Browse Our Resources For Acing Your Next Interview
Investment banking interviews are often very technical, testing you on financial concepts not taught in the classroom. The Finance Interview Coach Resources page was created to offer candidates with additional resources to assist in preparing for their interview.
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When should a private equity firm hire an investment bank for a deal? What value do they add? (1 min)
Most mid-market PE firms can execute acquisitions without the advice of an investment bank, since their team often consists of ex-bankers with deal experience and modeling experience. However, selling a portfolio company or doing an IPO of a portfolio company is not something a PE firm can do by themselves. Selling a company requires reaching […]
Why do many traditional mid-market PE firms avoid holding the real estate when buying a company?
Many traditional mid-market PE firms which focus on buying companies for their cash flows and do not have any real estate groups will try to avoid having to buy a lot of real estate in order to complete an LBO. This is because they prefer to focus on their core competencies in buying companies with […]
If you do an LBO with $100M initial equity and exit at $400M equity in 6 years, what is your IRR?
Using rule of 72, we can find the approximate IRR to double an investment for a given # of years. $100M growing to $400M equity in year 6 is similar to $100M doubling to $200M equity in year 3, and then doubling again to $400M in year 6. So by finding out what IRR is […]
How do you decide on the exit multiple?
After the projection period, it can be assumed that the company is at a “mature” stage. To find the exit multiple, we can take the median EBITDA multiple from a set of mature comparables. These companies should be larger and more mature, and therefore have a lower EV / EBITDA multiple compared to fast growth […]
If you could only use one financial statement, which would you use to evaluate an investment?
We should use the cash flow statement, because it tells us the most about a company’s financial health. Cash is king, because we ultimately decide on a company’s value based on its cash flows. The income statement only shows net income, but this is an accounting number and it does not show important cash flow […]
How would a decrease in net working capital in your DCF? What does that mean?
A decrease in net working capital would increase unlevered free cash flow. It represents less money being tied up in the daily operations of the business. For example, an increase in the number of days it takes us to pay our suppliers (also known as days payable outstanding) would free up cash.
