PE case study

Case Interview Private Equity
New answer on Aug 19, 2022
2 Answers
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Anonymous A asked on Aug 17, 2022

Hi, could someone point me how to tackle a PE case in an interview ? 

ex: a PE fund wants to invest in a public transportation metro system being sold off by the Govt. how to evaluate this ?

- how to value an entity like this ? 
- what synergies should we look for ? 
- the case prompt said 7% ROI as an average for their other investments. so should we look for an exit opportunity that can give atleast 7% ROI on the overall operational years?
 

please suggest/ guide me to any resource that could be helpful 🙏

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Kiran
CoachingPlus Expert
replied on Aug 17, 2022
Former McKinsey Consultant (ranked top 3-5%)|McKinsey interview coach, 50+ sessions|30% off first session|Tech Investor

Hi there, Typically, we think about PE investment decisions in the following way (this is a potential framework you could utilize/adapt):

  • Value of the market: Here we are thinking about size, growth, fragmentation and competitive landscape of the market the target asset is operating in
  • Value of the target: Here I think about financial (what does it core 3 financial statements look like e.g., FCF, debt) and non financial value (how strong are existing management)
  • Value that we can add: As the fund can we create synergies with existing portfolio companies, do bolt ons etc?
  • All of this feeds into the price we pay for the asset and how we finance it.

I know your example is very specific and happy to jump on a call to discuss, but hopefully the above framework is useful for the community (PE investment cases constitute ~80-90% of cases you will see across consulting interviews)

 

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Ian
Expert
Content Creator
replied on Aug 19, 2022
MBB | 100% personal interview success rate (8/8) and 95% candidate success rate | Personalized interview prep

Hi there,

Kiran is generally right here. We check that the market is good, then we check that the company is good (get the standalone value), then we see if there's value we can add to the company, and finally we need to look at the actual cost of acquisition+transaction compared to alternatives.

That said, every case is going to be different and requires a different approach.

It's going to be hard to get full understanding of this via a Q&A - I highly recommend coaching and additional online research here!

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Kiran

CoachingPlus Expert
Former McKinsey Consultant (ranked top 3-5%)|McKinsey interview coach, 50+ sessions|30% off first session|Tech Investor
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