Private Equity Case Study: Example, Prompts, & Presentation
Private equity case studies are an important part of the private equity recruiting process because they allow firms to evaluate a candidate’s analytical, investing, and presentation abilities.
In this article, we’ll look at the various types of private equity case studies and offer advice on how to prepare for them.
This guide will help you ace your next private equity case study, whether you’re a seasoned analyst or new to the field.
Types Of Private Equity Case Studies
Case studies are very common in private equity interviews, and they are a key part of the overall recruiting process.
While you’re extremely likely to encounter a case study of some kind during your recruiting process, there is considerable variety in the types of case studies you might face.
Below I cover the major types:
In-person lbo modeling assignment.
For this case study, you’ll get some company information (e.g. a 10-K or a CIM) and be asked to assess whether or not you’re likely to invest.
Generally, you’ll get between 2-7 days to prepare a full presentation or investment memo with your recommendations that you’ll present to the interviewer. To support your investment recommendation, you’ll be expected to complete a full LBO model . The prompt may give certain details or assumptions to include in the model.
This type of test is most common during “off-cycle” hiring throughout the year, since firms have more time to allow you to complete the assignment.
This is pretty similar to the take-home assignment. You’re given company materials, will build a financial model, and decide whether you would invest.
The difference here is the time you’re given to complete the case. You’ll generally get between two to three hours, and you’ll typically complete the case study in the firm’s office, though some firms are becoming newly open to completing the assignment remotely.
In this case, you’ll typically only complete an LBO model. There is usually no presentation or investment memo. Rather, you’ll do the model and then have a short discussion afterward.
This is a shorter, more condensed version of an LBO model. You can complete a paper LBO with a piece of paper and a pen. Alternatively, you may be asked to discuss it verbally with the interviewer.
Rather than using an Excel spreadsheet, you use an actual sheet of paper to show your calculations. You don’t go into all the detail but focus on the essence of the model instead.
In this article, we’ll be focusing on the first two types of case studies because they are the most widely used. But if you’re interested, here is a deep dive on Paper LBOs .
Private Equity Case Study Prompt
Regardless of the type of case study you’re asked to do, the prompt from the interviewer will ultimately ask you to answer: “would you invest in this company?”
To answer this question you’ll need to take on the provided materials about the company and complete a leveraged buyout model to determine whether there is a high enough return. Generally, this is 20% or higher.
Usually, prompts also provide you with certain assumptions that you can use to build your LBO model. For example:
- Pro forma capital structure
- Financial assumptions
- Acquisition and exit multiples
Some private equity firms provide you with the Excel template needed for an LBO model, while others prefer you to make one from scratch. So be ready to do that.
Private Equity Case Study Presentation
As you’ve seen above, if you get a take-home assignment as a case study, there’s a good chance you’re going to have to present your investment memo in the interview.
There will usually be one or two people from the firm present for your presentation.
Each PE firm has a different interview process, some may expect you to present first and then ask questions, or the other way around. Either way, be prepared for questions. The questions are where you can stand out!
While private equity recruitment is there to assess your skills, it’s not all about your findings or what your model says. The interviewers are also looking at your communication skills and whether you have strong attention to detail.
Remember, in the private equity interview process, no detail is too small. So, the more you provide, the better.
How To Do A Private Equity Case Study
Let’s look at the step-by-step process of completing a case study for the private equity recruitment process:
- Step 1: Read and digest the material you’ve been given. Read through the materials extensively and get an understanding of the company.
- Step 2: Build a basic LBO model. I recommend using the ASBICIR method (Assumptions, Sources & Uses, Balance Sheet, Income Statement, Cash Flow Statement, Interest Expense, and Returns). You can follow these steps to build any model.
- Step 3: Build advanced LBO model features, if the prompts call for it, you can jump to any advanced features. Of course, you want to get through the entire model, but your number 1 priority is to finish the core financial model. If you’re running out of time, I would skip or reduce time on advanced features.
- Step 4: Take a step back and form your “investment view”. I would try to answer these questions:
- What assumptions need to be present for this to be a good deal?
- Under what circumstances would you do the deal?
- What is the biggest risk in the deal? (e.g. valuation, growth, and margins).
- What is the biggest driver of returns in the deal? (e.g. valuation, growth, and debt paydown).
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How To Succeed In A Private Equity Case Study
Here are a few of my tips for getting through the private equity fund case study successfully.
Get the basics down first
It’s very easy to want to jump into the more complex things first. If you go in and they start asking you to complete complex LBO modeling features like PIK preferred equity, getting to that might be on the top of your list.
But I recommend taking a step back and starting with the fundamentals. Get that out the way before moving on to the complicated stuff.
The fundamentals ground you, getting you through the things you know you can do easily. It also gives you time to really think about those complex ideas.
Show nuanced investment judgment; don’t be too black-and-white
When giving your investment recommendation for a private equity fund you shouldn’t be giving a simple yes or no.
It’s boring and gives you no space to elaborate. Instead, go in with what price would make you interested in investing and why. Don’t be shy to dig in here.
Know where there is a value-creation opportunity in the deal, and mention the key assumptions you need to believe to create that value.
Additionally, if you are recommending that the investment move forward then bring up things you would want to know before closing a deal. You can highlight the key risks of the investment, or key things you’d want to ask management if you could meet with them.
At the end of the day, financial modeling is a commodity skill. Every investor can do it. What will really set you apart is how you think about the deals, and the nuance you bring to analyzing them.
You win by talking about the model
Along those lines, you don’t win by building the best model. Modeling is just a check-the-box thing in the interview process to show you can do it. The interviewers need to know you can do the basics with no glaring errors.
What matters is showing that you can discuss the investment intelligently. It’s about bringing a sensible recommendation to the table with the information to back it up.
How Do I Prepare For A Private Equity Case Study?
There is no one-size-fits-all when it comes to preparing for a private equity case study. Everyone is different.
However, the best thing you can do is PRACTICE, PRACTICE, and more PRACTICE!
I know of a recent client that successfully obtained an offer from multiple mega funds . She practiced until she was able to build 10 LBO models from scratch without any errors or help … yes, that’s 10 models!
Now, whether it takes 5 or 20 practice case studies doesn’t matter. The whole point is to get to a stage where you feel confident enough to do an LBO model quickly while under pressure.
There is no way around the pressure in a private equity interview. The heat will be on. So, you need to prepare yourself for that. You need to feel confident in yourself and your capabilities.
You’d be surprised how pressure can leave you stumped for an answer to a question that you definitely know.
It’s also a good idea to think about the types of questions the private equity interviewer might ask you about your investment proposal. Prepare your answers as far as possible. It’s important that you stick to your guns too when the situation calls for it, because interviewers may push back on your answers to see how you react..
You need to have your answer to “would you invest in this company?” ready, and also how you got to that answer (and what new information might change your mind).
Another thing that gets a lot of people is limited time. If you’re running out of time, double down on the fundamentals or the core part of the model. Make sure you nail those. Also, you can make “reasonable” assumptions if there’s information you wish you had, but don’t have access to. Just make sure to flag it to your interviewer
How important is modeling in a private equity case study?
Modeling is part and parcel of private equity case studies. Your basics need to be correct and there should be no obvious mistakes. That’s why practicing is so important. You want to focus on the presentation, but your calculations need to be correct first. They do, after all, make up your final decision.
How can I stand out from other candidates?
Knowing your stuff covers the basics. To stand out, you need to be an expert in showing how you came to a decision, a stickler for details, and inquisitive. Anyone can do the calculations with practice, but someone who thinks clearly and brings nuance to their discussion of the investment will thrive in interviews.
Private equity case studies are a difficult but necessary part of the private equity recruiting process . Candidates can demonstrate their analytical abilities and impress potential employers by understanding the various types of case studies and how to approach them.
Success in private equity case studies necessitates both technical and soft skills, from analyzing financial statements to discussing the investment case with your interviewer.
Anyone can ace their next private equity case study and land their dream job in the private equity industry with the right preparation and mindset. If you’re looking to learn more about private equity, you can read my recommended Private Equity Books.
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Private Equity Sache Study: Example, Prompts, & Presentation
Private equity case student are an important separate of the private equity recruiting process because they allow firm to evaluate a candidate’s analytical, investing, and presentation abilities.
In this article, we’ll look the the various types is private equity case studies and offer advice on how to prepare used them.
This guide will online you ace our following private equity case study, whether you’re an seasoned analyst or new on this field.
Genres Of Secret Equity Case Learn
Case studies are very common in private equity interviews, and it can a key part of that overall recruiting process.
When you’re extremely possibly in encounter ampere lawsuit study of some kind during your recruiting process, there is appreciable variety in which types of case studies you might face. Private Equity Workshop Materials
At I cover of major types:
In-person lbo modeling assignment.
For this rechtssache study, you’ll get some company information (e.g. a 10-K or a CIM) and be asked go assess whether oder not you’re likely at invest.
Generally, you’ll get between 2-7 days to prepare a comprehensive presentation or investiture reminder over your recommendations that you’ll present to the interviewer. To support your investment recommendation, you’ll be expected to complete a full LBO prototype . The prompt may give constant details or assumptions to inclusion in aforementioned model.
This artist of test is most common during “off-cycle” hiring over the year, since firms have more time to allow you to complete the assignment.
This will pretty similar to that take-home assignment. You’re given company select, will build a financial model, and decide whether you would invest. Private Equity Presentations: Are Of Tall Tales?
The difference here a the period you’re given up complete the case. You’ll generally get between two to three hours, press you’ll typically complete the case study in the firm’s office, though einige firms are becoming newly open to completing the assignment remotely. Showcase Objective. • This presentation is planned to deploy a high level review of the economic structure of Private Equity (“PE”) fund investments.
In save case, you’ll typically with complete einen LBO model. There is usually no presentation instead investment notation. Rather, you’ll do the model and then have a short discussion afterward.
This is a brief, more dense version of an LBO model. You can complete a paper LBO with a piece of hard and a pen. Alternatively, thou may exist asked to discuss it verbally with the interviewer.
Rather than through an Excel spreadsheet, you use can actual sheet are paper to show autochthonous calculations. You don’t go into all the detail but focus on the essence about the model instead. NB Privately Equity Partners: Company Presentation
In this article, we’ll be focusing the the first-time second types of case studies because group are the most widely used. And if you’re interested, here is ampere deep fall on Paper LBOs .
Private Equity Case Examine Prompt
Regardless of who type of case study you’re asked up do, the prompt from the interviewer will ultimately ask you till rejoin: “would you invest within this company?” Private Equity Workshop Presentation ... Examples of Waterfall Finance ... A recently example: consistently strong execution management.
To answer this question you’ll need toward make on the provided materials about to company and complete a leveraged buyout model to determine whether there is a high enough return. Generally, this is 20% button higher.
Usually, prompts also provide you with certain assumptions that you bucket use to build your LBO model. For examples:
- Pro forma capital built
- Financial assumptions
- Acquisition and exit multiples
Some individual net firms provide you in the Excels template needed for an LBO model, when additional prefer you for make one from scratch. To be complete to achieve that.
Private Equity Case Study Presentation
As you’ve seen above, if you get a take-home assignment as a case study, there’s a fine chance you’re left to have to present your investment comment in the interview.
There will usually be one or twin people from the resolute present for your presentation.
Each PE resolute has a different ask proceed, some could expectations you to introduce first additionally when ask questions, instead the other type about. Either method, be prepared by questions. The questions are where you ca stand out!
While private equity employee a there the assess your skills, it’s did all about my findings or what your model said. The interviewers are also looking at your communication competencies and whether you have strong caution to detail. Private equity investiture deck powerpoint presentation slides
Remember, are the home company interview process, no detail is too small. So, the more you provide, aforementioned better.
How To Do A Private Equity Case Study
Let’s look along the step-by-step process to completing a box study for the home equity personnel process:
- Step 1: Read and digest this material you’ve been given. Read through of materials extensively also get an understanding of which company.
