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Vlad

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Any insight on cases/questions for McKinsey in Paris (Private Equity practice)?

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Hi,

There are two types of cases you can have:

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

Note also that it can be a mix of both.

1. For Due Diligence you can use the following structure (It's the official framework from Bain website):

Market

  • Size
  • Growth rates
  • Profitability
  • Segments and growth
  • Regulation

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

  • Revenue and growth rates
  • Profits
  • Unit economics (Margins, costs) in current or target markets
  • Key capabilities

Feasibility of exit (in case of a PE company):

  • Exit valuation
  • Exit time
  • Existence of buyers
  • Risks

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. Financial synergies - working capital, capital structure, tax
  4. Risks - major risks that can decrease the synergies (tip: don't underestimate the merging companies culture factor)
  5. Total synergies potential in $, adjusted by risk (probability of failure)

Good luck!

Hi,

There are two types of cases you can have:

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

Note also that it can be a mix of both.

1. For Due Diligence you can use the following structure (It's the official framework from Bain website):

Market

  • Size
  • Growth rates
  • Profitability
  • Segments and growth
  • Regulation

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

  • Revenue and growth rates
  • Profits
  • Unit economics (Margins, costs) in current or target markets
  • Key capabilities

Feasibility of exit (in case of a PE company):

  • Exit valuation
  • Exit time
  • Existence of buyers
  • Risks

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. Financial synergies - working capital, capital structure, tax
  4. Risks - major risks that can decrease the synergies (tip: don't underestimate the merging companies culture factor)
  5. Total synergies potential in $, adjusted by risk (probability of failure)

Good luck!

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Hi,

while I have no particular McK-experience, I have a lot of PE experience and can give you some of the most common case types we would give at Bain.

1) Acquisition - Should the client aquire the target or not?

2) Synergy - How can you atain synergies with two related PE portfolio companies?

3) Sector attractiveness - Can you evaluate the market attractiveness for market X?

4) Value creation (essentialy a profitability case) - What are the value creation levers at company X and how much do they amount to?

There are obviously a lot of other case types but these are the most common one in my opinion.

I hope this helps.

Best,
John

Hi,

while I have no particular McK-experience, I have a lot of PE experience and can give you some of the most common case types we would give at Bain.

1) Acquisition - Should the client aquire the target or not?

2) Synergy - How can you atain synergies with two related PE portfolio companies?

3) Sector attractiveness - Can you evaluate the market attractiveness for market X?

4) Value creation (essentialy a profitability case) - What are the value creation levers at company X and how much do they amount to?

There are obviously a lot of other case types but these are the most common one in my opinion.

I hope this helps.

Best,
John

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