lbo investment thesis

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Leveraged Buyouts (Online)

A roadmap for evaluating, structuring, and executing LBOs

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Key takeaways.

By the end of the program, you will be able to:

• Recognize why organizations perform LBOs
• Explain how different aspects of the LBO process work for stakeholders
• Differentiate the financial instruments used to fund an LBO
• Determine how to access the leveraged credit and private equity markets that underwrite LBOs
• Evaluate the risk and potential success of LBO deals
• Determine how to successfully execute LBO deals

Who Should Attend?

Investment professionals looking to understand how to evaluate LBO deals and execute them effectively

Mid-level to senior finance professionals looking to build a comprehensive understanding of the leveraged buyout process and to the markets (leveraged credit and private equity) that underwrite them

Program Modules

This program provides a structured understanding of leveraged buyouts, from how to evaluate potential LBO candidates to how to successfully execute a buyout. Along the way, you’ll explore real-world case studies that highlight potential pitfalls and the elements required for success.

Explore the features, benefits, and critical elements necessary for a profitable LBO and the laws and regulations that govern them.

• Identify the components of an LBO
• Recognize the possible risks and rewards of completing a leveraged buyout
• Identify the key factors necessary for a leveraged buyout to be successful

Understand how to evaluate an LBO deal and determine the right price for the transaction.

• Identify the key characteristics of an ideal LBO candidate from a private equity perspective
• Evaluate the soundness of a leveraged buyout using business valuation, cashflow forecasts, human-capital valuation, and the analysis of future returns and ROI
• Identify strategies for avoiding bias in the valuation of an LBO deal

Understand different types of debt options available and learn how to structure leveraged transactions, including identifying the appropriate amount of debt.

• Differentiate the types of credit instruments used to finance LBOs
• Recognize the risks and rewards of different debt options and when in a credit cycle each is likely to be available to an organization
• Determine how to structure leveraged transactions, including identifying the appropriate amount of debt
• Identify how the recovery values for different stakeholders may differ when an organization defaults on different types of credit instruments

Explore the history of leveraged credit markets and understand the availability of financing for LBOs at various points of the credit cycle (boom, bust, indifferent).

• Analyze how the metrics used by credit investors affect availability cost and structure for the credit component of LBO financing
• Determine the current point in the credit cycle and whether the markets are open to LBO financing

Examine the methods credit investors use to analyze an investment opportunity for the various financing instruments in an LBO as well as the LBO’s credit quality.

• Calculate free cash flow available to service the principal on outstanding debt
• Develop assumptions for a base and downside forecast
• Determine whether an LBO generates free cash flow using a baseline case and a downside forecast
• Analyze how completed forecasts affect key credit analysis ratios

Delve into the investment thesis, financing, and exit of one of the largest LBOs on record, with a focus on how investors on both sides of the balance sheet fared.

• Analyze the key elements of an investment thesis that guides a successful LBO
• Recommend financing strategies for LBO candidates that are more likely to lead to a successful outcome
• Identify best practices for exiting an LBO

Program Experience

Two Live Sessions with Faculty

Real-World Case Studies

Bite-Sized Learning

Dedicated Program Support Team

Peer Learning Feedback

Live Office Hours with Program Leaders

Capstone Project Based on Real-World Case Study

Through real-world case studies and examples from multiple organizations and industries, you'll explore the realities of leveraged buyouts and the factors that can lead to failure or drive success. Examples include:

Imagine that you are a principal in the private equity group at Partners Group (PG), a global private markets investment organization, in 2014. In the Dynacast: Solid, Middle-Market LBO case study, your group is investing in Dynacast, a small global manufacturer of high-quality metal components. Through this case, you’ll gain real-world experience in evaluating the soundness of an LBO deal and compiling a summary report for your team and managing director to present to the bankers for the transaction.

As one of the largest leveraged buyouts on record, the HCA LBO was a home run for all constituents: private equity sponsors, creditors, and management. This case serves as the foundation for the final module of the program and takes a deep dive into its investment thesis, financing, and exit, and it provides an example of what a good LBO for both private equity sponsors and creditors looks like.

Program Faculty

Donna Hitscherich Senior lecturer in Discipline in Business; finance director in the Private Equity Program; and Bernstein Faculty Leader at the Sanford C. Bernstein & Co. Center for Leadership and Ethics Donna M. Hitscherich currently serves as a senior lecturer in Discipline in Business, finance director in the Equity Program, and a Bernstein Faculty Leader at the Sanford C. Bernstein & Co. Center for Leadership and Ethics at Columbia Business School. Hitscherich’s programs include Corporate Finance and the elective programs Business Law, Mergers and Acquisitions, and Advanced Corporate Finance. More info

Ellen Carr Adjunct Associate Professor, Finance Adjunct Faculty, Heilbrunn Center for Graham and Dodd Investing Ellen Carr has over two decades of experience as a high yield bond portfolio manager, most recently at Weaver C. Barksdale (WCB), a majority-women-owned, institutional fixed income investment management firm based in Nashville, TN. She specializes in the construction and management of high yield and core plus bond portfolios. Prior to joining WCB, she served as senior vice president and a high yield portfolio manager for institutional separate accounts and mutual funds for The Capital Group Companies/American Funds in Los Angeles, CA. More info

