learning PE in 24 hours
I have an interview for an internship in a boutique private equity micro-shop (100 AUM) in milan coming up on thursday morning.
I have more or less ten free hours to get the more knowleadgeble possibile before meeting the partners.
So, what you fellow monkeys would recommend me to study in this little time I have?
I know more or less nothing on PE, though i believe the interview will be more market based since we're in italy.
I know it's an impossible mission and that i'll never pass the interview since i know nothing on PE, but still there's nothing wrong with trying. So, can you give me some tips on what to study? For example a site with a good summary of what has been happening in the economic world in the last months? Or whatever else?
know few things - different types of PE firms, fee structure, difference between general partner and limited partners, factors/info need to prepare LBO models (high-level), investment strategies, J-curve, diversification benefits to investment portfolio etc would help in at least high-level conversation.
10 hours is way too less. If you haven't worked in IB or haven't taken modeling classes in MBA/uGrad level classes you might not have enough info to talk if partners dig down during interview.
It all depends of fit. If they think you have what they are looking for, they could give you a chance. Good Luck
To quickly learn about the PE industry/firms/practices, go here: http://www.theprivateequiteer.com/
Spend a little time going through Macabacus' LBO sections to get a quick understanding of the LBO model: http://www.macabacus.com/lbo-model/introduction
[quote=ThaVanBurenBoyz]To quickly learn about the PE industry/firms/practices, go here: http://www.theprivateequiteer.com/
Spend a little time going through Macabacus' LBO sections to get a quick understanding of the LBO model: http://www.macabacus.com/lbo-model/introduction[/quote] Second both these recommendations. The Private Equiteer has some great stuff and should get you up to speed pretty quickly - spend most of your time there, and only dive into the modeling if you have extra time. It actually looks like he's taken his best stuff and put it into an ebook. Kind of sucks since the blog used to be wide open, but it's really good material. Probably your best bet to shell out the $39 if you only have 10 hours.
CapK, is the e-book worth the $39? I've seen a few posts recommending the site, but like you said, you can't really see anything without buying the e-book. Does it really give a lot of extra info outside of what you'd learn during your analyst stint in i-banking?
I would focus on mainly on very high level topics like - why is PE done, why use leverage and what's the effect of it, some characteristics of companies or market that are conducive to PE (e.g., companies with predictable cash flows, have diversity of customers - no customer concentration, have competitive advantages vs. their peers, are in a market that has good size, growth & profitability, little capex needed, etc.) and the drivers of an LBO model. Also look up the firm - see what kind of deals they've done in the past, what markets/industries they like (be prepared to say why you like/dislike those areas)
Depending on your finance skill set and comfort level, you can learn on a basic level how a LBO model works in a few hrs. There's a ton of free LBO models available online - just do a search, there's already a few threads (or check Damodaran - Stern prof's website for some samples).
I don't think they'll get to things like j-curve or specific investment strategies... on structure, just know that a PE fund (or GP) would reach out to investors for their funds - these investors are called Limited Partners or LPs. And you can do a quick lookup on the 2/20 fee structure - but again, I don't think this is priority...
Could you, or someone else, go on these two topics? Or give me info on where to find basic explanations of them? I'm talking about, chiefly, the characteristics of companies "conductive" to PE and the reasons why and why not a PE should use leverage. I've taken a good look around and I haven't found much on these two subjects.
thank you very much to all for the useful comments. I'm starting right now, I'll keep you up to date.
1- you're not going to learn everything there is to know about PE in a day... or even a passable amount in a day. You're better off reading a few news articles and being honest in the interview as opposed to trying to demonstrate you understand LBOs and/or PE deal structure, business models, investing strategies etc...
The message you should be trying to convey is:
1- I am really fucking smart.
2- I don't know much about PE aside from a few things which piqued my interest, when I dug in a bit more, I ate it up and want to learn more... as much as possible... anything.
3- I am really fucking smart.
Key things to understand:
1- They are a $100mm AUM shop, they don't have their pick of the litter, nor do they have money to pay super competitive candidates.
2- You already got an interview, they're likely seen your resume and know you've have nothing to do with PE in the past.
3- As an intern, you'll be doing absolute bitch work, especially at a firm with $100AUM. It'll be good exposure for you since you know nothing about the space, but you don't need to have interned at primo wall st shops the last 2 summers in order to be able to do the job.
4- They need someone very smart and very scrappy and very resourceful... smart enough to pick things up very quickly, scrappy enough to do whatever is needed to be done without complaining, and resourceful enough to get things done with the limited resources and information at a firm this small.
God won't even help you now
Took this off a site: http://ezinearticles.com/?Levaraged-Buyout-(LBO)&id=1194284
LBO Candidate Criteria
Given the proportion of debt used in financing a transaction, a financial buyer's interest in an LBO candidate depends on the existence of, or the opportunity to improve upon, a number of factors. Specific criteria for a good LBO candidate include:
o Steady and predictable cash flow o Divestible assets o Clean balance sheet with little debt o Strong management team o Strong, defensible market position o Viable exit strategy o Limited working capital requirements o Synergy opportunities o Minimal future capital requirements o Potential for expense reduction o Heavy asset base for loan collateral
Well in PE you use debt - the more you use (which means you're using less of your own capital to fund your purchase) the higher your return (once you sell/exit the investment). Think of it like when you buy a house with a mortgage. Over time, you're using your income to pay down the debt, and overtime your equity portion is growing.
Similarly, you want a company that can produce steady cash flows to service the debt and make the scheduled payments.
So PE firms use leverage to boost their returns, but they also have a limit to how much they can use because a company can only take on so much debt, and because of market limitations (banks/lenders may be willing to supply a limited amount to one deal).
So what happened in the interview?
I would be careful with your wording there. Greater debt doesn't equal higher return; the debt amplifies your return, not always making the return higher.
Dont be so fuckin lazy.
You got 2 resources above which you probably don't feel like reading.
For your purposes, google the Tuck School of Business Notes on LBO. Its like a 15-20 page document, if you read that and understand the key concepts you'll be golden.
Uhm i think it went pretty well. I was only asked fit questions and just a couple technicals about the financial statements, no PE stuff. I was told that i was the first potential intern to be interviewed and that it may take a bit before they tell me if I'm in or not. Fingers crossed.
Kanon is so helpful. SB for her.
Actually yes, her post was really helpful. I'd give her a SB if i knew how to do that.
The Private Equiteer used to be a blog, which makes the ebook really concise and an easy read with short articles - unlike most PE books where you can get easily lost in the terms and numbers if you're a newbie.
It's a good starting point to learn the key concepts of PE and quickly. He uses real-world examples and frank explanations, so it's easy to understand.
I'm just bummed I bought it off Amazon because it's cheaper on the website :(
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