So I interviewed with the founder of a mid-sized PE firm the other day. He liked me, liked my attitude, resume, etc. He asked me about my modeling skills and I didn't lie when I told him my experience was limited. I currently work in consulting and only graduated 6 months ago.
He gave me a deal his firm did a few years ago and wants me to answer some questions along with perform an lbo model to determine the viability of the investment (SWOT analysis, what makes it a good or bad investment, etc) before my second interview. I have done this many times before (except the LBO which I am currently teaching myself how to do), so I am having no problem with answering the questions. What I do need help with though is the formatting.
I obviously know how to do prepare a word/powerpoint deck, but just wanted to know what's standard in the business for this type of interview "homework". I looked up a few that were done completely in excel, and some that were done completely in word, and some that were completely in powerpoint. They all looked like shit. I honestly think it doesn't matter since he just wants to see how I think, but would also like to make sure I do this right.
He only gave me the weekend to do it so I am assuming he doesn't want a massive pitchbook. I just want to make sure I cover all my bases. Currently, I have about 20 pages worth of writing I could put into the document but feel as though this is a bit heavy.
Thanks in advance guys.
Have never heard of PE firms doing this sort of thing..only HFs but below are some thoughts on how you can structure your views:
1) Investment thesis and risks: clearly articulate the pros and cons of the investment on 1-2 pages, including views on the industry, competitors, and target. Make sure you give adequate thought to downside risks...private equity investing is illiquid and capital preservation is of paramount importance. 2) Industry and competitive dynamics: include key exhibits on the industry size, growth, trends, competitors 3) Financial performance: include some detail on the historical performance of the company if you have it with an emphasis on historical growth, margins, and cash flow generation 4) Returns: Lay out your forecast and the key drivers... you would typically do an upside, base case, and conservative case but given your time limit, focus on a base case that is a 50/50 middle of the road type of case. If you know how to do it, include sensitivities for IRR and MIC based on a range of assumptions for purchase price, debt, EBITDA growth, etc. You will need to make some assumptions on capital structure to do this part if he hasn't already given you the assumptions. In this section, you should include some comps as well to inform what kind of price others have paid for similar assets, if applicable.
Power point is generally a better format than word so that you can add charts and stuff that you're probably used to in the consulting world. Keep a printout of your LBO model handy in case he wants you to work through the details. If you focus on the big items, you should be able to accomplish all of this in 10 power point pages or less.
good luck!
Thank you very much. I appreciate it.
damn this makes me worried about applying to PE without any modeling knowledge (other than self taught crap)
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