Donna Hitscherich Senior lecturer in Discipline in Business; finance director in the Private Equity Program; and Bernstein Faculty Leader at the Sanford C. Bernstein & Co. Center for Leadership and Ethics Donna M. Hitscherich currently serves as a senior lecturer in Discipline in Business, finance director in the Private Equity Program, and a Bernstein Faculty Leader at the Sanford C. Bernstein & Co. Center for Leadership and Ethics at Columbia Business School. Hitscherich’s programs include Corporate Finance and the elective programs Business Law, Mergers and Acquisitions, and Advanced Corporate Finance. In 2002, she was nominated for the Dean’s Award for Innovation in the MBA Curriculum for her presentation of the Advanced Corporate Finance program. She also received the Executive MBA Commitment to Excellence Award from the Berkeley-Columbia EMBA program graduating classes in 2010, 2011, 2012, and 2013 and the Commitment to Excellence Award for EMBA-Americas graduating classes in 2014 and 2017. She was also a BRIDGE Fellow for academic year 2014–2015 — Building Relationships with Industry and Defining Graduate Education in Business (BRIDGE) — at Columbia Business School based on an endowed gift which the school allocates each year for faculty members who are working on new initiatives aimed at building relationships with industry practitioners. Hitscherich has also served as a lecturer in law and accounting at Columbia Law School. From 1988–1990, she was an assistant professor of law at St. John’s University School of Law, where she taught Federal Securities Regulation and Legal Ethics. Prior to her present position as a senior lecturer at Columbia, Hitscherich had a career in investment banking, holding positions at CS First Boston, J.P. Morgan & Co. Inc., and Banc of America Securities. At J.P. Morgan, she helped found the takeover defense team and served as a senior member of the advisory review committee, which was responsible for all of the M&A fairness opinions issued by the company. As a managing director in the mergers and acquisitions group of Banc of America Securities, she was secretary of the firm’s fairness-opinion review committee and a major contributor to the firm’s training programs for managing directors and associates. Prior to her investment banking career, Hitscherich was a corporate lawyer at Skadden, Arps, Slate, Meagher & Flom. In addition to an MBA from Columbia Business School, Hitscherich received a BS and JD from St. John’s University and is a NYS certified paramedic.

Ellen Carr Adjunct Associate Professor, Finance Adjunct Faculty, Heilbrunn Center for Graham and Dodd Investing Ellen Carr has over two decades of experience as a high yield bond portfolio manager, most recently at Weaver C. Barksdale (WCB), a majority-women-owned, institutional fixed income investment management firm based in Nashville, TN. She specializes in the construction and management of high yield and core plus bond portfolios. Prior to joining WCB, she served as senior vice president and a high yield portfolio manager for institutional separate accounts and mutual funds for The Capital Group Companies/American Funds in Los Angeles, CA. Along with her high yield responsibilities, Carr also managed investment-grade corporate and long-duration credit portfolios. Carr began her career as an investment analyst for the Fixed Income Group at Capital in 1999. Carr has been an adjunct professor of finance at Columbia Business School since 2012, where she teaches programs on the credit markets and cash flow modeling. She is also a writer and an occasional contributor to the Financial Times and Institutional Investor. She has co-authored a book on women in investment management to be published in spring 2021 by Columbia University Press. Carr is a trustee of the National Public Radio (NPR) Foundation, as well as a board member of her local NPR affiliate and the Community Foundation of Western North Carolina. She serves as treasurer of the Wilma Dykeman Legacy and vice-chair of the Department of Management and Accountancy Advisory Board at the University of North Carolina Asheville. She is a member of the Kellogg Financial Network Advisory Board and also manages a family foundation (carrfamilyfoundation.org), which awards college scholarships in rural communities. Carr has an MBA from the Kellogg Graduate School of Management at Northwestern University and received her B.A. from Harvard in 1994, where she graduated magna cum laude and Phi Beta Kappa. Carr splits her time among Asheville, North Carolina, rural Tennessee, and New York. She has one son, two cats, and a pandemic puppy.

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Preparatory Considerations for Value Creation Analysis in LBOs on Investment Level

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In response to the identified shortcomings the following chapters set the stage for the conceptual as well as empirical part by clarifying the research object (ILA), the perspective of the analysis (II. B) and the notation of value creation (II.C).

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About this chapter

(2007). Preparatory Considerations for Value Creation Analysis in LBOs on Investment Level. In: Value Creation in Successful LBOs. Gabler. https://doi.org/10.1007/978-3-8350-5430-1_2

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Investment Banking Slide Examples of LBO

Tl;dr: Part of a collection of real examples of M&A investment banking slides. This blog covers LBO. See the PowerPoint presentations investment bankers are paid millions for. No matter your job, or your aspirations, you can learn from these slides.

This is part of a collection of 67 free M&A presentations from the top 20 banks (based on ranking, and also the quality of presentation for you to learn from).

Collection of M&A slide examplesc

The main page for all the M&A resources is here .

I have broken out 827 examples of slides across 32 sections. You can click through to the section you want to learn about next here:

Is this blog for you?

Why the heck should you care? Investment banks (historically) attracted the best and the brightest.

• Slide structure/design : Learn how complicated concepts are structured and designed in PowerPoint
• Analysis approach : See exactly how complex financial methods are presented
• Strategy and communication : M&A deals are not (normally, other than many Duff and Phelps decks) cookie cutter. There’s a host of topics that need to be dealt with
• Morbid interest : I used to do this for a living, but it’s still interesting to see how PPT are made… but then maybe it’s just me and so FML 😉

Who this will help:

• You want to work in banking : There’s a lot of applicants. Knowing the job helps you answer questions
• You work in banking : Even if you’re an MD, you need to know how the best are structuring their thoughts/analysis
• You write presentations : You can’t buy learnings like this. You can learn from the slides
• You have a curious mind : Good for you

LBOs mean Leveraged Buy Out. They were all the rage in the 80s and synonymous with corporate raiders. There are two parts:

• Leverage: This means taking on the maximum possible amount of debt
• Buy out: Means buying a company and taking control of it

The basic principle around LBO is to:

• Buy low and sell high by ideally increasing the valuation multiple
• Cost-cutting and operational improvements to increase free cash flow

This is a very gross simplification, ok.

Why these slides are made

For a corporate, a LBO is basically one way to acquire a company. Rather than just using cash and issuing stock, you take on a load of risky debt. If you take on debt the acquisition can be termed a LBO. I don’t know if there is a point at which the term applies?

You more likely relate LBO to financial sponsors, AKA PE (Private Equity) firms such as Carlyle or Permira. It’s literally their business model to use debt to ‘leverage’ returns by acquiring companies with debt, doing operational stuff, and then selling it off a few years later.

So LBO is a transaction structure, for your purposes, it’s a crap tonne of work for you to do. I’ve studied and made some LBO models for fun, but I’ve never done an LBO. In fact, I think the only times I heard people talk about LBOs were all the analysts in the Industrials team staying late and learning how to build them so they could jump ship to PE. I’m not joking.

So you do an LBO if the client wants to do one, or it’s a potential option and they want to see what the financial implications of it are. The mechanics are similar to the normal M&A models you will make, the real difference is that you have a lot of debt inputs to put in and you care about the amount of interest the client will have to cover (the ratios to debt etc). So, the ideal M&A advisor is a top-tier firm with DCM (Debt Capital Management) who talks to lenders. You will need them to give you the market terms for senior and junior debt, etc.

