Normal level of detail in models?
Hi all - I work in a small boutique that mainly advises on buyside M&A in the middle market. Currently in the midst of PE recruiting, and obviously reviewing my models as a result.
I've come to realize that our models are....well kinda shit and all very high-level. For example, when we evaluate CIMs for our clients to give a prelim view of valuation and what to bid, we generally take CIM numbers, make some judgement calls on haircutting revenue and margins, and project everything under the income statement as % of revenue.
Literally, the entire football field analysis can be done in ~1-2 hours.
Obviously operating models are more detailed, but really only on the income statement (which is VERY detailed). Everything else is still % of revenue.
I'm just wondering if this is common practice for M&A advisory on the buyside, or if other banks tend to actually build out the granular details of full 3-statement models. We also never do full merger models.
It does seem unnecessary in most cases, so I understand my bank's approach, especially since the acquisition targets are often small enough relative to our client that it doesn't matter. However, definitely makes me nervous if an interviewer asks about the operating model, and my response is, "oh yeah, we just project capex, D&A, and NWC as constant % of revenue..."