Hi!
As usual - instead of just outlining topics and buckets à la Victor Cheng (which have no explicit inherent logic), the key to an outstanding case performance is laying out the precise logic according to which you will answer the question!
In PE cases, the current purchasing price is only of secondary importance! The only thing that really matters is whether you believe that you can resell the company after a couple of years at a price that exceeds the current asking price by the minimum ROI percentage.
For example, if the asking price is 100MM USD and the PE fund has a minimum ROI requirement of 35% and wants to hold the company no longer than 4 years, then the only thing that matters is whether you believe that this company can be sold for more than 135MM USD in 4 years!
So you have to understand/find out how valuation works in this industry. If, e.g., there is a pertinent industry multiple (say 10), then this mens that if you believe you can get the target company to annual profit of more that 13.5MM USD, then this will make sense financially.
So the task is then to analyze, whether it is realistic to bring the target company to this profit level of 13.5MM USD per year.* If yes, this is a good deal based on the financial analysis.
Cheers, Sidi
*: So you will need to check the Status Quo, how far is the target company away from the required annual profit, and how can profits be brought to that level. This is an embedded diagnostic question within a larger strategic go- or no-go question. The analysis is done with the usual instrument: a driver tree which disaggregates the focus metric (profit) in order to identify optimization potential.
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Dr. Sidi Koné
(Former Senior Engagement Manager and Interviewer at McKinsey | Former Senior Consultant and Interviewer at BCG)
(editiert)