- Step 2: Build adenine bases LBO models. I recommend using that ASBICIR method (Assumptions, Sources & Uses, Balance Leaves, Total Statement, Cash Flow Statement, Support Expense, and Returns). You can followed these steps to construct any model.
- Step 3: Build advance LBO model features, if the prompts call for it, you can jump to any advanced features. Of course, you want to get through the entire scale, but your number 1 priority is to finish the core financial print. If you’re running out of time, I would skip with reduced time on advanced functionality.
- Step 4: Take a step endorse and form your “investment view”. I would tries to answer above-mentioned questions:
- What assumptions need to be present for this to being a good deal?
- Under what circumstances would you do one deal?
- Something is the biggest risk in the dealer? (e.g. valuation, growth, and margins).
- Get is the biggest truck concerning returns in the deal? (e.g. valuation, growth, and debt paydown).
How To Succeed In A Confidential Equity Case Study
On are a few of my tips for getting through that private common fund case study successfully.
Get the basics down first
It’s high easy to want to jump under an more complex thingies initially. If you go in and they start asking you to complete complex LBO modeling features like PIK preferred equity, getting to that might be turn the top of your list.
But I recommend taking a step back the starting with the fundamentals. Received that out one pathway before moving on until one complicated stuff.
The fundamentals earth you, getting you through the things you know you can do easily. It also gives her time to indeed think about those sophisticated ideas.
How nuanced investment judgment; don’t be too black-and-white
When giving your investment recommendation by a private shareholders fund them shouldn’t be giving a simple yes or no.
It’s boring and presents you cannot space to elaborate. Instead, go in with what pricing would make you interested in investing and why. Don’t being shy to grave in here. NB Individual Equity Mates Update
Know where there is a value-creation opportunity in the deal, and mentioned the key assumptions thou need to believed to create that value.
Additionally, if you is recommended that the participation move forward when carry up things you would require to know before closures a deal. You may highlight the press risks of the investments, or key things you’d want to ask management if you may meet with them. of disclosures and fairness of show; and (c) are being provided ... [See Investment included Private Operating Companies used example.
At the end von the day, financial mold your a commodity skill. Every capitalist can does it. Whatever will really fixed you apart is select you think about the deals, and the nuance you taking to analyzing them. Illustrative financial statements: Home Shareholder
Your winning per talking about the model
Along these cable, yours don’t triumph by building this best model. Modeling is just a check-the-box thing int the interview process to shows you can accomplish it. The poll need on know you can do the basics with no glaring errors.
Whats matters lives showing that you can discuss the investment intelligently. It’s about bringing a sensible recommendation to the tab at the information up back it up.
As Do I Prepare For A Private Equity Case Study?
There a no one-size-fits-all when it comes to preparing for a individual equity case study. Everyone remains different.
However, the best thing you can go is PRACTICE, PRACTICE, and other TRAINING!
I know of a recent patron that successfully obtained an offer from multiple mega resources . She practice until she was competent to built 10 LBO models from scratch without either errors conversely help … yes, that’s 10 models!
Now, about it takes 5 alternatively 20 practice kasten studies doesn’t matter. The whole point is to get to a set location you feel confident enough to do an LBO model quickly while under pressure. Learn about different types by private equity case studies and how to excel included them. Aforementioned guide coverage prompts, presentations, and homework tips
There is no way around that pressure in a private company interview. The heat will be on. So, yourself need to prepare yourself on that. You need to felt confident to yourself and your capabilities. Private Shareholders Casing Study: Example, Prompts, & Presentation
You’d be surprising how pressure can leaves you stumped for an answer to a question that you definitely know.
It’s also an great idea to how about the types of questions the private equities interviewer might beg you about your investment make. Prepare your answers as way as available. It’s important that you stick to autochthonous rifles also when aforementioned situation calls for it, because interviewers allow push back on your returns to see how you react..
Yourself need to have your answer to “would it invest in dieser company?” ready, and also how you got to that answer (and what new information might change your mind).
Another thing that gets a lot von people is restricted time. If you’re running out of date, double down on the rudiments or the main part about the model. Make sure you nail those. Also, you can make “reasonable” premises if there’s information you want you had, but don’t have access into. Just make sure to flag it to your interviewer Apex 10 VC Pitch Decks, Examples and Templates
Instructions major is modeling to a private equity case study?
Sculpt is part and parcel of private shareholder case surveys. Your basics what to be correct furthermore there should may no obvious bug. That’s why practicing is to major. You want to focus up the presentation, but your calculations need to be correct first. They do, after select, make up their final decision.
How can I stand out off other candidates?
Knowing insert stuff covers the basic. To stand out, you need to be an subject in showing how you came to a decision, a adherent for details, press inquisitive. Anyone can do the calculations with habit, but individual who thinks clearly furthermore brings nuance to their diskussion of the financial will thrive in interviews.
Intimate equity case studies are adenine difficult but necessarily part of the private equity recruiting process . Candidates can demonstrate their analytic abilities and impress potential employers by understanding to various types the sache studies and how to approach them.
Success in private equity suitcase studies necessitates twain technical and soft skills, from evaluate economic statements to talk the participation case with your interviewer.
Anyone can ace ihr continue private equity case study and land their dream job are the private equity industry with aforementioned right preparation additionally spirit. If you’re looking to learn more nearly private impartiality, you can read my recommended Private Capital Sell.
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Private Equity Interviews 101: How to Win Offers
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Private equity interviews can be challenging, but for most candidates, winning interviews is much tougher than succeeding in those interviews.
You do not need to be a math genius or a gifted speaker; you just need to understand the recruiting process and basic arithmetic.
Still, there is more to PE interviews than “2 + 2 = 4,” so let’s take a detailed look at the process:
How to Network and Win Private Equity Interviews
The Private Equity recruiting process differs dramatically depending on your current job and location.
Here are the two extremes:
- Investment Banking Analyst at a Bulge Bracket or Elite Boutique in New York: The process will be highly structured, and interviews will finish at warp speed. In some ways, your bank, group, and academic background matter more than your skill set or deal experience. This one is known as the “on-cycle” process.
- Non-Banker in Another Part of the U.S. or World: The process will be far less structured, it may extend over many months, and your skill set and deal/client experience will matter a lot more. This one is known as the “off-cycle” process.
If you’re in between these categories, the process will also be in between these extremes.
For example, if you’re at a smaller bank in NY, you may complete some on-cycle interviews, but you will almost certainly also go through the off-cycle process at smaller firms.
If you’re in London, there will also be a mix of on-cycle and off-cycle processes, but they tend to start later and move more slowly than the ones in NY.
We have covered PE recruiting previously ( overall process and what to expect in the on-cycle process ), so I am not going to repeat everything here.
Interviews in both on-cycle and off-cycle processes test similar topics , but the importance of each topic varies.
The timing of interviews and start dates, assuming you win offers, also differs.
The Overall Private Equity Interview Process
Regardless of whether you recruit in on-cycle or off-cycle processes, or a combination of both, almost all PE interviews have the following characteristics in common:
- Multiple Rounds: You’ll almost always go through at least 2-3 rounds of interviews (and sometimes many more!) where you speak with junior to senior professionals at the firm.
- Topics Tested: You’ll have to answer fit/background questions, technical questions, deal/client experience questions, questions about the firm’s strategies and portfolio, market/industry questions, and complete case studies and modeling tests.
The differences are as follows:
- Timing and Time Frame: If you’re at a BB/EB bank in NY, and you interview with mega-funds, the process starts and finishes within several months of your start date at the bank (!), and it moves up earlier each year. Interviews at the largest firms start and finish in 24-48 hours, with upper-middle-market and middle-market firms beginning after that.
By contrast, interviews start later at smaller PE firms, and the entire process may last for several weeks up to several months.
- Importance of Topics Tested: At large funds and in the on-cycle process, you need to complete modeling tests quickly and accurately and spin your pitches and early-stage deals into sounding like real deals; at smaller funds and in off-cycle interviews, the reasoning behind your case studies/modeling tests and your real experience with clients and deals matter more.
Firm-specific knowledge and fitting your investment recommendations to the firm’s strategies are also more important.
- Start Date: You interview far in advance if you complete the on-cycle process, and if you win an offer, you might start 1.5 – 2.0 years later. With the off-cycle process, you start right away or soon after you win the offer.
Private Equity Interview Topics
There is not necessarily a correlation between the stage of interviews and the topics that will come up.
You could easily get technical questions early on, and you’ll receive fit/background and deal experience questions throughout the process.
Case studies and modeling tests tend to come up later in the process because PE firms don’t want to spend time administering them until you’ve proven yourself in previous rounds.
However, there are exceptions even to that rule: For example, many funds in London start the process with modeling tests because there’s no point interviewing if you can’t model.
Here’s what to expect on each major topic:
Fit/Background Questions: “Why Private Equity?”
The usual questions about “ Why private equity ,” your story , your strengths/weaknesses , and ability to work in a team will come up, and you need answers for them.
We have covered these in previous articles, so I’ve linked to them above rather than repeating the tips here.
Since on-cycle recruiting takes place at warp speed, you’ll have to draw on your internship experience to come up with stories for these questions, and you’ll have to act as if PE was your goal all along.
By contrast, if you’re interviewing for off-cycle roles, you can use more of your current work experience to answer these questions.
While these questions will always come up, they tend to be less important than in IB interviews because:
- In on-cycle processes, it’s tough to differentiate yourself – everyone else also did multiple finance internships and just started their IB roles.
- They care more about your deal experience, whether real or exaggerated, in both types of interviews.
Technical Questions For PE
The topics here are similar to the ones in IB interviews: Accounting, equity value and enterprise value , valuation/DCF, merger models, and LBO models.
If you’re in banking, you should know these topics like the back of your hand.
And if you’re not in banking, you need to learn these topics ASAP because firms will not be forgiving.
There are a few differences compared with banking interviews:
- Technical questions tend to be framed in the context of your deal experience – instead of asking generic questions about the WACC formula , they might ask how you calculated it in one specific deal.
- More critical thinking is required. Instead of asking you to walk through the financial statements when Depreciation changes, they might describe companies with different business models and ask how the financial statements and valuation would differ.
- They focus more on LBO models, quick IRR math , and your ability to judge deals quickly.
Most interviewers use technical questions to weed out candidates , so poor technical knowledge will hurt your chances, but exceptional knowledge won’t necessarily get you an offer.
Talking About Deal/Client Experience
This category is huge, and it presents different challenges depending on your background.
If you’re an Analyst at a large bank in New York, and you’re going through on-cycle recruiting, the key challenge will be spinning your pitches and early-stage deals into sounding like actual deals.
If you’re at a smaller bank, and you’re going through off-cycle recruiting, the key challenge will be demonstrating your ability to lead, manage, and close deals .
And if you’re not in investment banking, the key challenge will be spinning your experience into sounding like IB-style deals.
Regardless of your category, you’ll need to know the numbers for each deal or project you present, and you’ll need a strong “investor’s view” of each one.
That’s quite a bit to memorize, so you should plan to present, at most, 2-3 deals or projects.
You can create an outline for each one with these points:
- The company’s industry, approximate revenue/EBITDA, and multiples (or, for non-deals, estimated costs and benefits).
- Whether or not you would invest in the company’s equity/debt or acquire it (or, for non-deals, whether or not you’d pursue the project).
- The qualitative and quantitative factors that support your view.
- The key risk factors and how you might mitigate them.
If you just started working, pick 1-2 of your pitches and pretend that they have progressed beyond pitches into early-stage deals.
Use Capital IQ or Internet research to generate potential buyers or investors, and use the company-provided pitch materials to come up with your projections for the potential stumbling blocks in the transaction.
For your investment recommendation, imagine that each deal is a potential LBO, and build a quick, simple model to determine the rough numbers, such as the IRR in the baseline and downside cases.
For the risk factors, reverse each model assumption (such as the company’s revenue growth and margins) and explain why your numbers might be wrong.
If you’re in the second or third categories above – you need to show evidence of managing/closing deals or evidence of working on IB-style deals – you should still follow these steps.