Comments on making these slides

The slides are just your standard outputs, assuming you know what LBO slides look like. You spell out the assumptions, you show the inputs, the sensitivities etc. I can’t say much more than you need to learn to make an LBO model and no I’m not going to teach you.

You’ll see that there aren’t that many LBO examples on this post. That’s because they’re just not all that common (at least for the kinds of deals you need to report to the SEC). I know that there are more LBO examples in my collection of IBD presentations but I can’t think of a specific presentation that was just about an LBO- they’re almost always an afterthought and an analysis some poor analyst had to make knowing it was just to make the client happy.

Examples of LBO

I don’t know why 3 of the images turned black when I turned them to a JPG from a GIF. It’s an old upload to the SEC.

Want to learn more about investment banking presentations?

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• Basic : Want to get a convenient file of all the 67 presentations? Get it here
• Premium : If you would love to learn more, you can buy an Excel with 374 presentations. Get it here
• Pro : For uber-nerds, you can buy a complete index of 3,490 rows of filings back to 2001. Get it here

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Private Equity Interviews 101: How to Win Offers

If you're new here, please click here to get my FREE 57-page investment banking recruiting guide - plus, get weekly updates so that you can break into investment banking . Thanks for visiting!

Private equity interviews can be challenging, but for most candidates, winning interviews is much tougher than succeeding in those interviews.

You do not need to be a math genius or a gifted speaker; you just need to understand the recruiting process and basic arithmetic.

Still, there is more to PE interviews than “2 + 2 = 4,” so let’s take a detailed look at the process:

How to Network and Win Private Equity Interviews

The Private Equity recruiting process differs dramatically depending on your current job and location.

Here are the two extremes:

• Investment Banking Analyst at a Bulge Bracket or Elite Boutique in New York: The process will be highly structured, and interviews will finish at warp speed. In some ways, your bank, group, and academic background matter more than your skill set or deal experience. This one is known as the “on-cycle” process.
• Non-Banker in Another Part of the U.S. or World: The process will be far less structured, it may extend over many months, and your skill set and deal/client experience will matter a lot more. This one is known as the “off-cycle” process.

If you’re in between these categories, the process will also be in between these extremes.

For example, if you’re at a smaller bank in NY, you may complete some on-cycle interviews, but you will almost certainly also go through the off-cycle process at smaller firms.

If you’re in London, there will also be a mix of on-cycle and off-cycle processes, but they tend to start later and move more slowly than the ones in NY.

We have covered PE recruiting previously ( overall process and what to expect in the on-cycle process ), so I am not going to repeat everything here.

Interviews in both on-cycle and off-cycle processes test similar topics , but the importance of each topic varies.

The timing of interviews and start dates, assuming you win offers, also differs.

The Overall Private Equity Interview Process

Regardless of whether you recruit in on-cycle or off-cycle processes, or a combination of both, almost all PE interviews have the following characteristics in common:

• Multiple Rounds: You’ll almost always go through at least 2-3 rounds of interviews (and sometimes many more!) where you speak with junior to senior professionals at the firm.
• Topics Tested: You’ll have to answer fit/background questions, technical questions, deal/client experience questions, questions about the firm’s strategies and portfolio, market/industry questions, and complete case studies and modeling tests.

The differences are as follows:

• Timing and Time Frame: If you’re at a BB/EB bank in NY, and you interview with mega-funds, the process starts and finishes within several months of your start date at the bank (!), and it moves up earlier each year. Interviews at the largest firms start and finish in 24-48 hours, with upper-middle-market and middle-market firms beginning after that.

By contrast, interviews start later at smaller PE firms, and the entire process may last for several weeks up to several months.

• Importance of Topics Tested: At large funds and in the on-cycle process, you need to complete modeling tests quickly and accurately and spin your pitches and early-stage deals into sounding like real deals; at smaller funds and in off-cycle interviews, the reasoning behind your case studies/modeling tests and your real experience with clients and deals matter more.

Firm-specific knowledge and fitting your investment recommendations to the firm’s strategies are also more important.

• Start Date: You interview far in advance if you complete the on-cycle process, and if you win an offer, you might start 1.5 – 2.0 years later. With the off-cycle process, you start right away or soon after you win the offer.

Private Equity Interview Topics

There is not necessarily a correlation between the stage of interviews and the topics that will come up.

You could easily get technical questions early on, and you’ll receive fit/background and deal experience questions throughout the process.

Case studies and modeling tests tend to come up later in the process because PE firms don’t want to spend time administering them until you’ve proven yourself in previous rounds.

However, there are exceptions even to that rule: For example, many funds in London start the process with modeling tests because there’s no point interviewing if you can’t model.

Here’s what to expect on each major topic:

Fit/Background Questions: “Why Private Equity?”

The usual questions about “ Why private equity ,” your story , your strengths/weaknesses , and ability to work in a team will come up, and you need answers for them.

We have covered these in previous articles, so I’ve linked to them above rather than repeating the tips here.

Since on-cycle recruiting takes place at warp speed, you’ll have to draw on your internship experience to come up with stories for these questions, and you’ll have to act as if PE was your goal all along.

By contrast, if you’re interviewing for off-cycle roles, you can use more of your current work experience to answer these questions.

While these questions will always come up, they tend to be less important than in IB interviews because:

• In on-cycle processes, it’s tough to differentiate yourself – everyone else also did multiple finance internships and just started their IB roles.
• They care more about your deal experience, whether real or exaggerated, in both types of interviews.

Technical Questions For PE

The topics here are similar to the ones in IB interviews: Accounting, equity value and enterprise value , valuation/DCF, merger models, and LBO models.

If you’re in banking, you should know these topics like the back of your hand.

And if you’re not in banking, you need to learn these topics ASAP because firms will not be forgiving.

There are a few differences compared with banking interviews:

• Technical questions tend to be framed in the context of your deal experience – instead of asking generic questions about the WACC formula , they might ask how you calculated it in one specific deal.
• More critical thinking is required. Instead of asking you to walk through the financial statements when Depreciation changes, they might describe companies with different business models and ask how the financial statements and valuation would differ.
• They focus more on LBO models, quick IRR math , and your ability to judge deals quickly.

