Take home case study question

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Hey guys,

For those of you that have had the pleasure of working on a HF case study , is it worth building a full 3 statement model? The particular company i got is not a balance sheet driven business and I can complete a valuation with an earnings model (Revenue down to EBITDA and FCF) and a debt waterfall. A 3 statement model obviously would be nice but time is a constraint and there are certain factors prevent it from being a straight forward exercise.

Let me know your thoughts. Thanks !

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Comments (15)

 
Jul 13, 2015 - 10:22am

I think you should build in the balance sheet with fairly simplistic (but defensible) assumptions. If this were an in office case study where you are under more time pressure, then you might be able to get away with not having a balance sheet. That said, I don't think inserting a balance sheet will take much time. Show at least one or two years worth of historicals and the projections. I think the two most important things to capture are changes in net debt and changes in working capital, the latter of which you will need to capture as they can impact cash flow quite a bit in some businesses.

My question to others is in your case study balance sheets, do you typically show each tranche of debt (so not just revolver, senior vs. junior but also each specific instrument and its maturity), or do you just lump it all into "total debt" and use the weighted average interest rate to calculate interest expense? The latter is not as exact but should be a decent approximation (unless the current debt was put in place a while ago when rates were higher and the company has announced plans to refinance in the near future which will lower their rates).

 
Jul 13, 2015 - 3:36pm

basketballbanker:

I think you should build in the balance sheet with fairly simplistic (but defensible) assumptions. If this were an in office case study where you are under more time pressure, then you might be able to get away with not having a balance sheet. That said, I don't think inserting a balance sheet will take much time. Show at least one or two years worth of historicals and the projections. I think the two most important things to capture are changes in net debt and changes in working capital, the latter of which you will need to capture as they can impact cash flow quite a bit in some businesses.

My question to others is in your case study balance sheets, do you typically show each tranche of debt (so not just revolver, senior vs. junior but also each specific instrument and its maturity), or do you just lump it all into "total debt" and use the weighted average interest rate to calculate interest expense? The latter is not as exact but should be a decent approximation (unless the current debt was put in place a while ago when rates were higher and the company has announced plans to refinance in the near future which will lower their rates).

I generally bucket by tranche- secured, senior, unsec, Pik/Mezz/ etc. Generally b/c this is how i've done with my senior analysts in the past. Also considering that some firms have 10+ bond structure which would look sloppy breaking out separately.

That being said, most of my case studies have been for smaller companies with one or two loans/bonds, in which case I broke it out separately

As for the OP's question, I would model the BS, especially outstanding debt. Just keep the assumptions simple and straight forward.

"Sounds to me like you guys a couple of bookies."
 
Jul 14, 2015 - 3:21am

Just use judgment on whether the quantity of debt (and differences between tranches) is material or not. For OP's question, I would have a simple B/S so that you have net debt if you're going to look at a forward EV valuation, and also to calculate ROCE, ROE etc, which some people care a lot about.

 
Jul 14, 2015 - 10:50am

Build the full 3 statement and make sure everything ties. Some insights are only shown when you see how all the numbers move together and what the ratios are. Plus you need some of the balance sheet stuff to project capex, depreciation, working cap changes etc etc etc.

Pennies from JcPenny
 
Jul 15, 2015 - 7:44am

I'd want to see a full 3-statement model for a take-home with any reasonable amount of time. We usually do in-office cases so the expectations are lower.

There have been many great comebacks throughout history. Jesus was dead but then came back as an all-powerful God-Zombie.
 
Jan 16, 2017 - 8:23pm

Take home case w/ limited info (Originally Posted: 03/25/2017)

After a first round interview with a boutique consulting firm, I was asked to complete a short PowerPoint (10 slides max, though preferably less) for a company choosing between 2 growth opportunities. Option 1 involves the company adding a distribution channel for its current product. Option 2 requires the company to add foreign products to its foreign distribution channels. I have intentionally left out the company/industry.

Normally I would use a framework to dig deeper, but I was told I cannot ask follow-up questions. Does anyone have an idea of how to tackle this and what the interviewer is looking for?

 
Jan 16, 2017 - 8:25pm

Private Equity Case Study (Take Home) (Originally Posted: 02/24/2018)

Hey guys,

Had a take home case study for MM PE firm. I submitted the case study and now they've invited me to discuss my analysis with them.

What all should I expect? What kind of questions should I prepare for?

Btw, they did not want a model for the case study - it was strictly a qualitative analysis.

Appreciate any input.

Thanks!

 
Jan 16, 2017 - 8:26pm
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