Cookie- und Privatsphäre-Einstellungen

Diese Webseite nutzt Cookies, um essenzielle Funktionen wie den User-Login und Sessions zur Verfügung zu stellen. Wir nutzen zudem Cookies und Software von Dritten, um Dein Surf-Erlebnis auf preplounge.com zu verbessern. Du kannst entweder nur essenzielle Cookies oder alle Cookies akzeptieren. Du kannst Deine Einstellungen jederzeit in unseren Cookie- und Privatsphäre-Einstellungen ändern. Dieser Link ist im Footer unserer Seit zu finden. Wenn Du mehr Informationen benötigst, besuche bitte unsere Datenschutz-Erklärung.

Datenverarbeitung in den USA: Indem Du auf "Ich akzeptiere" klickst, willigst Du zugleich gem. Art. 49 Abs. 1 S. 1 lit. a DSGVO ein, dass Deine Daten in den USA verarbeitet werden (von Google LLC, Facebook Inc., LinkedIn Inc., Stripe, Paypal).

Einstellungen individuell vornehmen Ich akzeptiere
expert
Experte mit der besten Antwort

Francesco

100% Empfehlungsrate

3.283 Meetings

12.064 Q&A Upvotes

449 USD / Coaching

5

How to approach PE Investment Cases best?

What is the best way to structure a case in which a PE ist considering an investment?

Thanks a lot in advance!

What is the best way to structure a case in which a PE ist considering an investment?

Thanks a lot in advance!

5 Antworten

  • Upvotes
  • Datum aufsteigend
  • Datum absteigend
Beste Antwort
Coaching mit Francesco vereinbaren

100% Empfehlungsrate

3.283 Meetings

12.064 Q&A Upvotes

449 USD / Coaching

Hi Anonymous,

quoting a previous post that I wrote, I would consider the following steps:

1) GOAL CLARIFICATION. It is always good to start with the end in mind – thus what is the specific reason why they want to buy the company? Just make profits reselling in 3 years for a higher price? Benefit from synergies with a portfolio company? Test the market for a bigger acquisition?

2) INDUSTRY. There are two macrovariables here.

  • Key industry numbers/facts. This includes for the market and potential subsegments the following
    • Growth
    • Size
    • Barriers to entry (BTE)
  • Key industry players. This includes:
    • Customers segmentation
    • Competition
    • Occasionally for some cases: suppliers and substitutes.

You should present this area connecting with the goal, and not purely listing the elements to analyse as if it was a laundry list. The best way to do so is explain how a certain variable will help you to achieve you goal. Eg, if your goal is to increase revenues, don’t simply say “I want to look at growth, size and BTE”, rather “I want to look at growth and size – this will tell me if the market has the potential to provide enough revenues for our client. I would also like to check BTE, to understand which are the obstacles in entering such a market and thus increase revenues”.

3) COMPANY - TARGET OBJECTIVE FEASIBILITY. Here you want to check the fit between the client and the selected industries.

  • Can our specific client reach its objective in the selected market (eg profits, revenues, increase in value, etc)?
  • Are there positive or negative synergies with the acquisition?

In the first point, you will probably have to go through a profitability/revenue/cost framework, to calculate the effective result.

4) PRICE AND CAPABILITIES. Once you know the industry is attractive and you can reach you goal, you should consider if the price is fair and you have enough capabilities

  • Is the price fair? To understand so, you should do a comparison between the acquisition price and the company value, using multiples in the industry or a DCF analysis.
  • Do we have enough money and other required resources (eg more proper management) to implement our strategy?

You can find more information on the DCF analysis at the link below: https://www.preplounge.com/en/consulting-forum/case-net-present-value-calculations-325

5) RISKS AND NEXT STEPS. What are the major elements that we should further analyse based on the previous points (eg regulator decision, potential other targets to consider, implementation risks, exit strategies)?

Hope this helps,

Francesco

Hi Anonymous,

quoting a previous post that I wrote, I would consider the following steps:

1) GOAL CLARIFICATION. It is always good to start with the end in mind – thus what is the specific reason why they want to buy the company? Just make profits reselling in 3 years for a higher price? Benefit from synergies with a portfolio company? Test the market for a bigger acquisition?

2) INDUSTRY. There are two macrovariables here.

  • Key industry numbers/facts. This includes for the market and potential subsegments the following
    • Growth
    • Size
    • Barriers to entry (BTE)
  • Key industry players. This includes:
    • Customers segmentation
    • Competition
    • Occasionally for some cases: suppliers and substitutes.