Most interviewers use technical questions to weed out candidates , so poor technical knowledge will hurt your chances, but exceptional knowledge won’t necessarily get you an offer.

Talking About Deal/Client Experience

This category is huge, and it presents different challenges depending on your background.

If you’re an Analyst at a large bank in New York, and you’re going through on-cycle recruiting, the key challenge will be spinning your pitches and early-stage deals into sounding like actual deals.

If you’re at a smaller bank, and you’re going through off-cycle recruiting, the key challenge will be demonstrating your ability to lead, manage, and close deals .

And if you’re not in investment banking, the key challenge will be spinning your experience into sounding like IB-style deals.

Regardless of your category, you’ll need to know the numbers for each deal or project you present, and you’ll need a strong “investor’s view” of each one.

That’s quite a bit to memorize, so you should plan to present, at most, 2-3 deals or projects.

You can create an outline for each one with these points:

• The company’s industry, approximate revenue/EBITDA, and multiples (or, for non-deals, estimated costs and benefits).
• Whether or not you would invest in the company’s equity/debt or acquire it (or, for non-deals, whether or not you’d pursue the project).
• The qualitative and quantitative factors that support your view.
• The key risk factors and how you might mitigate them.

If you just started working, pick 1-2 of your pitches and pretend that they have progressed beyond pitches into early-stage deals.

Use Capital IQ or Internet research to generate potential buyers or investors, and use the company-provided pitch materials to come up with your projections for the potential stumbling blocks in the transaction.

For your investment recommendation, imagine that each deal is a potential LBO, and build a quick, simple model to determine the rough numbers, such as the IRR in the baseline and downside cases.

For the risk factors, reverse each model assumption (such as the company’s revenue growth and margins) and explain why your numbers might be wrong.

If you’re in the second or third categories above – you need to show evidence of managing/closing deals or evidence of working on IB-style deals – you should still follow these steps.

But you need to highlight your unique contributions to each deal, such as a mistake you found, a suggestion you made that helped move the financing forward, or a buyer you thought of that ended up making an offer for the seller.

If you’re coming in with non-IB experience, such as internal consulting , still use the same framework but point out how each project you worked on was like a deal.

You had to win buy-in from different parties, get information from groups at the company, and justify your proposals by pointing to the numbers and qualitative factors and addressing the risk factors.

Firm Knowledge

Understanding the firm’s investment strategies, portfolio, and exits is very important at smaller firms and in off-cycle processes, and less important in on-cycle interviews at mega-funds.

If you have Capital IQ access, use it to look up the firm.

If not, go to the firm’s website and do extensive Google searches to find the information.

Finding this information should not be difficult, but the tricky point is that firms won’t necessarily evaluate your knowledge by directly asking about it.

Instead, if they give you a take-home case study, they might judge your responses based on how well your investment thesis lines up with theirs.

For example, if the firm makes offline retailers more efficient via cost cuts and store divestitures, you should not present an investment thesis based on overseas expansion or roll-ups of smaller stores.

If they ask for an investor’s view of one of your deals, they might judge your answer based on your ability to frame the deal from their point of view.

For example, if the firm completes roll-ups in fragmented industries, you should not look at a standard M&A deal you worked on and say that you’d acquire the company because the IRR is between XX% and YY% in all scenarios.

Instead, you should point out that with several roll-ups, the IRR would be between XX% and YY%, and even in a downside case without these roll-ups, the IRR would still be at least ZZ%, so you’d pursue the deal.

Market/Industry

In theory, private equity firms should care about your ability to find promising markets or industries.

In practice, open-ended questions such as “Which industry would you invest in?” are unlikely to come up in traditional PE interviews.

If they do come up, they’ll be in response to your deal discussions, and the interviewer will ask you to explain the upsides and downsides of your company’s industry.

These questions are more likely in growth equity and venture capital interviews, so you shouldn’t spend too much time on them if your goal is traditional PE (for more on these fields, see our coverage of venture capital interview questions and the venture capital case study ).

And even if you are interviewing for growth equity or VC roles, you can save time by linking your industry recommendations to your deal experience.

Case Studies and Modeling Tests

You will almost always have to complete a case study or modeling test in PE interviews, but the types of tests span a wide range.

Here are the six most common ones, ranked by rough frequency:

Type #1: “Mental” Paper LBO

This one is closer to an extended technical question than a traditional case study.

To answer these questions, you need to know how to approximate IRR, and you need practice doing the mental math.

The interviewer might ask something like, “A PE firm acquires a $150 EBITDA company for a 10x multiple using 60% Debt. The company’s EBITDA increases to $200 by Year 3, $225 by Year 4, and $250 by Year 5, and it pays off all its Debt by Year 3.

The PE firm sells its stake evenly over Years 3 – 5 at a 10x EBITDA multiple. What’s the approximate IRR?”

Here, the Purchase Enterprise Value is $1.5 billion, and the PE firm contributes 40% * $1.5 billion = $600 million of Investor Equity.

The “average” amount of proceeds is $225 * 10 = $2,250, and the “average” Exit Year is Year 4 (no need to do the full math – think about the numbers – and all the Debt is gone).

So, the PE firm earns $2,250 / $600 = 3.75x over 4 years. Earning 3x in 3 years is a ~45% IRR, so we’d expect the IRR of a 3.75x multiple in 4 years to be a bit less than that.

To approximate a 4x scenario, we could take 300%, divide by 4 years, and multiply by ~55% to account for compounding.

That’s ~41%, and the actual IRR should be a bit lower because it’s a 3.75x multiple rather than a 4.00x multiple.

In Excel, the IRR is just under 40%.

Type #2: Written Paper LBO

The idea is similar, but the numbers are more involved because you can write them down, and you might have 30 minutes to come up with an answer.

You can get a full example of a paper LBO test, including the detailed solutions, here .

You can also check out our simple LBO model tutorial to understand the ropes.

With these case studies, you need to start with the end in mind (i.e., what multiple do you need for an IRR of XX%) and round heavily so you can do the math.

Type #3: 1-3-Hour On-Site or Emailed LBO Model

These case studies are the most common in on-cycle interviews because PE firms want to finish quickly.

And the best way to do that is to give all the candidates the same partially-completed template and ask them to finish it.

You may have to build the model from scratch, but it’s not that likely because doing so defeats the purpose of this test: efficiency.

