(edited)
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Any insight on cases/questions for McKinsey in Paris (Private Equity practice)?
Overview of answers
Hi,
There are two types of cases you can have:
- Commercial due-diligence of the target company
- 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:
- 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.)
- Cost synergies - typically you use a value chain structure tailored to the industry (e.g. supply-production-distribution-marketing-after sales support)
- Financial synergies - working capital, capital structure, tax
- Risks - major risks that can decrease the synergies (tip: don't underestimate the merging companies culture factor)
- Total synergies potential in $, adjusted by risk (probability of failure)
Good luck!
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