Private Equity / M&A Advice

Anybody out there have some decent private equity or M&A experience? I applied for a job internally (corporate M&A buyside) and have the accounting, financial research and strategic business experience but in my current role I deal mainly with fixed-income only a small amount of venture capital and equity. I think the hardsell will be convincing the ex-IB’s that I can translate my experience (and CFA experience) to M&A which obviously focuses more on company analysis as a whole. Any advice is greatly appreciated as I am competing against IB analysts (external to the company) so one advantage that I have is that I have extensive industry / strategy experience other candidates don’t have as I’ve been with the current company for a number of years already.

Brush up on your financial modeling and transaction structure skills. Those are the only two skills that an IB analyst would clearly have an advantage on. If you are able to show them that you are at least at the same level in those areas, I think it would swing it your way due to your industry experience. Good luck.

Thank you. That is very helpful advice. I am certainly confident in the financial modeling aspect for sure and I think another aspect I may have to work on like you said is convincing them I can perform the job at an equal level despite not having any deal experience under my belt.

And when I mean financial modeling, I mean financial modeling including VB codes, sensitivity tables, complex capital structures, etc. All the best to you.

CFAMetal, jackofalltrades is correct that you’ll need to prove that you have the necessary modeling skills for the job – you might even proactively create a model to show them what you’re capable of. Definitely play up the advantages that you bring to the table. The main thing is to show them that you’re competant, and while you may not have the M&A experience, you will be quick to learn. Be confident…good luck!

Model, Model, Model, Model. One of my friends had to build a model for a PE interview he had. Steph, you friended me last night? I took an Ambien so everything from 10PM forward is foggy.

Thank you guys. Anybody have any recommendations about a particular model? Should I forecast a 10K perhaps? I was thinking of doing a standard DCF and maybe putting in some EV / EBITDA, sensitivity tables, etc. If anyone has a template or has any suggestions on what to include, please chime in.

Thank you. What about adding the hiring managers on LinkedIn if they’re at the same company after an initial interview. Bad idea or good way to showcase another ‘resume’ and shared connections / and or colleague recommendations?

linkedin shouldn’t have much of an effect on your candidacy. go for it as for your original question, as someone that did not come from a banking background that successfully got into PE on a pre-MBA level, i’d say the things i played up in my interview were (1) my ability to critically analyze potential investments from the perspective of a buyout investor; (2) intellectual curiosity and passion for investing; (3) transactional modeling; and (4) an understanding of the deal process and what PE is all about. your industry background is helpful but not as much as you think. i played up my healthcare sell-side background when i was interviewing for PE, and it was a nice value-add, but the four skills i identified above are a lot more important. industry knowledge is good but whenever PE investors really want to drill down into a company or industry, we have a litany of experienced industry executives and consultants that we can call anyway. and when i say “experienced” i’m talking about 15+ years. CFAMetal wrote: “Thank you guys. Anybody have any recommendations about a particular model? Should I forecast a 10K perhaps? I was thinking of doing a standard DCF and maybe putting in some EV / EBITDA, sensitivity tables, etc. If anyone has a template or has any suggestions on what to include, please chime in.” ^ suggests that you have to learn more about what deals are all about before even considering making a real career out of PE or M&A. a “standard DCF” and some valuation multiples are very different from a transactional model. as others have pointed out, you may be asked to build an LBO or M&A model given 1.5-3.0 hours at an empty cube – i.e. a modeling exam – and it also doesn’t suffice just to practice mechanics either. i mean, do you understand concepts like free cash flow, leverage, debt coverage, different financing situations, etc.? these are all things you will want to understand before you apply for a transactional job…you have to understand the concepts/assumptions underpinning the financial technicalities, else you will not make it beyond the first round of interviews. how can you improve your candidacy? well, learn more about what LBO’s are about, practice modeling for sure but more importantly it’s probably worth getting a book on valuation just so you understand on a high-level what’s going on and why certain assumptions are made for certain models. there are a lot of books out there that get into the nitty-gritty of things but it’s much more important to understand the big picture of things good luck

Numi, thanks for the in-depth advice and insight. That is extremely helpful. Certainly, the intellectual curiosity, passion for investing and a high level understanding is definitely there for me. The Level 2 curriculum certainly hammered out the Free Cash Flow to the Firm, Free Cash Flow to Equity, Residual Income, Dividend Discount, Price Multiples, DCF, Capital Structure, Merger Transactions, LBO and VC Models and the multitude of assumptions associated with these. As a repeater of that exam I have come to learn these quite well. Do you recommend reading up anything on valuation and deals beyond this? Obviously in the cirriculum you are not required to create complex spreadsheets or create a ‘full’ financial model for a company. This opportunity is in the Corporate Development group of a Fortune 100 company but it is by no means a bulge bracket IB type equivalent position, although obviously it’s still extremely competitive. The particular group mainly concentrates on smaller deals. I think I’ll have to really push those four attributes as I would speculate that my current experience definitely seems to suggest that I seem more suited to work at a bond desk rather than M&A.

Update: I got dinged for this position although I was a competitive candidate with Corporate Finance experience. One crucial variable under my control was competing with someone who had previous ‘deal’ experience working in banking. Obviously transaction experience is key in PE, M&A and IB. It was tough selling my asset management type focus to veteran banker. Oh well…life moves on…

hang in there and don’t give up! it’s very competitive out there now, but keep working on your skills and networking.