But you need to highlight your unique contributions to each deal, such as a mistake you found, a suggestion you made that helped move the financing forward, or a buyer you thought of that ended up making an offer for the seller.
If you’re coming in with non-IB experience, such as internal consulting , still use the same framework but point out how each project you worked on was like a deal.
You had to win buy-in from different parties, get information from groups at the company, and justify your proposals by pointing to the numbers and qualitative factors and addressing the risk factors.
Understanding the firm’s investment strategies, portfolio, and exits is very important at smaller firms and in off-cycle processes, and less important in on-cycle interviews at mega-funds.
If you have Capital IQ access, use it to look up the firm.
If not, go to the firm’s website and do extensive Google searches to find the information.
Finding this information should not be difficult, but the tricky point is that firms won’t necessarily evaluate your knowledge by directly asking about it.
Instead, if they give you a take-home case study, they might judge your responses based on how well your investment thesis lines up with theirs.
For example, if the firm makes offline retailers more efficient via cost cuts and store divestitures, you should not present an investment thesis based on overseas expansion or roll-ups of smaller stores.
If they ask for an investor’s view of one of your deals, they might judge your answer based on your ability to frame the deal from their point of view.
For example, if the firm completes roll-ups in fragmented industries, you should not look at a standard M&A deal you worked on and say that you’d acquire the company because the IRR is between XX% and YY% in all scenarios.
Instead, you should point out that with several roll-ups, the IRR would be between XX% and YY%, and even in a downside case without these roll-ups, the IRR would still be at least ZZ%, so you’d pursue the deal.
In theory, private equity firms should care about your ability to find promising markets or industries.
In practice, open-ended questions such as “Which industry would you invest in?” are unlikely to come up in traditional PE interviews.
If they do come up, they’ll be in response to your deal discussions, and the interviewer will ask you to explain the upsides and downsides of your company’s industry.
These questions are more likely in growth equity and venture capital interviews, so you shouldn’t spend too much time on them if your goal is traditional PE (for more on these fields, see our coverage of venture capital interview questions and the venture capital case study ).
And even if you are interviewing for growth equity or VC roles, you can save time by linking your industry recommendations to your deal experience.
Case Studies and Modeling Tests
You will almost always have to complete a case study or modeling test in PE interviews, but the types of tests span a wide range.
Here are the six most common ones, ranked by rough frequency:
Type #1: “Mental” Paper LBO
This one is closer to an extended technical question than a traditional case study.
To answer these questions, you need to know how to approximate IRR, and you need practice doing the mental math.
The interviewer might ask something like, “A PE firm acquires a $150 EBITDA company for a 10x multiple using 60% Debt. The company’s EBITDA increases to $200 by Year 3, $225 by Year 4, and $250 by Year 5, and it pays off all its Debt by Year 3.
The PE firm sells its stake evenly over Years 3 – 5 at a 10x EBITDA multiple. What’s the approximate IRR?”
Here, the Purchase Enterprise Value is $1.5 billion, and the PE firm contributes 40% * $1.5 billion = $600 million of Investor Equity.
The “average” amount of proceeds is $225 * 10 = $2,250, and the “average” Exit Year is Year 4 (no need to do the full math – think about the numbers – and all the Debt is gone).
So, the PE firm earns $2,250 / $600 = 3.75x over 4 years. Earning 3x in 3 years is a ~45% IRR, so we’d expect the IRR of a 3.75x multiple in 4 years to be a bit less than that.
To approximate a 4x scenario, we could take 300%, divide by 4 years, and multiply by ~55% to account for compounding.
That’s ~41%, and the actual IRR should be a bit lower because it’s a 3.75x multiple rather than a 4.00x multiple.
In Excel, the IRR is just under 40%.
Type #2: Written Paper LBO
The idea is similar, but the numbers are more involved because you can write them down, and you might have 30 minutes to come up with an answer.
You can get a full example of a paper LBO test, including the detailed solutions, here .
You can also check out our simple LBO model tutorial to understand the ropes.
With these case studies, you need to start with the end in mind (i.e., what multiple do you need for an IRR of XX%) and round heavily so you can do the math.
Type #3: 1-3-Hour On-Site or Emailed LBO Model
These case studies are the most common in on-cycle interviews because PE firms want to finish quickly.
And the best way to do that is to give all the candidates the same partially-completed template and ask them to finish it.
You may have to build the model from scratch, but it’s not that likely because doing so defeats the purpose of this test: efficiency.
You’ll almost always receive several pages of instructions and an Excel file, and you’ll have to answer a few questions at the end.
The complexity varies; if it’s a 1-hour test, you probably won’t even build a full 3-statement model .
They might also ask you to use a cash-free debt-free basis or a working capital adjustment to tweak the Sources & Uses slightly.
If it is a 3-hour test, a 3-statement model is more likely (the other parts of the model will be simpler in this case).
Here’s a free example of a timed LBO modeling test ; we have many other examples in the IB Interview Guide and Core Financial Modeling course .
IB Interview Guide
Land investment banking offers with 578+ pages of detailed tutorials, templates and sample answers, quizzes, and 17 Excel-based case studies.
Type #4: Take-Home LBO Model and Presentation
These case studies are open-ended, and in most cases, you will not get a template to complete.
The most common prompts are:
- Build a model and make an investment recommendation for Portfolio Company X, Former Portfolio Company Y, or Potential Portfolio Company Z.
- Pick any company you’re interested in, build a model, and make an investment recommendation.
With these case studies, you must fit your recommendation to the firm’s strategy rather than building a needlessly complex model.
You might have 3-7 days to complete this type of case study and present your findings.
You might be tempted to use that time to build a complex LBO model, but that’s a mistake for three reasons:
- The smaller firms that give open-ended case studies tend not to use that much financial engineering.
- No one will have time to review or appreciate your work.
- Your time would be better spent on industry research and coming up with a sold investment thesis, risk factors, and mitigants.
If you want an example of an open-ended exam like this, see our private equity case study article and follow the video walkthrough or article text.
Your model could be shorter, and your presentation could certainly be shorter, but this is a good example of what to target if you have more time/resources.
Type #5: 3-Statement/Growth Equity Model
At operationally-focused PE firms, growth equity firms, and PE firms in emerging markets such as Brazil , 3-statement projection modeling tests are more common.
The Atlassian case study is a good example of this one, but I would change a few parts of it (we ignored Equity Value vs. Enterprise Value for simplicity, but that was a poor decision).
Also, you’ll never have to answer as many detailed questions as we did in that example.
If you think about it, a 3-statement model is just an LBO model without debt repayment – and the returns are based on multiple expansion, EBITDA growth, and cash generation rather than debt paydown .
You can easily practice these case studies by picking companies you’re interested in, downloading their statements, projecting them, and calculating the IRR and multiples.
Type #6: Consulting-Style Case Study
Finally, at some operationally-focused PE firms, you could also get management consulting-style case studies, where the goal is to advise a company on an expansion strategy, a cost-cutting initiative, or pricing for a new product.
We do not teach this type of case study, so check out consulting-related sites for examples and exercises.
And keep in mind that this one is only relevant at certain types of firms; you’re highly unlikely to receive a consulting-style case study in standard PE interviews.
A Final Word On Case Studies
I’ve devoted a lot of space to case studies, but they are not as important as you might think.
In on-cycle processes, they tend to be a “check the checkbox” item: Interviewers use them to verify that you can model, but you won’t stand out by using fancy Excel tricks.
Arguably, they matter more in off-cycle interviews since you can present unique ideas more easily and demonstrate your communication skills in the process .
What NOT to Worry About In PE Interviews
The topics above may seem overwhelming, so it’s worth pointing out what you do not need to know for interviews.
First, skip super-complex models.
As a specific example, the LBO models on Macabacus are overkill; they’re way too complicated for interviews or even the job itself.
You should aim for Excel files with 100-300 rows, not 1,000+ rows, and skip points like circular references unless they specifically ask for them (for more, see our tutorial on how to remove circular references in Excel )
Next, skip brain teasers; if an interviewer asks them, you should drop discussions with the firm.
Finally, you don’t need to know about the history of the private equity industry or much about PE fund economics beyond the basics.
Your time is better spent learning about a firm’s specific strategy and portfolio.
PE Interview X-Factor(s)
Besides the topics above, competitive tension can make a huge difference in interviews.
If you tell Firm X that you’ve already received an offer from Firm Y, Firm X will immediately become far more likely to give you an offer as well.
Even at the networking stage, competitive tension helps because you always want to tell recruiters that you’re also speaking with Similar Firms A, B, and C.
Also, leverage your group alumni and the 2 nd and 3 rd -year Analysts.
You can read endless articles online about interview prep, but nothing beats real-life conversations with others who have been through the process.
These alumni and older Analysts will also have example case studies they completed, and they can explain how to spin your deal experience effectively.
PE Interview Preparation
The #1 mistake in PE interviews is to focus excessively on modeling tests and technical questions and neglect your deal discussions.
You can avoid this, or at least resist the temptation, by turning your deals into case studies.
If you follow my advice to create simplified LBO models for your deals, you can combine the two topics and get modeling practice while you’re preparing your “investor’s views.”
If you’re working full-time in banking, use your downtime in between tasks to do this , outline your story , and review technical questions.
If you only have 10-15-minute intervals of downtime, break case studies into smaller chunks and aim to finish a specific part in each period.
Finally, start preparing before your full-time job begins .
You’ll have far more time before you start working, and you should use that time to tip the odds in your favor.
The Ugly Truth About PE Interviews
You can read articles like this one, memorize PE interview guides, and get help from dozens of bank/group alumni, but much of the process is still outside of your control.
For example, if you’re in a group like ECM or DCM , it will be tough to win on-cycle interviews at large firms and convert them into offers no matter what you do.
If the mega-funds decide to kick off recruiting one day after you start your full-time job in August, and you’re not prepared, too bad.
If you went to a non-target school and earned a 3.5 GPA, you’ll be at a disadvantage next to candidates from Princeton with 3.9 GPAs no matter what you do.
So, start early and prepare as much as you can… but if you don’t receive an offer, don’t assume it’s because you made a major mistake.
So You Get An Offer: What Next?
If you do receive an offer, you could accept it on the spot, or, if you’re speaking with other firms, you could shop it around and use it to win offers elsewhere.
If you’re not in active discussions with other firms, you’re crazy if you do not accept the offer right away.
If You Get No Offer: What Next?
If you don’t get an offer, follow up with your interviewers, ask for feedback, and ask for referrals to other firms that might be hiring.
If you did reasonably well but came up short in a few areas, you could easily get referrals elsewhere .
If you did not receive an offer because of something that you cannot fix, such as your undergraduate GPA or your previous work experience, you might have to consider other options, such as a Master’s, MBA, or another job first.
But if it was something fixable, you could take another pass at recruiting or keep networking with smaller firms.
To PE Or Not to PE?
That is the question.
And the answer is that if you have the right background, you understand the process, and you start preparing far in advance, you can get into the industry and win a private equity career .
And if not, there are other options, even if you’re an older candidate .
You may not reach the promised land, but at least you can blame it on someone else.
You might be interested in:
- The Search Fund Internship: Perfect Pathway into Investment Banking and Private Equity Roles?
- Private Equity Analyst Roles: The Best Way to Skip Investment Banking?
About the Author
Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street . In his spare time, he enjoys lifting weights, running, traveling, obsessively watching TV shows, and defeating Sauron.
Free Exclusive Report: 57-page guide with the action plan you need to break into investment banking - how to tell your story, network, craft a winning resume, and dominate your interviews
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49 thoughts on “ Private Equity Interviews 101: How to Win Offers ”
Brian, What about personality tests? What is their importance in the overall hiring process eg if you get them as the last stage?
They’re not that important, and even if you do get them, you can’t really “prepare” in any reasonable way (barring a brain transplant to replace your personality and make it more suitable for the firm). It’s also highly unusual to get one in the final stage – a firm doing that is probably just paranoid that you are secretly a serial killer and they want to rule out that possibility.