You’ll almost always receive several pages of instructions and an Excel file, and you’ll have to answer a few questions at the end.

The complexity varies; if it’s a 1-hour test, you probably won’t even build a full 3-statement model .

They might also ask you to use a cash-free debt-free basis or a working capital adjustment to tweak the Sources & Uses slightly.

If it is a 3-hour test, a 3-statement model is more likely (the other parts of the model will be simpler in this case).

Here’s a free example of a timed LBO modeling test ; we have many other examples in the IB Interview Guide and Core Financial Modeling course .

IB Interview Guide

Land investment banking offers with 578+ pages of detailed tutorials, templates and sample answers, quizzes, and 17 Excel-based case studies.

Type #4: Take-Home LBO Model and Presentation

These case studies are open-ended, and in most cases, you will not get a template to complete.

The most common prompts are:

• Build a model and make an investment recommendation for Portfolio Company X, Former Portfolio Company Y, or Potential Portfolio Company Z.
• Pick any company you’re interested in, build a model, and make an investment recommendation.

With these case studies, you must fit your recommendation to the firm’s strategy rather than building a needlessly complex model.

You might have 3-7 days to complete this type of case study and present your findings.

You might be tempted to use that time to build a complex LBO model, but that’s a mistake for three reasons:

• The smaller firms that give open-ended case studies tend not to use that much financial engineering.
• No one will have time to review or appreciate your work.
• Your time would be better spent on industry research and coming up with a sold investment thesis, risk factors, and mitigants.

If you want an example of an open-ended exam like this, see our private equity case study article and follow the video walkthrough or article text.

Your model could be shorter, and your presentation could certainly be shorter, but this is a good example of what to target if you have more time/resources.

Type #5: 3-Statement/Growth Equity Model

At operationally-focused PE firms, growth equity firms, and PE firms in emerging markets such as Brazil , 3-statement projection modeling tests are more common.

The Atlassian case study is a good example of this one, but I would change a few parts of it (we ignored Equity Value vs. Enterprise Value for simplicity, but that was a poor decision).

Also, you’ll never have to answer as many detailed questions as we did in that example.

If you think about it, a 3-statement model is just an LBO model without debt repayment – and the returns are based on multiple expansion, EBITDA growth, and cash generation rather than debt paydown .

You can easily practice these case studies by picking companies you’re interested in, downloading their statements, projecting them, and calculating the IRR and multiples.

Type #6: Consulting-Style Case Study

Finally, at some operationally-focused PE firms, you could also get management consulting-style case studies, where the goal is to advise a company on an expansion strategy, a cost-cutting initiative, or pricing for a new product.

We do not teach this type of case study, so check out consulting-related sites for examples and exercises.

And keep in mind that this one is only relevant at certain types of firms; you’re highly unlikely to receive a consulting-style case study in standard PE interviews.

A Final Word On Case Studies

I’ve devoted a lot of space to case studies, but they are not as important as you might think.

In on-cycle processes, they tend to be a “check the checkbox” item: Interviewers use them to verify that you can model, but you won’t stand out by using fancy Excel tricks.

Arguably, they matter more in off-cycle interviews since you can present unique ideas more easily and demonstrate your communication skills in the process .

What NOT to Worry About In PE Interviews

The topics above may seem overwhelming, so it’s worth pointing out what you do not need to know for interviews.

First, skip super-complex models.

As a specific example, the LBO models on Macabacus are overkill; they’re way too complicated for interviews or even the job itself.

You should aim for Excel files with 100-300 rows, not 1,000+ rows, and skip points like circular references unless they specifically ask for them (for more, see our tutorial on how to remove circular references in Excel )

Next, skip brain teasers; if an interviewer asks them, you should drop discussions with the firm.

Finally, you don’t need to know about the history of the private equity industry or much about PE fund economics beyond the basics.

Your time is better spent learning about a firm’s specific strategy and portfolio.

PE Interview X-Factor(s)

Besides the topics above, competitive tension can make a huge difference in interviews.

If you tell Firm X that you’ve already received an offer from Firm Y, Firm X will immediately become far more likely to give you an offer as well.

Even at the networking stage, competitive tension helps because you always want to tell recruiters that you’re also speaking with Similar Firms A, B, and C.

Also, leverage your group alumni and the 2 nd and 3 rd -year Analysts.

You can read endless articles online about interview prep, but nothing beats real-life conversations with others who have been through the process.

These alumni and older Analysts will also have example case studies they completed, and they can explain how to spin your deal experience effectively.

PE Interview Preparation

The #1 mistake in PE interviews is to focus excessively on modeling tests and technical questions and neglect your deal discussions.

You can avoid this, or at least resist the temptation, by turning your deals into case studies.

If you follow my advice to create simplified LBO models for your deals, you can combine the two topics and get modeling practice while you’re preparing your “investor’s views.”

If you’re working full-time in banking, use your downtime in between tasks to do this , outline your story , and review technical questions.

If you only have 10-15-minute intervals of downtime, break case studies into smaller chunks and aim to finish a specific part in each period.

Finally, start preparing before your full-time job begins .

You’ll have far more time before you start working, and you should use that time to tip the odds in your favor.

The Ugly Truth About PE Interviews

You can read articles like this one, memorize PE interview guides, and get help from dozens of bank/group alumni, but much of the process is still outside of your control.

For example, if you’re in a group like ECM or DCM , it will be tough to win on-cycle interviews at large firms and convert them into offers no matter what you do.

If the mega-funds decide to kick off recruiting one day after you start your full-time job in August, and you’re not prepared, too bad.

If you went to a non-target school and earned a 3.5 GPA, you’ll be at a disadvantage next to candidates from Princeton with 3.9 GPAs no matter what you do.

So, start early and prepare as much as you can… but if you don’t receive an offer, don’t assume it’s because you made a major mistake.

So You Get An Offer: What Next?

If you do receive an offer, you could accept it on the spot, or, if you’re speaking with other firms, you could shop it around and use it to win offers elsewhere.

If you’re not in active discussions with other firms, you’re crazy if you do not accept the offer right away.

If You Get No Offer: What Next?

If you don’t get an offer, follow up with your interviewers, ask for feedback, and ask for referrals to other firms that might be hiring.

If you did reasonably well but came up short in a few areas, you could easily get referrals elsewhere .

