Monthly Archives: January 2022

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What is the difference between a stock deal vs. an asset deal?

A stock deal is when an acquirer purchases all shares (ie equity ownership) of a firm to purchase the entire company. The acquiror assumes both the assets and liabilities of the company. This is by far the most common kind of deal. In a stock deal, proceeds to the seller are taxed at the capital [&h...
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Startup Funding

Private Equity: Walk me through your resume / tell me about yourself (1-3 min)

You want to tell a story about how you became interested in finance, investing, and improving businesses. It’s best to provide some context initially about yourself so the interviewer understands what’s unique about you: where you grew up, where you went to school, and how the first “spark” ...
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Startup Funding

What makes a good LBO candidate?

The most important characteristic of a good LBO candidate is stable cash flows since the PE owner will have to service the debt and stay within covenants in order for the investment to be successful. This means recurring revenue is very valuable, meaning that the revenue is “sticky” and it’s h...
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If the balance sheet doesn’t balance, what does that mean? How can you fix that or prevent that while building a 3-statement financial model or LBO model?

Assets = Liabilities + Shareholder’s Equity Above is the balance sheet equation, which is saying that all assets must be funded by either liabilities (e.g. debt) or shareholder’s equity (e.g. money from private or public investors). If the equation does not balance, that means there is an error ...
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Walk me through a DCF.

• Understand the company and the industry in which it operates on a forward-looking basis• Make key assumptions about revenue growth, gross margins, SG&A, capex, etc.• Project unlevered free cash flows, typically 5 – 10 years• Derive terminal value by using perpetuity growth method...
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What is net working capital?

Net working capital represents the money tied up in the daily operations of the business. This includes both current assets and current liabilities. On the current assets side, we typically include accounts receivable, inventory, and prepaid expenses as part of net working capital. All these items w...
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