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Private Equity: Value Creation Interview - what to expect and how to structure answers

Hi, some really helpful content on this platform. I have an upcoming 2nd round interview with a mid-market PE firm, within their value strategy group (primarily focussed on the holding period and exit strategies), having had my fit interview. There is a combination of strategy consultants (I fit into this bucket) and those with a financial services background in this team. 

My preparation has been focussed around the three drivers of value creation 

(1) Operational improvements 

(2) Multiple Expansion 

(3) Changes in net debt. 

I have also looked over financial accounting terms to help around these areas, and the areas of investment in the current portfolio. 

I am unsure whether to expect a LBO modelling in this round. I have a few weeks to prepare and wanted to know if there was any advice on what I can expect in this 2nd round interview and the best way to prepare. Should I treat it as similar to typical strategy case interviews? I am struggling to come up with a structure to answer questions, as I'm unsure what to expect. 

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am 30. Dez. 2020

Hey,

Just wanted to make sure that you are covering all aspects. I pick up 3 distinct subjects from your question:

  1. Valuation
  2. Value creation
  3. LBO

As you know, these are different topics (obvs all under the same umbrella) and will require different approaches. Hope that makes sense.

#1 is your typical valuation of a firm and am assuming you know this subject (NPV, shares outstanding etc) and how to approach such cases. #2 can be intrepreted as creating shareholder value or customer value. You can create more value by growing revenue and/or reducing operating cost and/or improving asset efficiency and/or improving customer experience. There are many other ways but I have summarised and simplified here. #3 is about valuing a company to acquire..am assuming you know this subject.

Feel free to shoot me a message if you wish to discuss further.

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Vlad
Coach
am 30. Dez. 2020
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

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

  • 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!

Ian
Coach
am 30. Dez. 2020
Top US BCG / MBB Coach - 5,000 sessions |Tech, Platinion, Big 4 | 9/9 personal interviews passed | 95% candidate success

Hi there,

This feels a bit limited.

In addition to this, you need to think about pre-deal, deal, and post-deal. You need to look at both acquisitions and divestments (spin-offs/carve-outs) and how to think about when they apply, when they're good/bad, and how to value them. You need to understand methods of valuation (NPV for example) as well as additional non-financial ways of measuring this. You also need to be able to determine, when merging/acquiring, the methods for ensuring success (i.e. high vs low-control). You need to be well read on the most well-known (and recent) mergers, acquisitions, and failed acquisitions.

Shoot me a message...I've been preparing a number of candidates for PE-based consulting roles...more than happy to help further!

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