You should present this area connecting with the goal, and not purely listing the elements to analyse as if it was a laundry list. The best way to do so is explain how a certain variable will help you to achieve you goal. Eg, if your goal is to increase revenues, don’t simply say “I want to look at growth, size and BTE”, rather “I want to look at growth and size – this will tell me if the market has the potential to provide enough revenues for our client. I would also like to check BTE, to understand which are the obstacles in entering such a market and thus increase revenues”.

3) COMPANY - TARGET OBJECTIVE FEASIBILITY. Here you want to check the fit between the client and the selected industries.

  • Can our specific client reach its objective in the selected market (eg profits, revenues, increase in value, etc)?
  • Are there positive or negative synergies with the acquisition?

In the first point, you will probably have to go through a profitability/revenue/cost framework, to calculate the effective result.

4) PRICE AND CAPABILITIES. Once you know the industry is attractive and you can reach you goal, you should consider if the price is fair and you have enough capabilities

  • Is the price fair? To understand so, you should do a comparison between the acquisition price and the company value, using multiples in the industry or a DCF analysis.
  • Do we have enough money and other required resources (eg more proper management) to implement our strategy?

You can find more information on the DCF analysis at the link below: https://www.preplounge.com/en/consulting-forum/case-net-present-value-calculations-325

5) RISKS AND NEXT STEPS. What are the major elements that we should further analyse based on the previous points (eg regulator decision, potential other targets to consider, implementation risks, exit strategies)?

Hope this helps,

Francesco

(editiert)

Hi Francesco, thanks for the above. I had a question on your 'goal clarification'. I understand your first 2 points (profits vs synergies) but am struggling to understand your third - would you mind elaborating? Further, is this exhaustive or are there any other goals/ objectives not listed here? Thanks! — Anonym C am 6. Nov 2020

Hi there, the third objective may be translated into increase in revenues or a related metric. I would say the most common goal in a PE case is increase profits to resell at higher price, the interviewer can anyway clarify if the objective is different. Hope this helps! — Francesco am 6. Nov 2020

Hey anonymous,

Let me recover one proposal I ellaborated just a few days ago to a (relatively) similar query.

1. analyze the market/external factors

how sizable is currently the market and any growht expectation into the future? (demand side)

what about the competitive landscape? (supply side)

any relevant regulations/barriers to entry? (supply side)

2. analyze the company internal factors

what's the historical financial performance (traditional profitability tree; include benchmark vs. competitors and market share)?

do they have the right/needed capabilities (production, distribution, transport, management)?

3. transaction details

adequate pricing (valuation piece)

how to finance the transaction

exit strategy

Best

Bruno

Hey anonymous,

Let me recover one proposal I ellaborated just a few days ago to a (relatively) similar query.

1. analyze the market/external factors

how sizable is currently the market and any growht expectation into the future? (demand side)

what about the competitive landscape? (supply side)

any relevant regulations/barriers to entry? (supply side)

2. analyze the company internal factors

what's the historical financial performance (traditional profitability tree; include benchmark vs. competitors and market share)?

do they have the right/needed capabilities (production, distribution, transport, management)?

3. transaction details

adequate pricing (valuation piece)

how to finance the transaction

exit strategy

Best

Bruno

Coaching mit Andrea vereinbaren

100% Empfehlungsrate

142 Meetings

850 Q&A Upvotes

269 USD / Coaching

I agree with both answers. Maybe to get a little sharper on two points:

1) goal clarification --> if it's a PE firm you can ask immediately what is the exit hurdle rate and time horizon of investment. It's a fair assumption that a PE doesn't acquire for just "making a profit" but has a clear threshold in mind. Also In terms of synergies, that goes back to how do those synergies turn into reaching the threshold for both current target and old portfolio company (very rare)

2) valuation --> while is good to list all methods, would feel that suggesting to do a DCF during a live interview would be sadist unless a table with discount rates for all years is provided. My preference always goes for multiples and then ask if they do have a DCF done to compare between the two.

hope it helps!

andrea

I agree with both answers. Maybe to get a little sharper on two points:

1) goal clarification --> if it's a PE firm you can ask immediately what is the exit hurdle rate and time horizon of investment. It's a fair assumption that a PE doesn't acquire for just "making a profit" but has a clear threshold in mind. Also In terms of synergies, that goes back to how do those synergies turn into reaching the threshold for both current target and old portfolio company (very rare)

2) valuation --> while is good to list all methods, would feel that suggesting to do a DCF during a live interview would be sadist unless a table with discount rates for all years is provided. My preference always goes for multiples and then ask if they do have a DCF done to compare between the two.

hope it helps!

andrea

Coaching mit Vlad vereinbaren

98% Empfehlungsrate

405 Meetings

11.353 Q&A Upvotes

239 USD / Coaching

Hi,

At the consulting interviews you may have two types of PE cases:

  1. Due-diligence of the target company
  2. Synergies calculation of two merging companies

You can check which type of case you have by asking whether the PE fund already has another company in the portfolio for the synergies.

