to do was for a profits interest waterfall on a ridiculously complicated deal that included LLCs, C-corps, S-corps and multiple merger-sub holding companies, all of which had to be 'made whole' for a variety of tax liabilities.

The proceeds waterfall included 6 classes of management options (time vesting and tiered performance vesting), 4 classes of profit sharing options (some of which diluted specific classes of management options but were pari passu with others) and 4 tranches of senior units that were comprised of varied allocations of preferred / common membership interests.

By far, the most complicated part was dealing with the massive circular logic required to build in appropriate proceeds distributions that included pro-rata, catch-up, tag-a-long and drag-a-long provisions, among others.

I spent a good 2 days building the waterfall and the following week or so just explaining it to lawyers and bankers on both sides of the deal to ensure the structure was properly captured in the definitive purchase agreement. Needless to say, it was a fucking nightmare.

They can give you a quick view that is close to what you need, but a model built from scratch using the theories correctly will always be better. You can use a template as a guide but you will need to make adjustments for it to be good.

If I have a good finance backgroun in terms of undergrad coursework and fairly good excel skills, how hard will this be for me to pick up? I understand the components that go into a dcf, and have done one by hand given assumptions, but never looked at a company, and built one from scratch. Is that something I should look into doing prior to my SA start date?

Remember, there are different complexities of models for each different situation. If you're working on a pitch, you're model will be more simple. Once you're mandated, the little details matter, and you may need to create a model from scratch.

KMM - Having a good understanding of finance and excel is a great start. They'll teach you how to build basic models, and with practice, you'll start working on the more complex models. Most likely, you won't be staffed on a live deal from day 1, usually the analysts that pitch the deal are on the deal team. What they're looking for in analysts is someone that is smart. For your model to balance (i.e. future projected income statements, balance sheets and cash flows all match) you need to be able to understand how each item affects the other. This is easy for a basic model, but you gotta be really smart for a complex model.

The tricky part is building a very flexible model. You've plugged the numbers in, but there is always an assoc or vp that would ask, what about this? What is we adjust the debt stucture like so? I don't think your valuation is right, it should be X, make it X.