If you did not receive an offer because of something that you cannot fix, such as your undergraduate GPA or your previous work experience, you might have to consider other options, such as a Master’s, MBA, or another job first.

But if it was something fixable, you could take another pass at recruiting or keep networking with smaller firms.

To PE Or Not to PE?

That is the question.

And the answer is that if you have the right background, you understand the process, and you start preparing far in advance, you can get into the industry and win a private equity career .

And if not, there are other options, even if you’re an older candidate .

You may not reach the promised land, but at least you can blame it on someone else.

Additional Reading

You might be interested in:

• The Search Fund Internship: Perfect Pathway into Investment Banking and Private Equity Roles?
• Private Equity Analyst Roles: The Best Way to Skip Investment Banking?

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street . In his spare time, he enjoys lifting weights, running, traveling, obsessively watching TV shows, and defeating Sauron.

Free Exclusive Report: 57-page guide with the action plan you need to break into investment banking - how to tell your story, network, craft a winning resume, and dominate your interviews

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49 thoughts on “ Private Equity Interviews 101: How to Win Offers ”

Brian, What about personality tests? What is their importance in the overall hiring process eg if you get them as the last stage?

They’re not that important, and even if you do get them, you can’t really “prepare” in any reasonable way (barring a brain transplant to replace your personality and make it more suitable for the firm). It’s also highly unusual to get one in the final stage – a firm doing that is probably just paranoid that you are secretly a serial killer and they want to rule out that possibility.

Hey- for the Fromageries Bel case study, can’t quite make sense of the Tier 4 management incentive returns, what’s the calculation for each tier? Would think it’s Tier 2 less tier 1 * tier 1 marginal profit

Tier 4 is based on a percentage of all profits *above* a 2.5x equity multiple. Each tier below it is based on a percentage of profits between specific multiples, which correspond to specific EUR proceeds amounts.

I have an accounting background (CPA & several years removed from school) and a small amount of finance experience through internships. I’m interviewing for a PE analyst position and managed to get through the first round of interviews. The firm itself doesnt just hire guys with a few years of banking, their team is very diverse with some backgrounds similar to mine.

The first round interview was a mix of technical questions plus a lot about myself and my experience. No behavioral questions. The first round was with an associate for 30 minutes, the second round is an hour with a partner. I managed to answer a lot of the questions about LBO models and what types of companies are good LBO candidates. Thanks to your website for that.

Any advice for a second round interview for a guy like me who doesnt have deal making experience or much experience in finance? Will the subsequent interviews after the first round be more technical-based questions? Or do they lean more on technical questions in round 1 to weed out candidates?

They will usually become more fit-based if they’ve already asked a lot of technical questions in earlier rounds. I would focus on your story and answers to the Why PE / Why This Firm / Are you sure you want to switch?-type questions.

Is it likely too difficult to access the on-cycle process from the CLT office of an In-Between-a-Bank that it would make more sense to focus one’s energy on the MM/LMM? Is the new era of Zoom making geography/distance less of a factor or is the perceived prestige of NY still an obstacle?

Location is somewhat less of a factor now, but it still matters, and working from home will not continue indefinitely into the future. It will be very difficult to participate in on-cycle recruiting at the mega-funds if you’re working in Charlotte at Wells Fargo if that’s your question, but plenty of MM funds are realistic.

What are some of the larger funds that you would consider realistic?

There are dozens of funds out there (it’s not like bulge bracket banks or mega-fund PE firms where there’s only a defined set of 5-10), so I can’t really give you a specific answer. My recommendation would be to look up people who worked at WF on LinkedIn and see the types of funds they are now working at.

I remember I saw a video of yours (might have been YouTube) where you explained the PE process. You talked about do pe firms really add value and then you went over how when a pe firm buys a company, they do a little “trick” where they create a shell company to acquire the target so the debt isn’t on the pe firms books. I’ve been looking all over for this video. Do you know which video I’m referring to?

Yes, that is no longer in video form. It’s still in the written LBO guide but the video from the old course was removed because it was way too long and boring for a video and was better explained in text.

Hi Brian, can you elaborate more on ‘Understanding the firm’s investment strategies, portfolio, and exits’ when you talk about smaller firm and off-cycle processes, simliar point came up under *Type 5*: you must fit your recommendation to the firm’s strategy rather than building a needlessly complex model. What exactly should I pay attention on? I felt funds I checked their investment strategy descirption are pretty broad, and they invest in various type of deals, say even in one industry, they do different purchase range. Also, when talking about growth equity, you mentioned you can practice case by picking companies you’re interested in, downloading their statements, projecting them. What if they are not public companies, how can I get those information? Are you recommending only those companies with 20F available? Or can you just elaborate more on how can I follow your instruction? Thanks

All you can do is go off their website and possibly a Capital IQ description if you have access. See if they focus on growth, leverage for mature companies, operational improvements, or add-on acquisitions and pick something that fits one of those.

You can pick public companies for growth equity or find a public company that is similar to a private one the firm has.

Hey Brian! I have an interview with a family office for a private equity analyst position. The firm is small and not much about it online. I haven’t had much time to prepare as it was not an interview I was expecting. What would you say the most important elements to focus on are for the interview considering the time constraint? I am an undergrad, third year, second internship. (first internship was for a large construction/developer as project coordinator, not finance based)

Focus on your story, the firm’s portfolio companies and strategies, and a few investment ideas you have for specific sectors. Technical questions are fine, but you probably won’t have much time to prepare at the last minute.

How would PE interviews / Technical questions look like for straight out of undergrad PE role look like

e.g Blackstone internships, Goldman Merchant Banking internships etc

Similar to IB ones, with a focus on LBOs?

Largely the same, but less emphasis on deal experience and deal-related questions at the undergraduate level. They may ask slightly more questions on LBOs, but at the undergrad level, they assume you know very little, so questions will span a wide range of topics.

Have you written or seen similar articles on PE operating partner interviews?

No, sorry. There’s hardly any information on that level of interview online because you can’t really make an interview guide or other product to prepare for it, and most people at that level would need 1-on-1 coaching more than a guide. My guess is that they will focus almost exclusively on your past experience turning around and growing businesses and assess how well you can do it for their portfolio companies. They’re not going to give you LBO modeling tests or case studies.

“Next, skip brain teasers; if an interviewer asks them, you should drop discussions with the firm”

Could you please elaborate on this? Almost every IB interview includes brain teasers so I am wondering why a PE interview shouldn’t?

