Small PE fund internship

Have an interview with “Spirited Investors” in KW region on monday for a winter internship. Sounds like they only have a 20MM fund atm, so they are rather small. What kind of questions/traits would a small PE fund like this be looking for? Any advice of what to brush up on, would be great. Job Description as follows: We are looking for students who have a keen awareness in business to undertake industry-wide and company specific analyses. Students may also be involved in developing business plans for Spirited Investors Corp. and companies we acquire. Other potential tasks include: Evaluating business models. Conducting market analysis to gain industry knowledge and assessing business opportunities within the context of these industries. Reviewing new investment opportunities and conducting due diligence to assess the risk factors and return possibilities. Developing investment scenario models and analyses. Compiling research and market intelligence for various industries. Disseminating market intelligence to other investment team members. Assisting in writing and preparing due diligence documentation, investment memoranda and presentation materials.

Here are a few things that I know about PE. PE Groups buy businesses to improve, grow, and sell them at a profit. They usually speak with investment bankers who act as the agent to sell. Be familiar with the firms scope. Many only do business in certain industries and avoid certain industries. Important concepts to know are EBITDA and Adjusted EBITDA. Here is how he explained adjusted EBITDA to me. Adjusted EBITDA. Some examples include; 1. Hiring new management. (CEO currently making 300k, hire a new one for 150k). 2. Balance Sheet extraordinary events/items. (Extremely cold weather in MN kept the business truck from starting for a month etc). 3. Capitalization Expenses. (The extremely cold weather in MN caused a water pipe to burst which resulted in having to install all brand new weather resistant water pipes). 4. Others as fit. This is one way investment bankers can put some subjectivity in the value of the company. These are huge grey areas. I know its not much, but these are the few key concepts I know.

likely looking for a business sense (the ability to look at a business and think if it would make a good investment). probably also looking for tehcnical skills. i though i remember you reading you wanted to do ER though?

Thanks for the advice KJH. As to the other question, long-term I would like to work in a PE environment. Just saw research as a good stepping stone into the role, or is what others have told me in the field.

adehbone Wrote: ------------------------------------------------------- > Have an interview with “Spirited Investors” in KW > region on monday for a winter internship. > > Sounds like they only have a 20MM fund atm, so > they are rather small. These guys are really, really small. Looks like they just started very recently. Probably the kind of firm that will try to do any kind of deal they can. It also doesn’t appear that they have deployed any capital yet, because their website specifically says they are “in the process of fundraising $20mm”…so yes, these guys are very small and are just in the process of getting off the ground. In addition, these guys don’t post their biographies on their website which leads me to believe that the senior guys in their previous background may have fairly limited principal investing experience. Principals and partners in PE firms, if they actually have much of a background or track record, tend not to make a mystery of it. > What kind of questions/traits would a small PE > fund like this be looking for? I’ve never talked to a firm this small but they probably will ask you things like what would make a good private equity investment, how you think about valuation, what types of characteristics might typify a good buyout opportunity (even though it’s almost certain that a fund this small will not do any buyouts, unless syndicated). Also, it looks like this firm is set up such that a junior person will spend a lot of time doing industry research and screening potential investments so just come in with an understanding that you’ll probably spend time doing basic diligence. Also, I have no idea what KJH is talking about.

Numi- When an ibank pitches a company to PE, the most important figure from the PE standpoint is EBITDA. But, since a pitch is a sale opportunity, the ibanking analysts will present what is known as Adjusted EBITDA which adjusts items on the income statement and balance sheet in order to have increase the value of the company. Basically it can be looked at as the BS that comes with dealing with salesmen. My friend said this is the BS he has to sift through in order to see if this is a good business deal or not. Some investment banks are nortorious for utilizing this tactic while others do not use it. Again, I do not know much about private equity, but this is something a friend of mine mentioned which is a great challenge of the job.

Thanks KJH, but as someone who works at an investment bank and knows a fair amount about private equity, I can tell you that what your friend has told you is just not accurate.

I suspect numi’s on the right track although i don’t necessarily agree with the somewhat negative tone in a few sentences - small and starting up isn’t necessarily something to be concerned about (although it does contain more risk but also potential rewards vs. bigger shops). He’s probably right that they won’t be into financial engineering (LBO’s etc) but rather more management based takeovers…which according to a recent Harvard Business Review article i read (go to the website now, i believe its still free) is actually the source of about twice the profits for pe firms rather than financial engineering. Not saying financial engineering is mute mind you, just on a relative basis management turnarounds tend to create move value according to the HBV. As for the management’s history - although it doesn’t say specifically the background on anyone you can likely assume that these individuals have run businesses or change management or the like in their previous life. perhaps google their names to get a better sense? I did notice they say the website is currently under construction so they might not be hiding their backgrounds but rather haven’t finished the final site. As for numi’s last paragraph, i would concur with it. and have nothing of value to add beyond what he said. I think what you have to figure out is if you’re comfortable working for a small firm that’s just getting off the ground or if you’d rather have the big shop name behind you but likely be exposed to less tasks. I think it comes down to do you want to risk a small shop and likely develop a skill set beyond what you’d get to at a bank but not have the ‘big name’ on your resume or do you want the ‘big name’ and what i’ve found to be limited job tasks that internships typically offer…for you, i’d say you’re in a good position as to have choices like this many people would be jealous of.

Sorry, I wasn’t trying to come off with a negative tone – just trying to call it as I see it. And you’re right in that I probably come from a perspective of having dealt with the larger buyout shops, so readers should take into account whatever bias I may have

don’t apologize. you call it as you see it (and i feel likewise for me) bias or not, that’s what makes analysis wonderful - sharing opinions or insights and allowing others to draw conclusions, and agree or disagree with you.

thanks striker, i appreciate your perspectives as well. by the way, i sent you an e-mail a little earlier this evening. hope all is well and have a good weekend

Thanks for everything guys. numi as usual very direct, clear and concise. KJH I must concur with numi, that based on what I have read about PE firms and their strategies. That they are not simple saying the Ibanks valuation is false and must tinker to take out the fluff, but more they its based on assumptions of the original model. I may be way off the mark here. But I would say a Ibank is looking at a “deal” as a one-time peice. While a PE firm is looking to acquire a company as a “peice” in an entire portfolio, therefore there is alot of other things to take into consideration. Alot more variables and dillgence must be done. I’m off to see the pats game. Thanks again guys.