Hey- for the Fromageries Bel case study, can’t quite make sense of the Tier 4 management incentive returns, what’s the calculation for each tier? Would think it’s Tier 2 less tier 1 * tier 1 marginal profit
Tier 4 is based on a percentage of all profits *above* a 2.5x equity multiple. Each tier below it is based on a percentage of profits between specific multiples, which correspond to specific EUR proceeds amounts.
I have an accounting background (CPA & several years removed from school) and a small amount of finance experience through internships. I’m interviewing for a PE analyst position and managed to get through the first round of interviews. The firm itself doesnt just hire guys with a few years of banking, their team is very diverse with some backgrounds similar to mine.
The first round interview was a mix of technical questions plus a lot about myself and my experience. No behavioral questions. The first round was with an associate for 30 minutes, the second round is an hour with a partner. I managed to answer a lot of the questions about LBO models and what types of companies are good LBO candidates. Thanks to your website for that.
Any advice for a second round interview for a guy like me who doesnt have deal making experience or much experience in finance? Will the subsequent interviews after the first round be more technical-based questions? Or do they lean more on technical questions in round 1 to weed out candidates?
They will usually become more fit-based if they’ve already asked a lot of technical questions in earlier rounds. I would focus on your story and answers to the Why PE / Why This Firm / Are you sure you want to switch?-type questions.
Is it likely too difficult to access the on-cycle process from the CLT office of an In-Between-a-Bank that it would make more sense to focus one’s energy on the MM/LMM? Is the new era of Zoom making geography/distance less of a factor or is the perceived prestige of NY still an obstacle?
Location is somewhat less of a factor now, but it still matters, and working from home will not continue indefinitely into the future. It will be very difficult to participate in on-cycle recruiting at the mega-funds if you’re working in Charlotte at Wells Fargo if that’s your question, but plenty of MM funds are realistic.
What are some of the larger funds that you would consider realistic?
There are dozens of funds out there (it’s not like bulge bracket banks or mega-fund PE firms where there’s only a defined set of 5-10), so I can’t really give you a specific answer. My recommendation would be to look up people who worked at WF on LinkedIn and see the types of funds they are now working at.
I remember I saw a video of yours (might have been YouTube) where you explained the PE process. You talked about do pe firms really add value and then you went over how when a pe firm buys a company, they do a little “trick” where they create a shell company to acquire the target so the debt isn’t on the pe firms books. I’ve been looking all over for this video. Do you know which video I’m referring to?
Yes, that is no longer in video form. It’s still in the written LBO guide but the video from the old course was removed because it was way too long and boring for a video and was better explained in text.
Hi Brian, can you elaborate more on ‘Understanding the firm’s investment strategies, portfolio, and exits’ when you talk about smaller firm and off-cycle processes, simliar point came up under *Type 5*: you must fit your recommendation to the firm’s strategy rather than building a needlessly complex model. What exactly should I pay attention on? I felt funds I checked their investment strategy descirption are pretty broad, and they invest in various type of deals, say even in one industry, they do different purchase range. Also, when talking about growth equity, you mentioned you can practice case by picking companies you’re interested in, downloading their statements, projecting them. What if they are not public companies, how can I get those information? Are you recommending only those companies with 20F available? Or can you just elaborate more on how can I follow your instruction? Thanks
All you can do is go off their website and possibly a Capital IQ description if you have access. See if they focus on growth, leverage for mature companies, operational improvements, or add-on acquisitions and pick something that fits one of those.
You can pick public companies for growth equity or find a public company that is similar to a private one the firm has.
Hey Brian! I have an interview with a family office for a private equity analyst position. The firm is small and not much about it online. I haven’t had much time to prepare as it was not an interview I was expecting. What would you say the most important elements to focus on are for the interview considering the time constraint? I am an undergrad, third year, second internship. (first internship was for a large construction/developer as project coordinator, not finance based)
Focus on your story, the firm’s portfolio companies and strategies, and a few investment ideas you have for specific sectors. Technical questions are fine, but you probably won’t have much time to prepare at the last minute.
How would PE interviews / Technical questions look like for straight out of undergrad PE role look like
e.g Blackstone internships, Goldman Merchant Banking internships etc
Similar to IB ones, with a focus on LBOs?
Largely the same, but less emphasis on deal experience and deal-related questions at the undergraduate level. They may ask slightly more questions on LBOs, but at the undergrad level, they assume you know very little, so questions will span a wide range of topics.
Have you written or seen similar articles on PE operating partner interviews?
No, sorry. There’s hardly any information on that level of interview online because you can’t really make an interview guide or other product to prepare for it, and most people at that level would need 1-on-1 coaching more than a guide. My guess is that they will focus almost exclusively on your past experience turning around and growing businesses and assess how well you can do it for their portfolio companies. They’re not going to give you LBO modeling tests or case studies.
“Next, skip brain teasers; if an interviewer asks them, you should drop discussions with the firm”
Could you please elaborate on this? Almost every IB interview includes brain teasers so I am wondering why a PE interview shouldn’t?
Brain teasers are not that common in IB interviews in most regions unless you count any math/accounting/finance question as a brain teaser. They are far more common in S&T, quant fund, and prop trading interviews.
The point of this statement is that it’s OK if an occasional brain teaser comes up, but if the interviewer asks you brain teasers for 30 minutes, which have exactly 0% correlation to the real work in PE, you should leave because it’s a sign that the people working at the firm are idiots who don’t know how to conduct proper interviews or test candidates.
This is helpful. I find myself at a fix, I do not think I have had the right exposure, although in a BB I support teams with standard materials in a particular industry group in M&A. However I have interviews with a top global PE next month. Any guidance on how should I prepare for it ?
Thanks in advance
Follow everything in this article… practice spinning/discussing your deals… practice LBO questions and simple case studies.
Brian – thank you for your concise and candid remarks. do you have any insights or advice for someone with 5yrs of BB ECM & DCM experience now at a top full-time MBA program looking to break in?
It’s going to be very difficult if you just have capital markets experience and you’re already in business school. You should probably move to an M&A or strong industry team at a large bank (BB or EB) after business school and then go into private equity from there. It’s tough, but still easier than trying to move into PE directly out of an MBA program with only capital markets experience.
My next interview will highly likely involve a statement/growth equity modeling case. I tried to find the Atlassian Case interview but i am unable to open the link.
Would it be possible to share an example case or more information on that topic?
The Atlassian case study is all we have. I don’t know why you can’t open the files, but I just tried and they seemed to work. Maybe try again or use a different browser.
Hi M&I team,
I have an opportunity to interview for an Analyst level opening at a boutique PE fund. This is a shop that has just started operations so I am directly communicating with the Partner. I doubt they have any structured recruitment process at this stage of their existence. He asked me to send some written work (memos and spreadsheets) on any public listed co that demonstrates my understanding of investing (basic balance sheet analysis, ratio analysis, valuation multiples).
So I am just wondering what to do? Should I work on projections and prepare a DCF model or do something simpler? I’d really appreciate your guidance on this.
Thanks again for the amazing work you’ll have been doing!
Yes, just create simple projections, a simple valuation/DCF, and maybe a simple LBO model since it is a PE fund that intends to buy and sell companies.
Could you provide some advice for preparing interviews for principal investing role ?
Thank you in advance Laura
We don’t really focus on that, but the articles on private equity and funds of funds on this site might be helpful.
Just wanted to say thank you! After reading everything on this site including all the CV and interview material I have managed to transition from a second year engineering undergrad with no prior experience/spring weeks/insight days, into an intern at Aviva Investors (UK buy side) within the space of one year.
The information you have posted is invaluable and “breaking in” is definitely doable with the right mindset and appetite for rejections!
Thanks! Congrats on your internship offer.
Hi Brian/Nicole – Im an Economics student from the UK in 3rd year out of a 4 year course at a semi-target college, with 2 finance internships done up until now(not FO). I plan on doing a Msc Finance when I finish and eventually break into IB or Sales/Trading (I know I still haven’t decided which one I really want more). Through a family friend I have an offer to do a short internship this summer in NY in a post-trade regulatory commission. As this isn’t actually sitting at a trading desk experience, or anything related to IB should I decide to go down that road, would this add genuine value to my CV ? How are internships in regulatory commissions looked at for students looking to break into sales/trading? Surely even having any NY Finance experience on the CV will add more substance over here in London when going for internships compared to the majority of UK students who don’t? Appreciate any advice on this matter, Thanks!
I don’t think it would help much because you already have 2 non-FO internships, and a regulatory internship would be yet another non-FO internship. If it’s your best option, you can take it, but you would be better off getting something closer to a real front-office role.
Hey Brian. I am graduating after this semester going into Management consulting (Deliote, AT Kearny, Accenture)but I’m hoping to make a switch into either IB or PE after a couple years. I have one search fund internship which was enough to get me a few 1st and second round ib/pe FT interviews but no offers.My plan is to get into the best online MSF program I can and switch into Finance once I’m done. Do you think, given how close I was to getting in my 1st try, a high GPA from a reputable MSF and good experience in consulting will be enough or should I try to somehow get an IB internship before I apply?
I think you will probably need another internship just before the MSF starts or while it is in progress, not necessarily in IB, but something closer to it. Otherwise you’ll get a lot of questions about why you went from the search fund to consulting.
Thanks. As far as my story is concerned, is it better to do another finance internship before consulting so it’s search fund->ib->consulting->MSF (or MBA not sure)? I only ask because I may be able to get on some m&a projects with the consulting firm and my story could be when exposed to those deals, I realized how big my passion for finance was and that’s when I decided to get my MSF and switch to IB.
No, I think that would make less sense because then you would have to explain why you went from IB to consulting… and are now trying to go back to IB. Saying that you got exposed to M&A deals during the consulting experience would be a better story (and you would still ideally pair it with a transaction-related internship before/during the MSF).
Got it, thanks!
Probably missing something here, but for the first example, where does the 300% and 55% come from?
300% = 4x multiple. If compounding did not exist, we could just say 300% / 4 = 75% annual return. Because of compounding, however, the actual return does not need to be 75% per year in order for us to earn 300% by the end of 4 years. Instead, it can be a fair amount less than that, and we’ll still end up with 300% at the end.
To estimate the impact of compounding, you can multiply this 300% / 4 figure by a “compounding factor,” which varies based on the multiple and time period, but which is around 55% for a 4x return over a standard holding period.
Do you mind explaining how you can estimate a “compounding factor” such as with the 55% here?
There’s no easy-to-calculate-using-mental-math way to get this for all scenarios, but you can memorize quick rules of thumb (based on actual numbers and looking at the ratios) for 3 and 5-year periods and extrapolate from there. I don’t really think it’s worth doing that in-depth, though, because you just have to be roughly correct with these answers.
Do you think you will do a hedge fund interview guide similar to the one you have here?
Potentially, yes, but it’s much harder to give general guidelines for HF interviews because they’re completely dependent on your investment pitches. Also, interest in HFs has declined over the years (we no longer receive as many questions about them).
On that mental paper LBO question, how is the company able to pay off 900 of debt by year 3? It sounds like proceeds from the sale will have to be used in order to fully pay off the debt because EBITDA alone only adds up to 525, and that’s assuming there’s no interest.
Favorable working capital… NOLs… asset sales… the Konami code or other cheat codes. The point is not the numbers but the thought process.
