Hello consultants. I'm in the first year of my MBA and in the process of picking my course electives. I'm really interested in company valuation, financial modelling etc. even though I'm not from a finance background. Is it worth my while choosing this route (given my background) when planning to go into management consulting at one of the MBB firms? Please help.
Apr 27, 2016
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Agreed. Not 100% transferable but I'm sure you'll find it useful in the field, plus always an impressive skill to whip out in front of your engagement manager.
I think this probably comes down to opportunity cost. As rbeatty70 said, this won't be directly relevant for strategy consulting (the kind done by MBB), but you could learn a good bit about how money flows through companies, how it's reported, how you can project financial information, etc. that may be indirectly relevant. If you have a spot that you can't fill with something more relevant, it could be worthwhile, especially if you have any fleeting interest in finance. However, if you're giving up the opportunity to take a great class on management strategy or something more consulting-related, I would do that instead.
Valuation Consulting (Originally Posted: 09/05/2012)
Can anyone shed some light on the pros and cons of valuation consulting (salaries, lifestyle, exit ops, etc.). I'm actually not to familiar with what exactly this type of work entails, but I think it could be interesting. I have an oil & gas background so would like to be in Houston doing O&G valuation (Any firms? Big 4?) Thanks
Also interested--internship interview with a top 20 ranked Vault Consulting firm in the Valuation department--found total compensation around $60k/year under the heading 'consulting analyst' on Glass Door, but did not find any positions listed specifically to that department. What would hours be like? I'm sure I'll go over a bit of this tomorrow, but if anyone has information I'd be interested.
Hours would prob be from 8 -7 approximately depending on where you work
8:30-6 during regular hours. 8-9 during busy season.
As far as exit opps, IB seems to be a common one, most of the guys from my office ended up staying in valuation or getting into ER
Also, I have seen a few guys go from valuation to PE. There is def a skill set overlap with valuation and IB/PE the big difference is a valuation consultants work is done after the deal is complete whereas for IB/PE it's the exact opposite their work is done before the deal which is more demanding and something that IB/PE guys take into consideration when looking at potential junior employees.
How much would a consulting firm charge for a company valuation in M&A consulting context? (Originally Posted: 11/05/2013)
How much would a consulting firm charge for the M&A company valuation? The project is to be completed in 3 weeks.
Thanks
Thank you Qayin. This is a very comprehensive answer. I have always had worries about the possibility of me learning about valuation and financial modelling only to find that this skill only gets used in the investment banking space. I do like the approach of getting a greater understanding of the topics to help me make more considered recommendations to clients. I appreciate the input.
I am in M&A at a BB and thinking of moving to MBB so this comment piqued my interest
I am a little skeptical here. If you tried to pull that stuff in M&A you'd be laughed out of a room. And I have no idea what type of clients you work with but they must be a lot less sophisticated than ours if they are wooed by needlessly complex models. No sponsor would ever accept having any stochastic monte-carlo BS in a model for sure. Maybe a dumb strategic, but even then, corpdev guys are very sophisticated too.
This isn't what consulting firms do for the most part.. should be looking at banks for this kind of work. Especially since the valuation is partially something that is done so the board of directors can say they took proper care and were diligent.
Consulting firms would be hired to do due diligence work like looking at the staffing models to identify overlapping processes or gaps, evaluating market potentials and estimates to confirm it lines up with projections, etc.
The vast majority of non-finance (non-sponsor) clients aren't even going to try to understand what's going on in the model, definitely not in the mechanics. The most they would do is playing around with a couple sheet's with inputs/outputs/management dashboard. And this isn't M&A, the client counterpart is very rarely someone with banking experience.
By the way, stochastic does work in some cases. I.e. if there are variables that you have no real of way predicting, you can at least calculate at what values does the case for your project/initiative fail. If these are fairly likely values, you're not going to proceed. On the contrary, if you have to go pretty far to break your case, then it's more likely that it will succeed. Management is rarely an exact science, you have to take risks and make decisions with incomplete information. What consulting/finance math can do is help you compare the options and sometimes estimate the best choice from a mathematical expectation standpoint.
Well, I meant M&A advisory firm, not necessarily strategy or other management consulting, but point taken.
He isn't talking about an M&A model - he is talking about operating models. These do get very complex and can incorporate statistical type tools. Sponsors/corporate have extremely detailed/complex operating models.
Depends a lot on complexity of the valuation, time frame, and size of company (as mentioned before, valuations are usually done by investment banks, and occasionally the financial advisory arms of the Big 4). For a middle-market company, I'd say a general price bracket between $50,000 - $500,000 would be fairly reasonable.
Thanks
basis points*deal value
While this is standard for a sell-side engagement, I do not believe it is par for the course when it comes to a straight valuation advisory engagement.
My strategy for selecting bschool classes was to focus on things outside of my career path. I had a IB/PE background and now work at a HF, yet I had an overweight on operations, supply chain and strategy type classes. I believe that whatever you will use on the job you will learn on the job in so much greater detail than in a classroom. So in effect its a waste of time and opportunity - focus on thing that will complement your skillset. Knowing finance, valuation, modeling etc. will make you a much more well rounded consultant, especially relative to peers that don't. By having these skills and knowledge you will have a better understanding of thinking big picture of the implications of the strategies/improvements you are analyzing. Likewise, from my perspective, I wanted to know more about strategy/operations/supply chain etc. to better understand an investment. That's just my two cents.
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