Brain teasers are not that common in IB interviews in most regions unless you count any math/accounting/finance question as a brain teaser. They are far more common in S&T, quant fund, and prop trading interviews.

The point of this statement is that it’s OK if an occasional brain teaser comes up, but if the interviewer asks you brain teasers for 30 minutes, which have exactly 0% correlation to the real work in PE, you should leave because it’s a sign that the people working at the firm are idiots who don’t know how to conduct proper interviews or test candidates.

This is helpful. I find myself at a fix, I do not think I have had the right exposure, although in a BB I support teams with standard materials in a particular industry group in M&A. However I have interviews with a top global PE next month. Any guidance on how should I prepare for it ?

Thanks in advance

Follow everything in this article… practice spinning/discussing your deals… practice LBO questions and simple case studies.

Brian – thank you for your concise and candid remarks. do you have any insights or advice for someone with 5yrs of BB ECM & DCM experience now at a top full-time MBA program looking to break in?

It’s going to be very difficult if you just have capital markets experience and you’re already in business school. You should probably move to an M&A or strong industry team at a large bank (BB or EB) after business school and then go into private equity from there. It’s tough, but still easier than trying to move into PE directly out of an MBA program with only capital markets experience.

My next interview will highly likely involve a statement/growth equity modeling case. I tried to find the Atlassian Case interview but i am unable to open the link.

Would it be possible to share an example case or more information on that topic?

Many thanks,

The Atlassian case study is all we have. I don’t know why you can’t open the files, but I just tried and they seemed to work. Maybe try again or use a different browser.

Hi M&I team,

I have an opportunity to interview for an Analyst level opening at a boutique PE fund. This is a shop that has just started operations so I am directly communicating with the Partner. I doubt they have any structured recruitment process at this stage of their existence. He asked me to send some written work (memos and spreadsheets) on any public listed co that demonstrates my understanding of investing (basic balance sheet analysis, ratio analysis, valuation multiples).

So I am just wondering what to do? Should I work on projections and prepare a DCF model or do something simpler? I’d really appreciate your guidance on this.

Thanks again for the amazing work you’ll have been doing!

Yes, just create simple projections, a simple valuation/DCF, and maybe a simple LBO model since it is a PE fund that intends to buy and sell companies.

Could you provide some advice for preparing interviews for principal investing role ?

Thank you in advance Laura

We don’t really focus on that, but the articles on private equity and funds of funds on this site might be helpful.

Just wanted to say thank you! After reading everything on this site including all the CV and interview material I have managed to transition from a second year engineering undergrad with no prior experience/spring weeks/insight days, into an intern at Aviva Investors (UK buy side) within the space of one year.

The information you have posted is invaluable and “breaking in” is definitely doable with the right mindset and appetite for rejections!

Thanks again.

Thanks! Congrats on your internship offer.

Hi Brian/Nicole – Im an Economics student from the UK in 3rd year out of a 4 year course at a semi-target college, with 2 finance internships done up until now(not FO). I plan on doing a Msc Finance when I finish and eventually break into IB or Sales/Trading (I know I still haven’t decided which one I really want more). Through a family friend I have an offer to do a short internship this summer in NY in a post-trade regulatory commission. As this isn’t actually sitting at a trading desk experience, or anything related to IB should I decide to go down that road, would this add genuine value to my CV ? How are internships in regulatory commissions looked at for students looking to break into sales/trading? Surely even having any NY Finance experience on the CV will add more substance over here in London when going for internships compared to the majority of UK students who don’t? Appreciate any advice on this matter, Thanks!

I don’t think it would help much because you already have 2 non-FO internships, and a regulatory internship would be yet another non-FO internship. If it’s your best option, you can take it, but you would be better off getting something closer to a real front-office role.

Hey Brian. I am graduating after this semester going into Management consulting (Deliote, AT Kearny, Accenture)but I’m hoping to make a switch into either IB or PE after a couple years. I have one search fund internship which was enough to get me a few 1st and second round ib/pe FT interviews but no offers.My plan is to get into the best online MSF program I can and switch into Finance once I’m done. Do you think, given how close I was to getting in my 1st try, a high GPA from a reputable MSF and good experience in consulting will be enough or should I try to somehow get an IB internship before I apply?

I think you will probably need another internship just before the MSF starts or while it is in progress, not necessarily in IB, but something closer to it. Otherwise you’ll get a lot of questions about why you went from the search fund to consulting.

Thanks. As far as my story is concerned, is it better to do another finance internship before consulting so it’s search fund->ib->consulting->MSF (or MBA not sure)? I only ask because I may be able to get on some m&a projects with the consulting firm and my story could be when exposed to those deals, I realized how big my passion for finance was and that’s when I decided to get my MSF and switch to IB.

No, I think that would make less sense because then you would have to explain why you went from IB to consulting… and are now trying to go back to IB. Saying that you got exposed to M&A deals during the consulting experience would be a better story (and you would still ideally pair it with a transaction-related internship before/during the MSF).

Got it, thanks!

Probably missing something here, but for the first example, where does the 300% and 55% come from?

300% = 4x multiple. If compounding did not exist, we could just say 300% / 4 = 75% annual return. Because of compounding, however, the actual return does not need to be 75% per year in order for us to earn 300% by the end of 4 years. Instead, it can be a fair amount less than that, and we’ll still end up with 300% at the end.

To estimate the impact of compounding, you can multiply this 300% / 4 figure by a “compounding factor,” which varies based on the multiple and time period, but which is around 55% for a 4x return over a standard holding period.

Do you mind explaining how you can estimate a “compounding factor” such as with the 55% here?

There’s no easy-to-calculate-using-mental-math way to get this for all scenarios, but you can memorize quick rules of thumb (based on actual numbers and looking at the ratios) for 3 and 5-year periods and extrapolate from there. I don’t really think it’s worth doing that in-depth, though, because you just have to be roughly correct with these answers.

Do you think you will do a hedge fund interview guide similar to the one you have here?

Potentially, yes, but it’s much harder to give general guidelines for HF interviews because they’re completely dependent on your investment pitches. Also, interest in HFs has declined over the years (we no longer receive as many questions about them).