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“It is with pleasure to highly recommend Stephen Wensley. I have worked with many freelancers in my career, but none of them compares to what Stephen can do. He is the best of the best! Stephen is an exceptional web programmer, and is one of the most capable and responsible programmers I have ever worked with. He is virtually always available, is incredibly reliable, and has gone above and beyond the call of duty on numerous occasions. Stephen has even gone past the role he has been hired for. He explains what exactly he is doing to our sites and why certain steps need to be taken, etc. Moreover, he completes what he tells you he will complete. Stephen is detail oriented, well organized and excels with building web sites, and programming in general. He makes excellent recommendations when required. Stephen has all the attributes I was looking for in a web programmer. He is extremely reliable and dependable. He communicates effectively and will make sure he understands exactly what you’re asking for. Stephen is an exceptional web programmer and a wonderful person to work with. Truly one of the best. ”
“I had the pleasure partnering with Stephen on completing a very complicated project for the Planning and Development department at the City of Calgary. I enjoyed the time working with Stephen and found him to be a very knowledgeable professional providing sound advice to our clients as well as giving solid technical suggestions on bringing a new concept from paper to life. Stephen also possess very strong communications skills when he was asked to present his prototypes and final products to the client. His work received tremendous feedback from our clients and project partners. Seeing the qualify of his work, I will highly recommend him to any organizations.”
“Stephen provided me with extremely helpful information prior to the development of my website and also provided me with a superior finished product. He met anticipated time frames and also provided me with follow through assistance upon completion of the project. I would without reservation recommend his services to others.”
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- Preparation Materials
Interview Checklist: The 10 Steps To Success
- CV: Practice your CV presentation (“Walk me through your CV”) including your Deal Experience.
- Why PE? Make sure to properly think through and prepare responses to the question “Why Private Equity?”. Those should also take into account the investment strategy of your target fund!
- Paper LBO: Practice your Paper LBO (see links below).
- Full LBO Model: You should be able to build a solid 1-Page LBO Model in Excel in 45 minutes. You can download our proven gold-standard LBO Model here for free!
- Case Cracking: Investing Case Cracking Skills are key and most candidates stumble here! General / “consulting” case study preparation helps to build a first foundation for structuring a case but don’t fool yourself into thinking you don’t need to work on investing cases specifically to ace your PE interviews (check out our tailored 1-on-1 coachings with our leading coaches here if you need help with PE specific investment cases).
- Fund Investments: Make sure to know at least four investments of the firm you are interviewing with (yes, four! – believe it or not but firms want to see that you have properly engaged with their investments beforehand so you should not leave it to chance!)
- Investment Pitch: While not all funds ask for it, it is always good to have an investment pitch prepared to showcase your passion for investing. Ideally, your pitch matches the investment focus of the fund you are interviewing with.
- Mental Math: Your interviews will contain a number of back of the envelope calculations so make sure to refresh your Mental Maths Skills prior. Victor Cheng’s website (see link below) provides good tips on getting up to speed with your mental arithmetic.
- Brain Teaser: Refresh your Brain Teaser Cracking skills (see links below)
- Stay Up To Date: Read the news to stay up to date. The Financial Times and the Economist are great resources (see links below)
- Paper LBO (Example 1)
- Paper LBO (Example 2)
Commercial Case Study Preparation:
- Victor Cheng – Case Interviews
- Case in Point (Marc Cosentino)
- How to Ace the Brainteaser Interview (John Kador)
BIPE Top Recommendations
- Quality Investing: Owning the Best Companies for the Long Term (Lawrence Cunningham, Torkell T. Eide, Patrick Hargreaves)
- Valuation: Measuring and Managing the Value of Companies (McKinsey – Tim Koller, March Hoedhart, David Wessels)
Other Useful Books
- Intelligent Investor (Benjamin Graham)
- Security Analysis (Benjamin Graham)
- Warren Buffett’s Shareholder Letters (Warren Buffett)
- Common Stocks and Uncommon Profits (Philip Fisher)
- One Up on Wall Street: How To Use What You Already Know To Make Money In The Market (Peter Lynch)
- The Little Book That Still Beats the Market (Joel Greenblatt)
- The Little book of Valuation: How to Value a Company, Pick a Stock and Profit (Aswath Damodaran)
- The Most Important Thing (Howard Marks)
- Private Equity in Action: Case Studies from Developed and Emerging Markets (Claudia Zeisberger)
- Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success (William N. Thorndike)
- Distressed Debt Analysis: Strategies for Speculative Investors (Stephen Moyer)
Magazines / Online Resources:
- MUST READ: Financial Times
- The Economist
- The Wall Street Journal
- Tech Crunch
- Leveraged Buyouts: A Practical Guide to Investment Banking and Private Equity (Paul Pignataro)
- Investment Banking: Valuation, Leveraged Buyouts, and Mergers and Acquisitions (Joshua Rosenbaum, Joshua Pearl)
- VAULT Guide to Private Equity and Hedge Fund Interviews
- Analyst & Associate Guide (Financial Edge)
- Wallstreet Oasis
- Wall Street Prep
- AMT Training
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Super insightful and the rankings section is great. Really helps to get a good understanding of which funds are out there and what their focus is!
Mariam - Private Equity Investor @ Hg Capital
Really great website on Private Equity Recruiting in Europe and helped me a lot! Brings a lot of transparency and gives good insights on how to navigate the headhunters!
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Best Private Equity Case Study Guide + Excel Model + Example
The most important part of the private equity interview is the case study round. After meeting a few people and going through a number of interviews, you will most likely get hit with a case study where you have to analyze whether a company is a good leveraged buyout target or not.
Your performance during the private equity case study round will determine whether or not you will get an offer. It is the most important part of the interview process, so you need to make sure you are well prepared and create a work product that sets you apart from the other candidates you are competing against.
Private Equity Case Study Example + Full LBO Excel Model
Private Equity Case Study Example + Model
It’s hard to know how to complete a full private equity case study if you don’t actually have experience working in private equity. With just an investment banking background or someone who is straight out of undergrad, you just don’t have the experience to understand how to structure and write a good case study.
Make sure you get access to a full private equity case study that was used in a real interview. You can use this as a reference on how to write your response and build the LBO model with all the key outputs.
Get access here before reading on. It becomes much easier to build a proper LBO model and complete a case study when you can refer to one that is already fully completed.
The case study was written by a private equity professional and includes a:
- Real Private Equity Case Study Example and Response
- Full Detailed LBO Excel Model
How is a Private Equity Case Study Structured
The private equity interview process is a lot more structured relative to hedge fund interviews. Most interviews happen during “on-cycle” recruiting your first six months in investment banking right out of undergrad. This is the best time to land an offer as you have dozens upon dozens of firms that are fighting to get the top talent to work at their firms. People will land offers after a matter of days after answering the basic private equity interview questions because of all this competition.
Unlike hedge fund case studies , private equity case studies are a bit different as it depends on if you are interviewing during the rush of on-cycle recruiting where firms fight for talent. You can expect the case study to be structured in either three ways:
- LBO Modeling Test
If you are going through the crazy all-out blitz of private equity interviews during on-cycle recruiting, you will like get either of the first two types of case studies, the modeling test and/or the paper LBO.
For an interview that is done outside of this period and at most of the smaller middle-market funds, you may get a longer take-home case study that is more comprehensive. It really just depends on the firm and how they conduct interviews.
1. LBO Modeling Test
The LBO modeling test is used in person during on-cycle recruiting very frequently. Usually when on-cycle interviews start, you’ll get invited along with other candidates to do a modeling test over the course of a few hours, then proceed with the usual interviews either before or after.
There is no reason why anyone can’t pass the modeling test. All it takes is practice after practice, just like how you’d get good at anything else. Back when I was an investment banking analyst, the only way I would learn how to do anything was by looking at previous models done by prior analysts saved on the shared drive and recreating those models from scratch over and over again. It’s the best way to learn how to get good at any type of Excel model – looking at precedent then recreating from scratch.
Wall Street Prep was another tool I used back during my investment banking analyst days. There is a course that was specifically created for Private Equity interviews and LBO modeling that teaches you everything you need to know. It was the best resource I was able to find to get prepared for private equity interviews and teaches you how to complete a full LBO model step-by-step from start to finish.
Start preparing today and sign up for the course below if you really want to break into private equity. I promise you will have a very low chance of landing a private equity offer if you do not know the basics of how to build an LBO.
Get 15% off if you use the coupon code in the link below:
Private Equity Masterclass: Step-By-Step Online Course
A Complete LBO and PE Training Program. Whether you’re preparing for an LBO Modeling test or you want to learn to build an LBO model and become a better PE professional, this course has you covered.
Special Offer: Get 15% Off On Wall Street Prep’s Private Equity Course
2. Paper LBO
The paper LBO is used during interviews to make sure you have spent the time to learn the basics of how an LBO works. Usually, you are given a set of assumptions, a pen/paper and asked to work through a paper LBO live during the interview without the help of a computer or calculator.
You need to be able to walk through how to:
- Calculate the purchase price
- Calculate sources and uses
- Build a simple income statement and projections
- Build to levered free cash flow
- Calculate the exit value, IRR and multiple on invested capital
The Wall Street Prep course above walks through how to do all this in detail and provides a few paper LBOs that you can use for practice.
3. Private Equity Take-Home Case Study + Written Memo
Now the full-blown take-home case study is the hardest and most in-depth analysis a private equity firm can ask of you during interviews. Outside of on-cycle recruiting, this is the most common type of case study that is given. Most firms will give you a week to work on it independently at home.
This case study round is the most important part of the interview. If you do not have a well-written case study with a good backup model that you can present to the interviewer, you will not get an offer.
The majority of case studies will ask either two questions:
- Look into XYZ company and tell us whether it’s a good LBO target
- Find an attractive LBO target and give us your thoughts
To answer the first question, you need to screen a universe of public companies and find one that could be an attractive target. You need to find a business that has the following characteristics:
- Growing market dynamics – markets that have structural tailwinds is a good place to start
- Strong competitive advantages – study Porter’s Five Forces if you haven’t already
- Stable recurring cash flows – business is going to be levered up in a buyout so it needs to have positive EBITDA and stable cash flows to pay off interest payments
- Low working capital / capex needs
Quickly eliminate all companies in your screen that have:
- Negative EBITDA
- High capex needs (capex is >75% of EBITDA)
- High valuation (EV/EBITDA is > 15x)
You can quickly eliminate companies in your screen that have negative EBITDA or high capex needs. Once you’ve found your target company (or if already given one), then you can start working on the actual meat of the case study.
Steps to Finish a Private Equity Case Study
This guide will walk you through all the steps required to complete a case study, from start to finish. You will learn everything from what documents you need to download, to how to build the LBO/model with all the key outputs, to how to actual write a good memorandum/presentation, to all the common mistakes to avoid.
- Download and organize all documents in one folder
- Research the industry to understand trends and key metrics
- Read the filings and take notes
- Input financials in Excel and build the LBO model
- Work on the presentation / memo
1. Download and organize all documents in one folder
You want to have everything in one folder that you can quickly access. Key websites to use for company filings are:
- www.sec.gov/edgar/searchedgar/companysearch.html – for direct access to filings
- www.Bamsec.com – access to filings in an organized fashion
- You want to save down (at the very least) the latest 10K and the prior four 10Qs, last four transcripts, earnings releases, investor presentations and supplements
- Other sources if you have access to them: Bloomberg, CapIQ, FactSet
- Sell-side research – sell-side research is how you gauge market expectations and quickly understand the business. Most initiating coverage reports will give a good overview of the company, its strengths, weaknesses and competitive landscape. Ask around for others to send you research if you don’t have direct access
- Other write-ups online – read all of the articles on Seeking Alpha and look at ValueInvestorsClub.com. Research on Seeking Alpha is usually very bad, but there may be articles that do a good job summarizing any fundamental pressures / tailwinds
2. Research the industry to understand trends and key metrics
If you have access to sell-side research, then go through the latest industry analysis for your target company or initiating coverage reports. When a sellside research firm initiates coverage, they write up a very in-depth review of the company. These reports provide a very good summary of a company and the industry it’s in with all relevant metrics.
If you don’t have access to sell-side research, then go through prior investor presentations of the company or any of its peers. There should be an industry/market overview and benchmarking metrics vs. peers in these presentations.
If you do not understand what is happening in the industry that the company is in, you will not know if there are any big headwinds or tailwinds that are directly impacting the company. A lot of private equity LBOs focus on growth and consolidation within an industry, so you need a good understanding of the market and what the growth opportunities are.
