Hey guys, I've been working in middle market leveraged finance for about 2 years so I've gotten some very good experience in reviewing/using sponsor's lbo models in addition to using our internal template model.
My question is - do PE analysts/associates typically build each model from scratch or does the sponsor have a general template from which to work off of and edit/adapt as necessary to the deal? I am curious to see if over the next year or two as I prepare to transition to PE I should concentrate on building my own models. I understand the fundamentals of an lbo model and could put one, albeit a basic one, together fairly decently.
I've also heard that many PE shops during the interviewing process would ask the candidate to prepare a model on the spot for a deal they're working on or had worked on. Have most of you found this to be true?
Thanks for everyone's input on the matter.
Just like it varies from bank to bank... UBS LA for example makes (or used to make) their analysts build all models from scratch. If you're working on a deal the PE is serious about you'll probably have to create something very custom or create it from scratch. But if you're just trying to run the numbers on a company or get a very quick idea of valuation, using a template is probably fine.
For PE interviews, yes you will be asked to prepare models in person during the interview. As long as you practice beforehand this is nothing to be intimidated by... you can get pretty quick at building a basic 3-statement LBO model after you do it enough. They will also ask you to do case studies but you typically have a few days to a week to prepare these.
Thanks for the response. I have built a couple basic LBO models but was looking back and forth to my template a few times for the more difficult formulas (ECF, R/C draw). The rest of it is pretty basic though. I figured that you would probably have to build a basic model for every deal you're doing and then if the company is unique you'd probably have to customize it and make sections specific to that deal (store count, any type of waterfall analysis, etc.).
Once I begin gearing up for recruiting in another year or two, I'll probably just keep making my basic model until I can do it in under a couple of hours without looking back at my template. I'll also have a good understanding of various customizations that I'd need to make just in case they came up in an interview.
Thanks for the info.
whats the best place to learn to build the basic models that you would need to get through an interview? (this is with no modeling experience)
levfinanalyst - you want to be able to crank out a simple LBO model in under an hour in some instances so as you said, just keep building your basic model from scratch as practice.
404 - try an online program like wallstreetprep or the like. itll cost you some cash but its a quick way to get up to speed.
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