PE case study mistakes

Hi all - have a couple of case study interviews coming up for pe. Range from 1 to 3 hours. Although I am an ex-banker and am comfortable building models from scratch, i can make silly mistakes when under significant time pressure. this is not the case if I have 24 hrs + to build a model.

the purpose of this thread is to ask PE Pros as to what kind of mistakes made by candidates could be overlooked and what would result in instant dings. over the top of my head, i would think that 3 statement model not working (ie B/S not balancing) would be an immediate ding as far as a 3 hour case study (starting from a bank excel and given a 10k goes) but could be ignored if the time was restricted to an hour. would love to hear from those of you who've gone through the process multiple times / involved in recruiting. thanks in advance

PS - Once interviewing for a top fund in the US, i went to the final round where i was one of the three. the firm did not extend me an offer but told me that the case study was the most comprehensive of all they'd seen since giving that one so i am not really sure how much it matters. for context, i had a week to prepare it. was overlooked for a guy who had direct pe experience unlike me

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Comments (12)

Jul 24, 2019 - 10:27am

Haven't really done many case studies to opine freely on this but in my limited experience: was advanced to the next round when I hadn't been able to complete the full model in an hour (model was 98% complete tho); other time I got rejected because the full blown model that I sent across did not balance and I had a week to do it. That was such a big blunder as I sent an old v, and only realized it 2 days later

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Jul 24, 2019 - 11:21am

Thanks for sharing. It would be helpful to hear from others too. I agree with you though that I'd ding you for that too. lol

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Jul 24, 2019 - 1:58pm

In my opinion, balance sheet not balancing is always an insta-ding, unless literally everything else is flawless and it's due to a minor, honest mistake. It's probably the first thing everyone checks.

Otherwise, some of worst case studies I've seen have just been when people are not able to justify their assumptions. Don't just plug in blind assumptions on growth, margins, capex, leverage, etc. Be able to support your assumptions when asked. Anyone can build a model with practice but, in my view, the ability to think critically about companies and defend your assumptions is much more important.

Jul 25, 2019 - 9:49am

Echoing the above poster's points, the balance sheet must balance and we will flex your assumptions to make sure that it dynamically balances - not just under your submission scenario.

Other issues I've seen (many of which are simple):
- Growth rate calculated incorrectly, usually a factor of people rushing through the calculation
- Monitor fees not flowing through correctly
- Financing fees not properly amortized on BS
- PPA not calculated correctly

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Jul 25, 2019 - 1:17pm

helpful! what would you say is the rough timeline for people who are successful in case studies to hear back after their submission?

Jul 25, 2019 - 7:24pm

If you really want to stand out, I'd consider doing a build up of the key inputs (rev, margins, maybe capex) - buyside loves to see folks that can understand the business deeper than the avergage monkey.

E.g. if they sell widgets try to do a top down market build with market share thoughts, a bottoms up capacity build, some sort of sales force based model etc to all triangulate what revenue could be.

And in terms of don'ts - my 2 cents suggestion - if you are projecting revenue growth to slow, then you will want to have capex at a normalized level (eg if it's 10% of rev when sales are growing 30% per year, they are prolly adding factories and stuff - once sales growth ~ industrial production + inflation, you want capex to come down because they are just maintaining their factories at that point. This point is very important if there is a DCF involved, as the terminal calc always assumes a more moderate growth assumption

Jul 27, 2019 - 3:34am

All these are good points. Thank you to the three gents / ladies who commented. But there's so much one can do in 3 hours. And how much do case studies really matter? I was severely disheartened when I didn't get my offer despite being told my case study was the best the firm had seen. I did so much primary and secondary research on that...

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