3. Read the filings and take notes
Create a new word document to copy and paste anything notable that you read. You can create sections in your notes for company overview, revenue / cost drivers, fixed versus variable costs, industry tailwinds/headwinds, key questions for items you don’t understand or need to follow-up with management on, etc.
The most important part of every 10K/10Q is the management’s discussion and analysis section (MD&A). This is where the company talks in detail about how the business has performed over the quarter/year relative to prior year’s performance. You should focus on the sections of the MD&A that talk about the revenue and cost drivers. Make a table in Excel and copy and paste commentary every quarter on what impacted revenue growth and margins (COGS and SG&A). Once you lay it all out in Excel, the fundamental picture of the Company becomes clearer and you can see what has had a major impact on recent results.
The most important thing you should read are the transcripts and investor presentations. Management usually gets into more detail on the overall strategy and key tailwinds / headwinds of the business. Additionally, you can gauge what the sell-side is most focused on in the Q&A section at the end of every transcript.
Lastly, read the risk section of the latest 10K to note what the Company finds to be the biggest risks to its overall performance. Pay close attention to the top few items listed here as you want to see what the structural/secular challenges are to the business.
4. Input financials in Excel and build the LBO model
Since private equity interviews can start very quickly after you start your first job in investment banking, most do not know how to properly build an LBO model. Every single private equity firm builds an LBO when looking at any investment. If you want to work in private equity, you need to make sure you spend time understanding an LBO, how it works and how to build one in your sleep.
Like I mentioned before, sign up for Wall Street Prep if you don’t know how to build an LBO. It’s the best resource available to learn how to build a LBO model and provides step-by-step instructions using a real public company example.
5. Work on a presentation or write a memo
Once you have done all the research and finished the modeling, you need to create outputs in a presentation or word doc format. The interviewer may specify what kind of output they prefer, but if not than do what you most comfortable with.
This presentation/memo will be what your interviewer will focus on, so the outputs need to be nicely formatted just like how you create outputs in investment banking. Formatting may not seem that important to you, but showing that you can present analysis in a clean, formatted manner without errors is what will set you apart from your peers.
Continue reading below to learn everything you need to know on what to include in this presentation or memo.
Private Equity Case Study Presentation / Memo
Background and company overview.
If you had to screen to find a company, briefly summarize the criteria you used to choose your company. List the financial metrics and any other factors you used when making the decision.
Then you need to summarize what that company does in around five sentences. If you were provided the company to analyze, the interviewer already knows what the company does so no need to go that much in depth as you can describe more in person if asked. Make sure to describe how the company makes money (a revenue breakdown), where they make money (what markets drive the most revenue), who their customers are (customer concentration), etc.
This is the easiest section as you can open up the latest 10K and within the first few pages there is a business description section that outlines what the company does. You should also check the latest investor presentations (if available) and sell-side research initiating coverage reports as they usually give good overviews of the company.
You need to make sure you yourself understands what the company does and what the revenue and cost drivers are. Anybody can copy the business descriptions written by the Company and sell-side research. You should make sure you know the company well enough to be able to talk about it without looking at your notes.
Here you list out the top reasons why a company is a good leverage buyout target or not. The most common investment highlights discussed in a potential target can be:
- Attractive market dynamics due to XYZ reasons – could be due to fragmented market / consolidation opportunities, growing market dynamics, geographic expansion lack of competition, etc.
- Multiple ways to win – private equity firms love businesses that don’t just rely on one avenue of growth, so point out all the different ways value can be created either through revenue growth, expense rationalization, multiple expansion, etc.
- Recurring revenues – leverage buyout targets need to have steady cash flows since the business is going to be levered up in an acquisition and so cash flows need to be steady to support high recurring interest payments on the debt. Revenues need to be stable, recurring and non-cyclical in nature.
- Asset-light business – Also, PE firms like businesses that are asset-light (low capital expenditures or working capital requirements) and have low variable costs (little need to increase the expense base to grow revenues, also known as operating leverage).
- Valuation – if a company is underappreciated in the public markets and trades at a low valuation relative to peers, then returns can be very high if you can somehow grow/fix the business and make it more attractive at exit in the future. High LBO returns come from both growing cash flows and multiple expansion. Usually, you want to assume the same exit multiple (the multiple you sell the business for) in your model compared to your entry multiple (the multiple you purchased the business for). Purchasing a business at a high multiple and selling it at a lower multiple in the future will lead to significantly lower returns and can be a big risky.
Like I mentioned earlier, make sure you understand Porter’s Five Forces to understand the main competitive advantages/disadvantages a business can have.
Recommendation to Investment Committee
Summarize whether or not you think the company you chose to analyze (or were provided) is a good LBO target or not. Everything depends on the purchase price, so if you mention that it is not a good LBO target then make sure to describe why and at what price do you think makes the deal attractive.
Your LBO model should have summary outputs that describe how attractive the deal looks from a financial perspective. At minimum, you need to show:
- Returns at various prices
- Sources and uses
- Pro forma capitalization
- Sensitivity table on returns, showing IRR/MOIC at various premiums and exit multiples
- 5-year levered free cash flow bridge
- Main model assumptions
The private equity case study example shows you all of these outputs and more, which you can replicate for your model.
Here you talk about the main risk factors and any potential unexpected events that would cause the firm to lose money on its investment. Look in the Risk Factors section of the 10K or sellide research to understand what the main risks are to the business. Analyze the most important risk factors to see if they have any merit and the potential implications to your analysis if the risk factor is realized. Examples of risks include technology disruption, realization of synergies / other cost savings initiatives, commodity price changes, wage or cost inflation in general, cyclicality/seasonality, changes to regulations, etc.
Outstanding Diligence Questions
Depending on the company, there may or may not be very detailed information on the company in public filings. Usually the bigger the market capitalization, the better the disclosures are.
You want to show the interviewer a list of diligence items you would still want to ask from the company to better understand the business. These questions should be around unit economics, profitability by segment/region, strategic plan over the next five years, cost structure plans/initiatives, etc.
Either in a separate PDF or in the exhibits, you want to have a full output of the entire LBO model. At most private equity firms, associates print out the full model to discuss key assumptions with others on the deal team and to make sure everything is working properly. Make sure your Excel is nicely formatted and is already in print format.
The model should have all the outputs described above as well as full detailed 3-statement financials, revenue build and the levered free cash flow waterfall.I know this seems like a lot of work, but it’s the minimum that you need to do for a take home private equity case study.
General Tips and Common Mistakes to Avoid
Get Access to a Real Private Equity Case Study Example + Excel Model
If you need an example case study used in an real interview, then get instant access to one in the link below. You can use this as a reference as you complete a case study to make sure you are building the LBO model correctly, having all the key outputs, and learning how to put it all together in a written memo.
Check your model for errors
One of the worst things you can do is send a model that has a huge bust that changes all the outputs and return metrics. It’s the quickest way to get axed during the interview process, so make sure you spend time going through each cell of your model after completion to make sure there are no errors.
Spend time properly formatting the case study
Being able to cleanly present your analysis is a very important skill in private equity. Most firms create decks and go to investment committee to present a deal, so you need to show that you can format properly and present financials in a clean manner.
There are a ton of people applying for the same job as you are, so you need to figure out a way to differentiate yourself. If you were previously or currently an investment banker, then you should have no problem properly formatting the Excel model and the memorandum.
Understand the firm’s investment style
Every private equity firm has their own approach to making investments. Make sure that you understand the types of investments the firm likes to make and the key qualities to look for.
Then if given a case study, point out these key qualities. It’s good to show that you can analyze investments in a similar manner as the private equity firm you are interviewing at if possible.
Prepare for the most common private equity interview questions
Private equity is one of the most sought career paths and one of the Best Paying Jobs in Finance and Wall Street . There are so many young, smart, Ivy League educated investment bankers trying to break into private equity, so you must make sure you stand apart from the crowd in both your case study and when answering the most common private equity interview questions .
Don’t lie or try to bullshit if asked a question you do not know the answer to
The problem with a lot of smart people in this industry is that they are reluctant to say “I don’t know” and tend to talk as if they know what they are talking about. Interviewers will easily see through the bull shit as they likely know the company well and have heard others talk about the company.
Be a “straight shooter.” Be honest if you do not know the answer to a question and say you will follow-up with the interviewer. That said, you should know the company and industry inside out before presenting the case study and be confident when you speak about facts that you know are true.
Memorize key metrics
When discussing the case study in person with the interviewer, make sure you are an expert in the company and can answer questions on the spot without having to reference your written case study. Key metrics you should know off the top of your head include EBITDA, capex, interest, margins, market cap, total enterprise value, leverage, valuation metrics, valuation metrics versus peers, IRR/MOIC, etc.
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For a job interview , I recently created a 15 page Private equity investment memo type presentation on a company for which I did quite a lot of primary research - I spoke with ex employees and 4 research analysts covering the co. I had a week to do it and could pick company of my choice. I now need to present it to the principals for 1.5 hour. I have some questions that I hope someone can answer:
First, would the primary research get me quite a lot of bonus points? I would hope so! I also feel quite confident about my thesis
presentation and the model are clean and well-laid our and error free. I want to get an idea of what covenants should I be proposing as a part of the lbo package? The co is in retail so to be conservative I have assumed 3x ebitda but if someone asks me how would I think of covenants - what do I say? How do I think through this?
lastly isn’t a 90 min presentation a lot?? I have a feeling that this is too much time. Am I mistaken?
Pls help me a fellow WSO user out. Have a blessed day all
I don't think the primary research will really earn you any brownie points if your overall presentation falls flat.
Generally speaking, maintenance covenants no longer exist in this market... but for retail, maybe they do. 3x ebitda sounds conservative enough for a general retailer. You can back into how much quantum of debt a company can realistically incur by making some assumptions on cost of debt and where your ULFCF will be in your model. Then your leverage becomes an output and you can sensitize covenants by taking some haircut to your ebitda forecast and setting covs off that.
90 min presentation seems appropriate. Time actually flies when you're presenting a thoughtful thesis and have Q&A interjected. Be prepared to have your train of thought broken by Q&A and being able to compose yourself and continue where you left off. I've sat through dozens of case studies and they usually last 60-90 min.
Would you like to look at this presentation? I’d be very interested in getting your view. You don’t need to critique it in detailed manner?
What means there are no maintenance covenants any longer?