1. For DD you can use the following structure:

Market

  • Size
  • Growth rates
  • Profitability
  • Segments
  • Distribution channels

Competition

  • Market shares of competitors and their segments (see the next point)
  • Concentration / fragmentation (Fragmented market with lots of small players is less mature and easier to enter from a scratch. Concentrated market is hard to enter but has potential acquisition targets)
  • Unit economics of the players (Margins, relative cost position)
  • Key capabilities of the players (e.g. suppliers, assets, IP, etc)

Company

  • Unit economics (Margins, costs) in current or target markets
  • Brand
  • Product mix
  • Key capabilities

Feasibility of exit:

  • Exit multiples
  • Exit time
  • Existence of buyers

2. For Synergies Calculation you can use the following structure:

  1. Revenue synergies - here you calculate the synergies in price and quantity (depending on the case it may be new geographies, new products, new distribution channels, bigger share on shelves crosselling opportunities, etc.)
  2. Cost synergies - typically you use a value chain structure tailored to the industry (e.g. supply-production-distribution-marketing-after sales support)
  3. Risks - major risks that can decrease the synergies (tip: don't underestimate the merging companies culture factor)
  4. Total synergies potential in $, adjusted by risk (probability of failure)

In private equity interviews, the cases will be much more detailed in financial part. Depending on the company you'll need to:

  • Find the relevant information in P&L and Balance sheet
  • Do the simplified valuation using NPV: calculate cash flows and make assumptions about growth rate and discount rate
  • Do the valuation using comps - you'll have to explain which comps you will use and why

Good luck!

Hi,

At the consulting interviews you may have two types of PE cases:

  1. Due-diligence of the target company
  2. Synergies calculation of two merging companies

You can check which type of case you have by asking whether the PE fund already has another company in the portfolio for the synergies.

1. For DD you can use the following structure:

Market

  • Size
  • Growth rates
  • Profitability
  • Segments
  • Distribution channels

Competition

  • Market shares of competitors and their segments (see the next point)
  • Concentration / fragmentation (Fragmented market with lots of small players is less mature and easier to enter from a scratch. Concentrated market is hard to enter but has potential acquisition targets)
  • Unit economics of the players (Margins, relative cost position)
  • Key capabilities of the players (e.g. suppliers, assets, IP, etc)

Company

  • Unit economics (Margins, costs) in current or target markets
  • Brand
  • Product mix
  • Key capabilities

Feasibility of exit:

  • Exit multiples
  • Exit time
  • Existence of buyers

2. For Synergies Calculation you can use the following structure:

  1. Revenue synergies - here you calculate the synergies in price and quantity (depending on the case it may be new geographies, new products, new distribution channels, bigger share on shelves crosselling opportunities, etc.)
  2. Cost synergies - typically you use a value chain structure tailored to the industry (e.g. supply-production-distribution-marketing-after sales support)
  3. Risks - major risks that can decrease the synergies (tip: don't underestimate the merging companies culture factor)
  4. Total synergies potential in $, adjusted by risk (probability of failure)

In private equity interviews, the cases will be much more detailed in financial part. Depending on the company you'll need to:

  • Find the relevant information in P&L and Balance sheet
  • Do the simplified valuation using NPV: calculate cash flows and make assumptions about growth rate and discount rate
  • Do the valuation using comps - you'll have to explain which comps you will use and why

Good luck!

Antwort auf Frage:

Private Equity case interview

Hi

I don't have personal experience interviewing with PE firms, but according to my friends:

1. The focus is on valuation cases (duh :P) - these require you to estimate a target company's revenue sources, costs and do some basic DCF calculations to arrive at a price that they should pay for the target.

2. The cases are math-heavy and you are required to be quick on your feet with calculations and estimates.

3. Be clear on the personal interview front - why do you want to join PE? How do your story and motivations lead up to this?

