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Private Equity interview coming up - operational improvement case?

Hi all,

I have have a third-round private equity interview coming up in a week, with one of the big mid-market funds. I was expecting market sizing (I know that is very common) and LBO/valuation cases. However, I got some more information over the phone today, and I am not true what to expect;

”You will have 3 case-interviews, all will be of 45 minutes. It will probably be a mix if market sizing, LBO and operational improvements.” I then went to ask; “what do you mean by operational improvement case, never heard of it?”. He answered “you can probably google regular PE cases, just me calling it operational improvement. When we acquire companies, we want to make a difference under or ownership either on the top line, or the bottom line - or both preferably. Think along those lines and that will be fine.”

I think the market sizing and LBO will be fine, but I do not understand the operational improvement part. I have not seen such a case been given in PE interviews. Is he talking about a McKinsey-style/Victor Cheng case? 

Does anyone have any idea of what the operational improvement case can contain?best,

F

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Vlad
Coach
bearbeitet am 8. Okt. 2019
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

There are several types of operational cases that you may have:

1) Operational math problems. (e.g. Should we increase the speed of the elevator or just buy a second one? How should we reduce the queues? How should we increase the output of a factory?).

Structuring:

  • Usually, you have to look at the process. Even the most complicated systems have the inflows and outflows

The key concepts that you have to learn:

  • Capacity and utilization (both machine and people)
  • Cycle time, Throughput time, Little's Law
  • How the does lowest cycle time influence the production? (Lead time = cycle time of the slowest process)
  • How can we mitigate the bottlenecks with low cycle time? (Buffer, Parallel process, speeding up)

2) Cost cutting cases

Structuring:

  • What is the cost composition and what are the biggest costs
  • Benchmarking of the biggest costs to find the improvement potential
  • Process improvements to meet the benchmarks
  • Costs and benefits of the proposed initiatives

The key concepts that you have to learn:

  • Internal / external benchmarking
  • Idle time
  • Core processes (usually are optimized) and the supporting processes (usually are cut)
  • Math structures (Frequency of operations * time per operation)
  • Other useful structures (e.g. people - process - technology)

Feel free to reach me for further help with these cases.

3) Bottleneck / capacity cases (e.g. Huge write-offs in the meat store or bottleneck on the bridge)

Structuring:

You draw a value chain and go through it to find a bottleneck. 

E.g. for the meat write-offs it will be:

  • Supplier issues (packaging, meat quality, warehousing)
  • Transportation (Length, fridges)
  • Store (Refrigerators in the warehouse, in-store fridges, demand for meat)

Feel free to reach out if you need any help with these cases - we can have a session

Best

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