Miss Essays - Financial Markets, Corporate Finance, Investment

Lots of people are going through private equity recruiting this time of year, so let?s take a look at what to expect and how to tackle the case study ? a critical part of most buy-side interviews. Note that these ?case studies? are completely different from the ?case interviews? you get in management consulting (not that I would even waste space on consultants here, but just to clarify?). Why? Although I labeled these ?private equity case studies? above, you?ll encounter them in almost every buy-side interview, from mega-funds to tiny 4-person firms to everything in between. Not all hedge funds do them, but any fund that does some long-term investing (as opposed to effectively day-trading) will usually make you complete some type of case study as part of the interview process. Sometimes they?re formal and sometimes they?re informal, but they?re always important ? if you screw yours up, you probably won?t be moving onto the next round or getting an offer. Who? No matter your profile or previous background, you?ll encounter case studies if you?re trying to move into private equity. So even if you?re a consultant or you?re moving in from a different field altogether, you will still have to complete case studies. No one ever says, ?Oh, well you you didn?t do much modeling so we can just skip that part of the interview.? Instead, they assume that you know how to do it and then weed out people who don?t. Even if you are applying to PE firms straight out of undergrad, or you?re applying as an intern, you?re still likely to get case studies ? multiple friends who did this had case studies pretty much everywhere. The only exception here is senior-level hires ? but then, if you?re reading this right now you?re probably not interviewing for Partner-level positions? What? The case study is designed to answer 1 simple question: ?Should we invest in this company The firm could ask you to complete the case study in a couple different ways: Most Common: You get materials on the company they want you to analyze (financial statements, 5-10 page document describing it, maybe some outside research) and you have anywhere from a few days to a week to complete a short presentation. Part of the Interview: Some places will make the case study a part of the interview itself ? they might give you basic information on the company and then give you 2-3 hours to do your work and present to them immediately afterward. More common at mega-funds. Just the LBO Model: This is less common, but they could also give you 30 minutes to create a ?simple? LBO model of a company just to verify that you actually know how to do this. This article will focus mostly on #1 and #2, since #3 is just a sub-set of those. Hedge funds are less ?formal? than PE firms if they ask you to do a case study at all, and in other fields like corporate development and venture capital you?ll either have more of an informal case study, or you won?t do one at all. Case Study Ingredients At the bare minimum, you?ll usually get some type of Word document describing the company in question (called an ?Information Memorandum? (IM) or ?Offering Memorandum? (OM) or ?Executive Summary? in banker terminology). It might be short (10 pages or less) or it might be quite long ? dozens or even 100+ pages. If you?re analyzing a public company, they might just point you to the 10-K or 10-Q (annual report and quarterly report, respectively) instead. It?s rare to get extremely detailed operating models because you don?t have time to go into pages of detail. Outside research is similarly rare. The firm usually won?t give you guidance on how to value the company or how to build your models, but that?s for an entirely different reason: they want you to figure it out. Structure: Simple FTW! Simplicity is the most important word for your case study. If they don?t give you a structure to adhere to, I would recommend the following: 1 Summary slide in the beginning. 2-3 Qualitative slides discussing the market, management, and anything unique to the deal. 3-4 Quantitative slides that go into the appropriate valuation, and what kind of returns the firm can expect. 1 Conclusion slide summing up everything and