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Private Equity Case Study Presentation Template
Transcript: Merchant bankers in London and Paris financed industrial concerns in the 1850s; most notably Crédit Mobilier, founded in 1854 by Jacob and Isaac Pereire, who together with New York based Jay Cooke financed the United States Transcontinental Railroad. J. Pierpont Morgan's 1901 acquisition of Carnegie Steel Company from Andrew Carnegie and Henry Phipps for $480 million represents the first true major buyout. In 1938, Laurance S. Rockefeller helped finance the creation of both Eastern Air Lines and Douglas Aircraft and the Rockefeller family had vast holdings in a variety of companies. Eric M. Warburg founded E.M. Warburg & Co. in 1938, which would ultimately become Warburg Pincus, with investments in both leveraged buyouts and venture capital. India gets major of its start ups funded from Singapore. Singapore acts as Hub for start up VC's in ASIA. First two venture capital firms in 1946: American Research and Development Corporation (ARDC, By Georges Doriot, the "father of venture capitalism ) and J.H. Whitney & Company. ARDC is credited with the first major venture capital success story when its 1957 investment of $70,000 in Digital Equipment Corporation (DEC) would be valued at over $355 million after the company's initial public offering in 1968 (representing a return of over 500 times on its investment and an annualized rate of return of 101%) ARDC total investment in 150 firms. First two Ventured Start ups :- a) Fairchild Semiconductor (1957) b) Venrock Associates (1969) Different Stages of a start up has different roles of funding. A hypothetical Start up goes from a IDEA to IPO. It goes from the owner getting 100% of nothing to some amount of shares in a big company and getting the returns on investments to all the fund providers along with the owner himself. 1946-81 SMALL FUNDING 1982-93- The first boom and bust cycle, was characterized by the dramatic surge in leveraged buyout activity financed by junk bonds and culminating in the massive buyout of RJR Nabisco before the near collapse of the leveraged buyout industry in the late 1980s and early 1990s 1992-2002- The second boom and bust cycle emerged from the ashes of the savings and loan crisis, the insider trading scandals, the real estate market collapse and the recession of the early 1990s. This period saw the emergence of more institutionalized private equity firms, ultimately culminating in the massive Dot-com bubble in 1999 and 2000. 2003-07- The third boom and bust cycle came in the wake of the collapse of the Dot-com bubble—leveraged buyouts reach unparalleled size and the institutionalization of private equity firms is exemplified by the Blackstone Group's 2007 initial public offering. Analyzing the potential in the plan of the start up, the ROI and the exit strategies. Getting availability of the funds with other investors( particularly in case of VC's ). Setting terms of the Equity Funding. Final Documentation. Takes active part in the functioning and working of the firm. Exits whenever they want to with good ROI ( generally by selling the investment or selling out an IPO ) How This Funding Works Venture Capitalist :- Invests in either a firm which is running and needs cash for growth. Angle Investors :- Invests in a plan that is still on paper and needs funds for execution. Leveraged buyout funds :- Typically acquire controlling stakes, either alone or in partnership with other PE firms, of mature, cash-flow-stable companies. Growth equity funds invest in more mature businesses that are looking to scale operations (organically or through M&A) and enter new markets Private Equity Segmentation The First's in Private Equity AngelList: It has been used by more than 1,000 companies to find accredited investors -- often a mix of "angels" and venture capitalists, but smaller investors can play, too. CircleUp: San Francisco startup specializes in helping inventors of consumer products such as pet food and organic snacks find investors. Crowdtilt: "Groupfunding" site backed by Y Combinator lets groups of friends launch funding campaigns for projects or purchases; money is collected via credit card, and the site takes a cut. FundAnything: The site launched by Donald Trump to offer artists, entrepreneurs and philanthropists "money for their dreams." FundersClub: It was launched in July 2012 as an "online venture capital firm" whose money comes from individual accredited investors. Kickstarter: Best known as a place to find backers for an artistic endeavor or invention, but small tech companies and other businesses can also launch funding campaigns. Liquidnet: It offers a platform to let private companies sell shares directly to institutional investors. SecondMarket: The firm also allows for the buying of private-company shares, but by individuals. Wefunder: It offers "crowdfunding for startups," lets investors put in as little as $1,000 and is making plans to welcome non-accredited investors once federal rules permit. Different platforms available
Transcript: Ikke-fiendlig buyout Kjøp: $5.5 milliarder Fortjeneste: $7.2 milliarder Definisjon Privat EK - ikke børs-notert Ekspansjon, produktutvikling og restrukturering IPO Langsiktig tidshorisont Ulike strategier Private Equity Oppstarts/unge selskaper Høy risiko Venture Capital Modne selskaper Svake resultater Kjøpes ut av børsen Safeway Inc. Kilder Strategier Leveraged Buyouts http://www.investopedia.com/terms/b/buyout.asp 12.02.2017 http://www.investopedia.com/terms/p/privateequity.asp 08.02.2017 Saunders, A. & Cornett, Marcia M., (2015), Financial Markets and Institutions, 6.etd, McGraw-Hill Education Mishkin, Frederic S. & Eakins, Stanley G., (2015), Financial Markets and Institutions, 8.etd, Pearson Forelesnings-slide (FIN3522) http://www.investopedia.com/terms/v/venturecapital.asp
Transcript: Private Equity By Max Horton The goal of today's meeting is to create a new private equity firm for the Derryfield School Creating a Long Term Plan Derryfield's Future She saw what Google did when it created Google Venture (GV) Unorthodox idea to better the school Create an independent firm profits will be funneled to the improvement of the school Dr. Carter's Vision Vision Private Equity Venture Capital Private Placement 3 Main Types of Firms What is PE? Private Equity Invest in companies with techniques like leveraged buyouts Buying mature companies to give a makeover so that they become profitable Most popular form First leveraged buyout by JP Morgan in 1901 of Carnegie Steel Corporation Private Equity Pros Allows companies to grow outside of the public eye A Harvard study found that companies backed by private equity performed better than their counterparts in the stock market Private equity offered networking and funding Make about 2% annually on administration fees and 20% on profits of company Pros to Private Equity Cons Hard to liquidate Need to find a person/company willing to buy all the assets Not like the stock market where oyu can just sell Price of assets is determined through agreement, not driven by market forces could be good or bad Downsides to Private Equity Invest in young, growing or emerging companies Google Ventures invested in Uber and Nest Not always just monetary investment May help with technical or managerial expertise Want to invest in companies with strong business plan and have a lot of room for growth Venture Capital Venture Capital Pros Have high rate of return on investment Investors get liquidity in company After a certain amount of time, like 4 to 6 years, the investors leave the company through a merger, acquisition or IPO Benefits of Venture Capital Pros Due to being highly profitable, they are also very risky investments Risk-return paradox Rarely obtain majority control Need to do a lot of background research before investing Investing a lot of money Downsides to Venture Capital The sell of securities to a relatively small number of select investors Investors like large banks, mutual funds, insurance companies and pension funds Not open to the general market like a stock Used to raise short term money for the company and long term money for investors Private Placement Private Placement Pros The sell of securities to a relatively small number of select investors like banks and mutual funds Used to raise short term money for the company and long term money for investors This type of investment isn’t regulated by the SEC Can get money faster with less hoops to jump through Information of the deal is not disclosed The firm can remain privately owned Benefits of Private Placement Cons Investing is not as secure because not backed by SEC Can loss a lot of money So have to know what you’re doing Downsides to Private Placement Any of these types of investments will offer Derryfield endless opportunities to grow Take advantage of a great way to raise money Bringing your school into the 21th century Endless Opportunities Conclusion
Transcript: INDIA Favorite child of host private equity Top 10 firms are WHY???? MEANING Inability of PE funds to raise capital from market declining interest of foreign investors in India experienced private equity individuals venturing out on their own low return on investment FEATURES success stories for private equity are - FLIPKART,BHARTHI AIRTEL,PANTALOONS AND SNAPDEAL private equity in growh companies in 2000-2002 earned handsome returns on their investment as it was intoduced newly it attracted investers however in recent times this structure is facing many problems In financial terms , private equity is an asset class consisting of equity security and debt in operating companies that are not publicly traded on a stock exchange. Its operations are not only confined to new firms but also existing firms which are running in losses or facing problems in operations. The private equity secondary market refers to buying and selling of pre-existing investment committments to private equity and other alternative investment funds By is nature private equity funds are illiquid ,intended to be a long term investment to buy and hold,and there is no listed public market too A private equity investment will generally be made by a private firm,a venture capital firm, or an angel investor , however, all provide working capital to the target company to nurture expansion,new product development,restructuring management etc IMPACT IN INDIA funds will not go public not listed in stock exchange highly illiquid long lock up periods lack of transparency J curve PRIVATE EQUITY FUND The Carlyle group Kohlberg Kravis Roberts(KKK) Black stone group Apollo global management TPG capital CVC capital partners General atlantic Ares management clayton Dubilier and rice Advent international INTRODUCTION It is a collective investment scheme used for making investment in various equity securities according to one of the investment strategies associated with private equity A private equity fund is raised and managed by investment professionals of a specific private equity firm LIQUIDITY MEANING PROBLEMS
Transcript: MergerMarket/DealReporter M+A Deals PE Houses Companies in PE portfolios Analysis of strategic intent Bloomberg News: NI PE NI MNA Analysis PE MA (advanced search) FSRC Private Equity and Journals Databases Finding a specific journal article Private Equity Performance and Liquidity Risk. FRANZONI, FRANCESCO NOWAK, ERIC PHALIPPOU, LUDOVIC Journal of Finance, Dec 01, 2012; Vol. 67, No. 6, p. 2341-2373 http://banker.thomsonib.com [email protected] cassbanker10 Journals - academic literature Refworks web based - www.refworks.com Helps you compile a bibliography. Create your own personal database by importing references from databases. Thomson One Private Equity Fund performance Deals Analysis www.city.ac.uk/library Private equity data... which database? Thomson One Banker Zephyr Bloomberg MergerMarket /DealReporter SDC Platinum Referencing “How to” guide on Library webpages Pears, Richard (2010) Cite them right: the essential referencing guide. [email protected] * Business Source Complete * Proquest Business Collection * Science Direct * SSRN * Emerald Management * JSTOR * Web of Knowledge (citation reports) Zephyr M+A deals Search by Deal Type Deal structure/finance News/Commentary Analysis
Private Equity: Case Study
Transcript: 5. If revenues are going to grow faster because of the synergy apply a faster growth rate to revenue in the combined statement. If costs are going to be cut, show the reductions in costs on the statement. Part 3: The value paid for acquisition THANK YOU! NATUREX & ROBERTET Synergy Valuation 3. Prepare cash flow statement for the combined firm Under the Florange law, those bidding to take over a company in France are also now legally obliged to meet with the workers' committee of the target company and answer questions about what they plan to do if they succeed in taking over. Bidders who refuse to divulge their plans, or are later to be found to have withheld their genuine intentions, could in some cases face prosecution for infringing the law. With the adoption of the Florange law, companies are now able to employ a range of defensive measures against takeover bids. Pre-Florange, company boards required the permission of shareholders to take defensive action, but now they can go ahead with defensive measures without shareholder permission, provided that their defensive action is within their rights and provided that it is in the interests of the company. Part 6: Execution Risk Synergies>Premium DEAL DONE! Shares dilution level Roll up strategies consolidate highly fragmented markets where the current competitors are too small to achieve scale economies. This strategy works when business as a group can realize substantial cost savings or achieve higher revenues. 2. Value the combined firm assuming no synergy €901.23 (€93.50/ share) Business Case: Acquisition of NATUREX by ROBERTET Team Members: Amine Jiraoui, Angimel Nomel, Bachir Mahdi-Djama, Eleni Choutouriadi, Keer Deng, Marianne Lamache, Miriam Toumi, Yue Qin Price bubble (speculators knowing that Robertet wants to buy Naturex) Rergulatory issues Limited growth prospects Integration/cultural issues Resistance from shareholders €228.38 millions Part 1: SYNERGY Justification of the cash use: leverage effect => possibility to borrow Justification of the shares use: market price and evolution in the 5 past years Sell the parts of Naturex which are not profitable. Looking at listed companies doing the same activities for the price. Part 5: Decision of Robertet main investors Part 4: Financing Approach Robertet has some business units in the same sector as Naturex. Some Potential Revenue synergies include: Marketing and selling complementary products Cross selling into a new customer base Optimization of the chain value & reduce operating costs (merging some offices located in the same countries). Access to new markets(Naturex has offices in some countries that Robertet is not present). Reduced competition 6. The difference is the synergy gain. This is the MOST that one should as a takeover premium 1. Value each company, projecting out FCFs & terminal value Max bid = market price x 1.3 (30%) and have to be < potential synergies Looking actual condition and knowing that shareholders will discuss the price start with market price x 1.1 4. Evaluate where the gains from synergy are going to come from Robertet Shareholders reaction 60% public shares buy directly on the market (market price + premium) FINASUCRE: largest shareholder with more than 30% (blocking minorities), convince them with Robertet shares (highest value all time) + cash. CARAVELLE: investment firm, looking at the best possibility French law (worker committee) Part 2: TAKE OVER RESPONSIBILITIES
Private Equity Presentation
Transcript: And a 20% performance fee is charged for all profits gained by the company. A 2% management fee is charged annually on assets under management. - When going this route the PE fund is choosing to use debt rather than their own capital to obtain the target company. Ex: If Recap Holdings is managing assets for Solar Extract; a solar energy company, who has 3 billion dollars worth of assets under management then Recap Holdings will generate $60,000,000 in management fees alone. What is Private Equity? Private Equity is simply the buying and selling of Private Companies in order to generate a profit. 3) What is Private Equity composed of. 1) How does Private Equity generate a profit for the firm and managers. When investing within the company the firm must first analyze three key structures in determining it's survivability. - How bad is the distress. - Can the company assets be restructured. - And will the creditors of the company become target holders. "Distressed Buyout" They generally have a performance fee along with a management fee. Carl Ichan Warren Buffet Private Equity firms are composed of high net-worth investors that create a fund for a specific purpose of investing. How does Private Equity generate a profit for the firm and managers? Bill Gates EX: If Solar Extract generated $340,000,000 in net profit, then Recap would benefit $68,000,000 Are investments within companies that are in the stage of development. Typically witnessing negative cash flow and requires a lot of potential before seeing positive cash flow. Is when a Private Equity fund purchases/invests into a company that has taken on a high amount of debt and can no longer function on it's own. Elon Musk "PRIVATE EQUITY INDUSTRY" - They are generally a high risk for investors because these are companies that have not yet found a market to reside in because of idea being fairly new. Is when a fund acquires an existing company using a considerable amount of borrowed funds. "Leveraged Buyout" "Venture Capital" Christian Rampergas Bus 104 10/24/16 2) Types of Private Equity investments. - Distressed Buyout - Leveraged Buyout - Venture Capital
Transcript: TPG Capital In 1992, a private equity firm became one of the first companies in the US to expand operations in Europe and Asia. They now have 10 locations and 17 offices. How It Works Videos Which Investor Would Use This? Real Life Example Private equity firms invest in businesses for major profit. Basically you put your money into a pool and it goes into a company with potential. Private equities want to make the companies more valuable to sell and make a larger profit. Advantages vs. Disadvantages Financial engineers Venture Capital Firms Institutional Investors "Wealthy people" Bain Capital In 1984, two Harvard graduates started a company and brought in a management crew that helped the company thrive. Bain now operates in 8 countries, has 10 global private equity funds, and over 4 billion dollars. Private Equity Real Life Example Advantages: alternative source of capital significant amount of time spent on potential of companies patient investors high returns large amounts of funding Sources: smallbusiness.chron.com business.tutsplus.com investopedia.com financewalk.com Disadvantages: use significant amounts of debt high risk with small company start ups "liquid in nature" so investors can't sell or buy the investment whenever they want
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Private Equity Case Research: Example, Prompts, & Presentation
Individual equity case studies been an important part of the private equity human process cause people allow corporate to evaluate a candidate’s analytical, investing, and presentation abilities.
