PE interview - technical and “commercial case” interview (second round). What to expect? Truly appreciate some advice gents.

Hey guys!

Reached second step (last one) of the interview with a small / middle sized PE firm focused on commercial businesses / services and have been informed it will be focused on technical questions and a "commercial case". The interview will last 1 hour and I am a second year Analyst from a BB, based in Europe.

Regarding the technical part I assume it is a good approach to read most of the interview prep guides out there focused on LBOs and also practicing some cases to really understand it throughout (even if there will not be a 1h LBO case but rather straight questions). Feel quite comfortable regarding this first part as I believe I already have a quite good platform of experience with room to improve of course.

-> However, I am less sure about the "commercial case" / questions and would really appreciate some input of what to expect and how to prepare as much as possible? In my mind I am thinking of a potential case regarding a target where they will ask me to evaluate if it would be a good investment, focusing on some financials but foremost on the commercial part such as the market, competitors, barriers to entry, targets historical financials compared to market / peers etc. Maybe I will be given a CIM to quickly read and later be asked some commercial questions related to it?

I would really, deeply, appreciate some help as I really want to land this job (dream fund since a while) and would be very thankful on some input regarding the above!Best,A2

 

Bump - also super keen to receive similar input on the commercial case as I have one as well!

 
Most Helpful

Your expectation sounds about right. I would expect a case where you are either presented a CIM or some high-level information about a business, and then asked to think through things like business model, unit economics, market dynamics, growth opportunities, investment risks, KPIs, and areas of additional diligence. I think your best bet in terms of practicing is to try to develop some structure in how you think about businesses, and then practice with a few random CIMs you can find.

One example framework could be: (1) how does the business generate revenue (I.e what does it sell and how does the company sell it)? (2) How does the company‘s ability to generate revenue evolve over time (take a view on growth prospects)? (3) what are the direct costs associated with the revenue streams (I.e is this a people-oriented cost structure , a SaaS business, a materials-based cost structure)? (4) what are the indirect costs needed to drive revenue generation and delivery (think about sales intensity, capital intensity)? (5) at this stage you should have a general understanding of growth rates, margin profile, operating leverage, unit economics, and cash flow profile. Then, round it out with (6) where is the business positioned in the value chain, and what are the exogenous factors that will impact the current business model - including changing market dynamics, competition, pricing changes, etc.

This is just one of many frameworks you could use. Once you’re able to think through all that stuff relatively quickly, you can then quickly identify the key opportunities and the key risks, as well as what the “have to believe’s” are for it to be a success, which can help inform your view on what key areas of additional diligence will be.

This stuff is tough to train for, if it’s a commercial case like I’ve seen, it’s mostly about how you think through a business as an investment opportunity, with some numbers around it for accuracy. Your best bet is to train with CIMs and try to make a SWOT + key diligence questions list for the business within a set time period

 

Helping another WSO guy as we speak on a similar Case Study format. DM me if you'd like - happy to discuss offline a framework, key sections, and what to do with the data, including sourcing content and data outside of what's given (Industry, Comps). Once the sections are broken out and you know what you need to source, it really becomes an exercise in knowing how to source & synthesize data.

 

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