All the best!

Hi

I don't have personal experience interviewing with PE firms, but according to my friends:

1. The focus is on valuation cases (duh :P) - these require you to estimate a target company's revenue sources, costs and do some basic DCF calculations to arrive at a price that they should pay for the target.

2. The cases are math-heavy and you are required to be quick on your feet with calculations and estimates.

3. Be clear on the personal interview front - why do you want to join PE? How do your story and motivations lead up to this?

All the best!

Verwandte BootCamp-Artikel

Case Studies

The case study is the most important element of the case interview, which you'll have to nail in order to get into strategic consulting. Here you can learn the specific skills and concepts necessary to solve them.

1 Q&A

Verwandte Cases

MBB Final Round Case - Smart Education

15,4 Tsd. mal gelöst
MBB Final Round Case - Smart Education Our client is SmartBridge, a nonprofit educational institution offering face-to-face tutoring services. The client operates in the US. The mission of SmartBridge is to help as many students as possible to complete studies and prevent that they drop from the school system, in particular in disadvantaged areas. The client is considering starting operations for its services in the Chicago area. They hired us to understand if that makes sense. Due to the nonprofit regulation, SmartBridge should operate on its own in the market, without any partnership. How would you help our client?
4.6 5 530
| Bewertung: (4.6 / 5.0)

Our client is SmartBridge, a nonprofit educational institution offering face-to-face tutoring services. The client operates in the US. The mission of SmartBridge is to help as many students as possible to complete studies and prevent that they drop from the school system, in particular in disadvant ... Ganzen Case öffnen

Espresso, Whatelse?

9,0 Tsd. mal gelöst
Espresso, Whatelse? Espresso Whatelse is an Italian company that produces coffee and espresso machines since 1908. It is the Italian market leader and has a strong presence overall in Europe. In 2019, Espresso Whatelse has increased its revenues but it has seen declining profit margin. Your client wants to understand the root causes of this 2019 trend and how to increase its profit margin again.  
4.6 5 459
| Bewertung: (4.6 / 5.0)

Espresso Whatelse is an Italian company that produces coffee and espresso machines since 1908. It is the Italian market leader and has a strong presence overall in Europe. In 2019, Espresso Whatelse has increased its revenues but it has seen declining profit margin. Your client wants to understand ... Ganzen Case öffnen

PE Portfolio Strategy

6,4 Tsd. mal gelöst
PE Portfolio Strategy We are a private equity firm operating primarily in the automotive industry. We would like you to figure out whether we should increase our portfolio in the sensor market or not. We would like you to do a profit/margin growth potential analysis and tell us how we can add value to this company given the other companies in our portfolio.
4.1 5 357
| Bewertung: (4.1 / 5.0)

We are a private equity firm operating primarily in the automotive industry. We would like you to figure out whether we should increase our portfolio in the sensor market or not. We would like you to do a profit/margin growth potential analysis and tell us how we can add value to this company given ... Ganzen Case öffnen

Hot Wheels

4,9 Tsd. mal gelöst
Hot Wheels Problem definition: Our client is Korean Car Parts (KCP), a multi-national original equipment manufacturer (OEM) of car parts based in Korea. They've recently seen a decline in profits and have brought us in to understand how to address this falling profitability.
4.6 5 284
| Bewertung: (4.6 / 5.0)

Problem definition: Our client is Korean Car Parts (KCP), a multi-national original equipment manufacturer (OEM) of car parts based in Korea. They've recently seen a decline in profits and have brought us in to understand how to address this falling profitability. Ganzen Case öffnen

Chinese Chess - Airline Business During COVID-19

3,4 Tsd. mal gelöst
Chinese Chess - Airline Business During COVID-19 Sky China, a government-backed Chinese airline, has recently seen profits plummet due to COVID-19. Profits are down 80% in the months of February and March, but are showing early signs of a rebound in April.  They've brought you in to first investigate what can be done immediatedly to prevent hemorrhaging cash and surive in the short-term. They are also looking to see how the current situation can be viewed as an opportunity, and what can be done to prepare for the future. 
4.3 5 102
| Bewertung: (4.3 / 5.0)

Sky China, a government-backed Chinese airline, has recently seen profits plummet due to COVID-19. Profits are down 80% in the months of February and March, but are showing early signs of a rebound in April. They've brought you in to first investigate what can be done immediatedly to prevent hemor ... Ganzen Case öffnen