Introducing the All Nighter Blog

Introducing The All Nighter Blog.

We will be publishing material on our home page for your enjoyment periodically so check back for some entertaining posts. Below is the first entry...

The ASSociate

You know a big fat brownie has landed right in your lap when you get an email like this:

From: Moran, Seth (IBD)
Sent: 27 October 2006 16:07
To: Moncrieff, Michael (IBD)
Cc: McDermott, Mary (IBD)
Subject: Presentation for Monday


I just spoke to Mary who said you have some capacity to help me with a short follow-on pesentation on Project Magnificent. I specifically asked for you as I know the type of work you deliver and this is one of those babies where we are so close to a deal that we cannot let it slip away from us.

As you are already familiar with the company and previous work we did for them. I have spent quite some time whilst on holiday thinking about what we need to do for Monday, and below is a list of pages I need you to create.

1.  Table of contents

2.  Introduction â€" I will draft this.

3.  Selected creds â€" doctor the league tables so we are No. 1 in equity, debt and <abbr><abbr title="mergers and acquisitions">M&A</abbr></abbr>. I know this is hard so I don’t care how you do it. We need to be No.1.

4.  Industry Snapshot â€" update the page we used last time with the benchmarking matrix superimposed on the attractiveness/interest matrix using a bubble chart. Try to also squeeze in there the correlation graph Charlie came up showing the relationship between size and profitability (his answer though is wrong I think) â€" there should be a much stronger correlation â€" check this and change it so that correlation is greater than 80% - I don’t care how you do it.

5.  Share price graph with volume over the last 12 months, with industry and FTSE100 indexed to the start in the background, and annotated key events on the seidebars.

6.  Equity research views page with price target / research house / analyst / date histogram. Also call equities and get investor sentiment feedback and put it in. Be selective here and only include positives.

7.  Summary capitalization page â€" from share price to firm value. Also show implied EV:EBITDA multiples for 2006, 2007 and 2008. Use average IBES <abbr><abbr title="earnings before interest tax depreciation and amortization">EBITDA</abbr></abbr> estimates. Also show Implied P:Es for 2006, 2007 and 2008, again using IBES estimates.

8.  Pull a list of precedent transactions and show them in a colourful bubble chart. We need the elected multiple to be about 8x LTM <abbr><abbr title="earnings before interest tax depreciation and amortization">EBITDA</abbr></abbr>, so work your way back from there when selecting which transactions to show.

9.  Do a simple <abbr><abbr title="discounted cash flow">DCF</abbr></abbr> analysis and show the implied <abbr><abbr title="discounted cash flow">DCF</abbr></abbr> valuation. Show a page on key <abbr><abbr title="discounted cash flow">DCF</abbr></abbr> assumptions. Run the <abbr><abbr title="discounted cash flow">DCF</abbr></abbr> on a pre and post synergies basis. Show also the valuation difference if you use a 1% perpetuity growth or exit <abbr><abbr title="earnings before interest tax depreciation and amortization">EBITDA</abbr></abbr> approach. If it is not too much trouble, I would like to see both 5 and 10 year DCFs before deciding how to present this.

10.  Run a simple <abbr><abbr title="leveraged buyout">LBO</abbr></abbr> analysis. One page on the key assumptions. Entry multiple = exit multiple. Debt at 9x LTM <abbr><abbr title="earnings before interest tax depreciation and amortization">EBITDA</abbr></abbr>, recap after 2 years. Try to get debt pricing from capital markets before they leave for the weekend today â€" you may need to do this quickly as it’s 4PM already. I want to see the <abbr><abbr title="leveraged buyout">LBO</abbr></abbr> on an OpCo:PropCo structure and a standard sale and leaseback structure, as well as the standard leveraged acquisition. It would also be interesting to see whether a <abbr><abbr title="real estate investment trust">REIT</abbr></abbr> structure would fly for this. Don’t spend too much time on this. I don’t want you to be here all weekend.

11.  Prepare a page outlining which sponsors have invested in the industry before and hold portfolio companies in this industry.

12.  Have a section on Bolton acquisitions. With the following slides:

13.  Accretion / dilution analysis based on 100% cash, 75% cash, 50% cash, 25% cash and 100% stock. Show each analysis on the basis of 2005A 2006, 1007 and 2008 projected financials.

14.  Illustrate the impact on the <abbr><abbr title="discounted cash flow">DCF</abbr></abbr> of the bolt-on acquisition. In a page. Do a sensitivity table for the structure used (100% cash, 75% cash, 50% cash, 25% cash and 100% stock).

15.  Do the same for the (LBO 100% cash, 75% cash, 50% cash, 25% cash and 100% stock)

16.  Next section is our understanding of the business:

17.  Prepare three once page case-studies based on the most appropriate precedent transactions you will find. Each case study should show analysis of strategic rationale, financial impact and iplied multiples and stock market commentary.

18.  Scorecard benchmarking different options: how much debt to use, to do bolt-ons, which <abbr><abbr title="leveraged buyout">LBO</abbr></abbr> structure to use, etc. I want moons/half moons and ticks and crosses alongside the commentary.

19.  Conclusion â€" I will draft this.

Thanks for your help with this and call me when you have a solid draft.

Have a good weekend.


...Originally posted on The All Nighter Blog

Comments (15)

Jan 9, 2007 - 1:43am

Hey guys
Looks at the brighter sides of the whole assignment.
1) You don't have to Introduction & Conclusion.
2) And whatever needs to be in the draft has already been dished out, what else could you ask for.

I know there were a few (I don't care how) but over all thats much better than asking someone fresh out of undergrad to build a business model to compare two different telecom technologies, and saying "I don't know how to do it, that's why i hired you!!"

Hope now you would see the brighter side of the above.....

Jan 9, 2007 - 6:50pm

Good stuff.

This gives you an insight into what an i-banker really does. I hate reading those "a day in the life of an i-banker" articles in the economist or other magazines of similar ilk. Their stories are too generic. Props.

Jan 17, 2007 - 10:59am
"That dude is so haole, he don't even have any breath left."
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