People Take Excel and Modeling Way Too Seriously (rant)


Nothing worse than being on a sell side deal team that wants to run 10 different cases( with 3 sub cases, for a total of 30 cases), and have them all output at once. Model ends up looking like chit and becomes completely opaque to someone not spending 100 hr weeks looking at it exclusively. With all the offset / choose / and self referencing ifs functions it becomes a total chit show and the excel crashes like crazy (not too mention the chance of error is high)

People take modeling way too serious. Most of these "cases" have so many stupid assumptions the odds of any of them even being remotely accurate is next to none. Plus, most people don't even care what your model says anyways. (Buy side certainly doesn't)

Many bankers (especially juniors) basically worship modeling and think its the most intellectual and amazing thing they do. If you want to suck off modeling so much, you should have majored in CS and went FAANG (higher pay and better hours/culture) where you can actually MODEL and run millions of scenarios at your leisure.

The only reason bankers use excel is because it easily outputs to powerpoint and the resident boomer MD can use it without having a stress attack(actually, that last part isn't even true). At the end of the day we are just Powerpoint baby back biatches whether you admit it or not.

Comments (34)

  • Analyst 1 in IB - Gen
Aug 7, 2020 - 12:46am

lol this is so true

Aug 7, 2020 - 1:48am

Gonna add some more thoughts:

No one that matters REALLY cares about modeling.

Every deal I've done no one above associate even opened up the model or cared enough to check. On the corporate client side same thing. Its usually just bunch of juniors on both end monkeying around, while the senior stake holders glance at some outputs and move on to real discussion.

The only time anyone really looks at the model is when shareholders try and sue the company and their advisors for the bullchit merger they just got swindled into and dig into all details only to find out the analyst subtracted a negative number accidentally. But usually by then the analyst has already escaped out of banking so he never gets in trouble anyways.

  • Associate 3 in PE - LBOs
Aug 7, 2020 - 1:03pm

Hahaha I once went through a very-important multi-team call while realizing I subtracted depreciation instead of adding it back. We couldn't figure out why our DCFs didn't match (other issues too). I was ready to piss myself the whole time.

Fixed it in the next version and noone was any the wiser.

Aug 7, 2020 - 1:37pm

Associate 3 in PE - LBOs:

Hahaha I once went through a very-important multi-team call while having subtracted depreciation instead of adding it back. We couldn't figure out why our DCFs didn't match (other issues too). I was ready to piss myself the whole time.

Fixed it in the next version and noone was any the wiser.

Exactly, I've caught so many stupid errors like that late in the game. Usually just incorporate them when we price update and no one notices.

Most Helpful
Aug 7, 2020 - 8:15am

I agree, to an extent. On the banking side, yes, the complex models are pretty much useless since (i) management has their own (assuming you work with even remotely capable teams) and (ii) buy side will discount your model even if it's "conservative" and not use much of it.

However, on the PE side, I've found it to be useful. I'm not talking about running 30 scenarios, but it's nice to show monthly cash burn rate and flex cost structure in case of a downturn. Recession happens in 12 months? If revenue goes to 50%, what are the easy levers to pull and what does that look like for our cash position? It's pretty important to know if we'll be drawing on the revolver, have remotely enough cash for acquisitions, need to put more equity in and the list goes on. Granted, this type of analysis isn't complex but it is informative and senior folks do care about it. What do they care about most? Returns. Can they do some quick math and estimate returns? Sure, but a LP/co-invest is not going to accept "uhh yeah great deal. I think it'll be 3x".

  • Associate 1 in PE - LBOs
Aug 7, 2020 - 5:29pm

Yeah really the only reason we run cases at all is to stress test our base assumptions and see what covenant/cushions look like. I scratch my head thinking about why we ran so many cases in banking. Now that I’m not in the analyst seat getting grilled, I realize that regardless of who we sent the model to, they were probably just stripping out the historical data a plugging it into their own model. Perhaps they glanced at our main forecast (maybe using it as a bank/management case). And I honestly was in a pretty tame group. I’ll never forget one of the old Piper/sweatshop threads on this forum where someone was like yeah I had to build out 15 different merger models over Christmas, etc. I came into this thread expecting something totally different based on the title, but yeah it really is remarkable how much time is wasted on modeling, esp on the sell side

Aug 7, 2020 - 11:52am

Devils Advocate:

The longer you stay in this industry, the more you realize how little the model matters to getting a deal done.

Absolutely. No one really cares about it. It's all about whatever the agreed upon EBITDA is, the structure, and the multiple they convinced themselves is justifiable. Often times they already had a price in mind, and back solved for the multiple anyways.

The model is just there in case someone tries to sue them later and to justify fees.

Aug 7, 2020 - 2:01pm

Spot on - the more you're in the game the more you realize that modelling is total bullshit. First off, everyone models things differently. Everyone's assumptions are different. It would grind my gears back in the day when my mba associate would grill me on every assumption and ask why things aren't to the dollar when it literally made no impact to returns.

I think the people who really succeed in this industry are people who are able to see the bigger picture and be very efficient with their time - not spending 50 hours on a model where it takes up 1 presentation slide which people just flip through...

Aug 7, 2020 - 7:58pm

Everyone above is missing the whole point while there has always been a stereotype for "modeling" and it's "value". IB at junior level is most often considered a conduit into buy-side. Buy-side recruiting focuses heavily on your deal expereince, particularly if it involves modeling and has modeling case studies of their own.

THIS is why juniors go "hardo" for models etc. Nobody who actually understands how the sausage is made thinks a F500 CEO agrees on an M&A deal because an excel model told him / her so. Model assumptions are often fed and adjusted by seniors to reverse engineer a value they already have a ballpark figure of in their head. The sensitivity analysis during a deal as mentioned above is for liability reasons and also to some extent to justify fee's and made a deck look more "thorough"

  • Intern in IB-M&A
Aug 10, 2020 - 12:16pm

The reason everyone on here hypes up modeling is that it matters for interviews/recruiting. Interview questions on DCFs, LBOs, and comps are standard, so basic modeling knowledge is pretty much required to understand that stuff well. Because of that, college students get super into modeling and think it's a huge part of the job, even though it really isn't. If they asked interview questions about powerpoint, people would be all excited about that too.

Aug 12, 2020 - 12:22pm

Believe it or not, modelling is a skill best learned by doing, so if you haven't done modelling, people aren't going to murder you in an interview on how to model unless you are foolish enough to put it on your resume despite having never done a real model. At least this is true for interviews I have had up to now, and was true at the firm I worked as an intern at.

The associate who led recruitment cared more about work ethic and genuinely knowing what they are getting themselves into than he did knowing how to model for interns. FT analysts was a different story.

Aug 12, 2020 - 6:42pm

Just heard a search fund intern complain about not enough modeling on the job, and said that's why he's interested in IB. Forgot how much of an awakening candidates are in for if they do ever get the job.

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