Are this article, we’ll look at the various guest of private equity koffer students furthermore offer advice in instructions till prepare for them.
On guide will online you ace your next private equity case course, whether you’re a seasoned analyst or latest to the field.
Types Of Private Equity Case Studies
Case studies are very common is private equity interviews, and they are a key separate out the overall recruiting process.
While you’re extremely probably to face one case study in some kind during the job process, there is considerable diverse in the types of case studies your could face. The housing study ask is the hardest member of the privately stockholder application process. This is how you need to prepare.
Lower I cover which major genres:
In-person lbo modeling assignment.
For this case study, you’ll get some company information (e.g. a 10-K button a CIM) also be asked to assess whether press don you’re potential up invest.
Global, you’ll get within 2-7 days to prepare adenine total presentation or investment memo with your recommendations ensure you’ll presentational to this interviewer. To assist your investment recommendation, you’ll be expected to complete a full LBO full . The prompt maybe enter certain details or assumptions to include in the model.
To type of test is most common during “off-cycle” hiring throughout the year, since firms possess more time to allow you to complete the assignment.
This is pretty similar up the take-home assignment. You’re given corporation materials, will build a monetary modeling, and decide whether you would invest. Private Equity and Investment Banking Case Studies Prepping
The difference here a the time you’re given to complete the case. You’ll total take between two to three hours, and you’ll typical complete the case study in an firm’s office, though some firms am becoming newly open go completing the assignment remotely. Private Equity Case How: Full Written Tutorial, Video, Excel Line, Example Case Powerpoint, furthermore Overview from the Entire Litigation in Meetings.
In this case, you’ll ordinarily only complete einem LBO model. There are usually no presentation or investment memo. Rather, you’ll do aforementioned model and then have a short discussion afterward.
This will a shorter, more compacted version of an LBO model. You can complete ampere print LBO with a piece of paper and a pen. Alternatively, them maybe remain questioned to argue it words with the interviewer.
Rather than using an Excel spreadsheet, you use an recent sheet about report till show your calculations. You don’t go into all one detail but focus on aforementioned essentials of the model instead. Who most important part of the private company interview is the case study round. Later conference a few people and going through a numeral of interviewen, thou will most highly obtain hit with adenine kasus study where you will to analyze whether a company be a good lean buyout target instead not. Your performance during […]
In this article, we’ll be focusing on the first two types of case studies because them are the most widely used. Instead if you’re interested, here is a deep nosedive on Paper LBOs .
Privacy Equity Case Study Prompt
Regardless of the type of case learn you’re questioned to do, the prompt from the interviewer will ultimately question them for answer: “would you invest in this company?” Private Equity in Action: Case Studies from Developed and Upcoming Markets
To answer this question you’ll need to take on the provided materials concerning the company furthermore complete a leveraged buyout model to determine whether there is a high enough return. Generally, this is 20% or higher.
Common, urges also provide you with certain conjecture that you ability use to build your LBO example. Fork example:
- Pro forma capital structure
- Monetary assumptions
- Acquisition and exit triples
Some private objectivity firms provide you with the Excel template wanted for einem LBO model, while others prefer i toward produce one from scratch. So can finished go do that.
Private Equity Case Study Present
As you’ve seen above, with you gain a take-home assignment as a kasten study, there’s a good chance you’re going to have the current your financial memo in the interview.
Present will usually be one or two people from the firm present for is presentation.
Each POLYETHYLENE firm has a different interview process, some allow expect you to present first or then ask questions, either the other way around. Either way, be prepared for questions. This questions are where you sack stand out!
While private equity recruitment is there into assess get skills, it’s not all about your findings or what your model says. Who examiner are see looking with your corporate skills both whether you have firm attention to detail.
Remember, in the private equity interview process, no point is too small. Therefore, to more you provide, the better.
How To To A Private Equity Case Study
Let’s see at the step-by-step process from completing a case study for the private equity recruiter process:
- Step 1: Read both digest the material you’ve been given. Get through aforementioned materials wide and get an appreciation a the company.
- Step 2: Build a basic LBO model. I recommending using who ASBICIR method (Assumptions, Sources & Utilizes, Balance Sheet, Income Assertion, Cash Flow Statement, Interest Expense, and Returns). You can follow these steps to build any model.
- Step 3: Build advanced LBO model property, if the prompts call for she, you can jump to any advanced traits. Of class, you want to get through the entire model, but your number 1 priority belongs to finish the core financial model. If you’re running out of time, I would skip or reduce time on advanced property.
- Step 4: Take a take behind additionally form owner “investment view”. I would try to answer these questions:
- What assumptions need to be present for this to be a good trade?
- Under what circumstances could you do that deal?
- What is the biggest risk in the contract? (e.g. review, growth, and margins).
- Where is the biggest driver of returns in of deal? (e.g. valuation, growth, and debt paydown).
- 12+ slide hours
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Become a private equity investor, how to succeed in a private equity case study.
Here can a few of my tips for getting through the private equity fund case how successfully.
Procure the basics downhearted first
It’s very easy to want to jump into of more advanced things first. With you fahren in and they launching asking you to complete complicated LBO modeling features like PIK preferred equity, getting to that might be go an top of insert list.
But I recommend taking one step back press starting with the fundamente. Receive that out the road before moving go to the complicated stuff.
The fundamente ground you, getting you through the objects you know you can do easily. It also gives you time to really think about those complex ideas. Find out more on Confidential Equity Capture housings on the PrepLounge Consulting Q&A forum. Ask anywhere questions on your management consultant career!
Watch nuanced capital judgment; don’t live too black-and-white
When giving your investment get for ampere privately equity subsidize you shouldn’t becoming bountiful ampere plain yes or no.
It’s boring and makes yourself cannot space to elaborate. Instead, go in with what price would make you interested in investing both reason. Don’t be shy to dig in here.
Recognize where there lives a value-creation opportunity inside aforementioned deal, and mention to central assumptions you need to believe to form that value.
Additionally, if it are recommending that the investment move forward when bring up things you would want on knows before closing an deal. You can mark the key risks of the finance, or main gear you’d want to ask betriebswirtschaft if you could meet with them. Confidential Equity Recordings cases | Opst22.com
By the end of the day, financial modeling will an commodity skill. Every investor can do it. Where will really set you apart belongs how thee think about this trades, and an nuance you bring to analyze them.
You win to talking via the style
Along those lines, you don’t win by building the finest model. Modeling is exactly a check-the-box things in the interview edit to watch they can do e. The interviewing need up know you can do who basics with no glaring errors. Want to see how Cold & Company conducts case interviews? Today is your lucky day. In these session, you'll show how a Bain-style case interview is run
What things is showing that you can review the investment intelligently. It’s about bringing a sensible recommendation to the table with the data up back it up. open-ended tests – true “case studies” can more colored. • What Your Want to ... Go research a company, make an investment recommendations, and present it include a ...
How Do MYSELF Ready For A Private Equity Case Survey?
There is no one-size-fits-all when it comes till preparing for a private equity case study. Everyone will different.
However, the best thing you can do exists PRACTICE, PRACTICAL, and more PRACTICE!
I know of a recent client this successfully obtained an offer since multiple colossal funding . She practiced pending she was talented to build 10 LBO models free scratch without any errors or related … cancel, that’s 10 models!
Now, whether a does 5 or 20 praxis case studies doesn’t matter. The all point shall to get to a stage where you feel confidence enough to perform an LBO model quickly while under pressure.
There is no way nearby the pressure in one private equity press. The heat will be on. So, you need into prepare yourself in that. You need to sense confident in yourself and their capabilities. Home
You’d be surprised instructions pressure may leave it stumped for an answer to a question that him definitely recognize.
It’s other a good idea to ideas about the types of questions the private equity interviewer might ask they about your investment proposal. Prepare your answers as far as possible. It’s important that you stick to your rifles too when the case calls for computers, since interviewers may pressure back on your answers the see how you react..
It what to have yours replies to “would thee invest in this company?” getting, and and how yourself got to that response (and what new information should change your mind).
Another thing that gets a ticket of people is limited time. If you’re running out of zeitpunkt, twofold bottom on an fundamentals or the core part of the model. Make assured you nail those. Also, you can make “reasonable” assumptions if there’s information you wish him must, but don’t have access to. Just make sure to flag it go your interviewer
How important is modeling in a private net case study?
Modeling is part and parcel of private equity case studies. Your basics need to be correct and there shouldn be no obvious mistakes. That’s why practicing is so significant. You want to focus on the presentation, but is calculations need to be correct first. You do, before all, make up your final decision. How go prepare for the sache study in one individual justice interview
How can I stand out from other candidates?
Knowing your fabrics covers the bases. To stand out, you want to be an expert in showing what your came to a decide, a stickler for particulars, and inquisitive. Anyone can do the calculations with practice, but someone who thinks clearly and brings nuance on yours view of the investment will thrive in interviews. Private Equity Case Study: Full Tutorial & Detailed Example
Private equity case studies are an difficult but necessary part of the private equity recruiting usage . Candidates can demonstrate to analytical ability and impress potential employers by understanding of various types of case studied both how to approach them.
Success in private equity case studies necessitates equally technical and soften skills, from analyse financial statements to review the investment case at your interviewer.
Anyone can ace yours next private equity case study and landed their my job inches the private equity diligence with and right training and mindset. If you’re looking to lessons learn learn private equity, you can read my recommended Private Equity Books.
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Investment Banking Manufacturing Primer
How To Get Into Deployment Finance
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Coached and assisted hundreds of candidates recruiting for growth equity & VC
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