On that mental paper LBO question, how is the company able to pay off 900 of debt by year 3? It sounds like proceeds from the sale will have to be used in order to fully pay off the debt because EBITDA alone only adds up to 525, and that’s assuming there’s no interest.

Favorable working capital… NOLs… asset sales… the Konami code or other cheat codes. The point is not the numbers but the thought process.

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Ace Your Private Equity Interviews

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How to: LBO Model Tutorial Slide Deck

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This slide deck should be viewed first and/or concurrently while accessing the LBO Practice Model .This resource is recommended for Juniors and Seniors interested in/with a previous background in Investment Banking and Private Equity. For UPenn students, we recommend completing a technical mock interview with Career services first, before utilizing this resource. This resource was created by a former Wharton MBA student and Career Services Graduate Assistant with a background in finance.

Private Equity Interviews: The Official Guide

Private equity interviews: the official guide, private equity lbo modeling tests: key components of the lbo modeling test presentation.

Let’s continue our conversation (from the last post) about the private equity LBO modeling test . The LBO modeling test is used by many, perhaps most, PE firms both large and small as part of the interview process to test 3 things:

• Finance knowledge
• Excel modeling skills
• Executive presentation / communication skills

This is a short series that covers the “who” and “what”  of the LBO modeling test, the specific components of the LBO modeling slide presentation, delivering the oral presentation to your interview committee, how to practice for the LBO modeling test, and how the modeling test is evaluated in the context of other recruiting considerations.

This post is about the key components of the LBO modeling test presentation. You can see other posts in this series here:

• Who  gets the private equity LBO modeling test and  what  is it ?
• The LBO modeling test  oral interview presentation ,  how to practice  for the LBO modeling test, and how the test is  evaluated

In the last post, I covered what you are expected to show when you  present your findings to the interview committee. But what should you cover in each of the specific components of the LBO modeling slide presentation?

Executive summary slide

Your goal here is to summarize 3 things clearly.

• Whether the firm should invest:  You need to give a  clear  recommendation one way or the other — without equivocating, hedging, or conditioning your response on additional “TBD” factors. You would be surprised how many candidates fail to do this basic task, which may translate into an automatic rejection.
• Key Merits : You need to highlight the most important merits supporting your investment recommendation (try to limit yourself to no more than 3-4, otherwise it suggests lack of editorial judgment on your part)
• Key Risks : Similarly, you need to touch on the biggest concerns and risk factors (again, limiting yourself to no more than 3-4)

Just to illustrate, here are some sample bullets you might write for an executive summary:

+ The deal team  recommends  that we proceed with a bid to  invest in TargetCo  at a  6.5x EBITDA multiple  ( $850M purchase price )

• TargetCo presents a  strong investment opportunity  that could provide a  2.8x MoM  over a  5-year holding period  ( ~24% IRR ) given base case assumptions ( revenue growth  in line with historical trend line, 2%  EBITDA margin expansion  through cost improvements by year 3)

+ Key Merits

• Strong company  fundamentals , robust cash flow
• Comparables  trade at 15% higher multiples on average, making TargetCo especially price-attractive
• Untapped international expansion presents key  growth opportunity  (not factored into base case)
• Distinctive senior  management team

+ Key Risks

• Continuing  sluggish economic recovery  continues to make consumer spending rebound very uncertain (“new normal”)
• New technology emerging  could threaten defensibility of one of TargetCo’s major product lines
• Regulatory issues  that could impede international expansion

Market, industry, and operations slides

With the market and industry slides, you goal is to cover the most interesting, relevant, and insightful macro analyses possible given the information provided to you.

For example, you might show data or charts about the market as a whole, including how fast it is growing , what consensus out-year forecasts are, and what various trends are in terms of innovation, regulation, etc.

You might also show the industry’s or company’s historical growth , key near-term expansion opportunities the company could pursue, and any forecast expectations for whether the company is expected to grow faster or slower than the market as a whole (and why).

You could also show a competitive analysis — primary competitors, key advantages / weaknesses of the company and its peers, and strategies the company might consider including how the landscape might shake out over the next few years.

Focus on the core economic forces and market drivers that most greatly impact your investment decision, and let that guide the analyses you show in this section.

LBO model slides 

This cluster of slides is meant to show valuation and expected returns , along with key assumptions and drivers that lead to your conclusions.

You can get yourself into trouble (and increase the risk of mistakes) by making your model too detailed and ambitious with 10 different operating cases, a slew of EBITDA add-backs, multiple debt tranches, PIK vs. cash interest scenarios, and book vs. cash tax reconciliations.

Fight the urge to impress the firm by going into unnecessary detail and instead focus only on the key assumptions and drivers . Your interviewers will not nit-pick over your assumptions and projections as long as they are reasonable and thoughtful ; they will not say “how come you didn’t think about using mezz debt?” or “why didn’t you consider the difference between book vs. cash taxes?”

Keep it simple and clear .

The core things you need to show in your model are:

• Sources and uses showing how much debt vs. equity you are financing the transaction with, how much is being used to re-finance existing debt,  pay fees, etc
• Entry / exit multiples and leverage ratios
• Income statement / EBITDA projections
• Free cash flow projections
• Working capital projections (balance sheet not necessary, unless they specifically ask for it or you are facing an unusual acquisition scenario)
• Returns scenarios and sensitivities at various multiples / prices, EBITDA projections, and leverage ratios

So you might structure your 3 slides as follows:

• Sources and uses, entry / exit multiples, and leverage ratios
• Income statement / EBITDA projections, Free cash flow projections, and working capital schedule (if needed)
• Returns scenarios and sensitivity tables at various multiples / prices, EBITDA projections, and leverage ratios

Conclusion Slide

The conclusion slide is essentially a rehash of your executive summary slide (i.e., slide 1). Here you are simply  summarizing your conclusions , perhaps with specific key points from your market and model slides, along with re-stating your  go / no-go recommendation on whether to invest and how the PE firm should mitigate risk factors you identified in the presentation.

If your recommendation is NOT to invest, then you could perhaps mention under what terms the deal would be attractive — e.g., how much would the price have to decline or what would have to change about the company’s prospects in order for your recommendation to change ?

The go / no-go recommendation is seldom clear-cut , and there can quite possibly be good arguments on both sides. Your job is to provide a well-reasoned argument for your particular recommendation, and your actual answer doesn’t matter so much as how you support your reasoning and defend your recommendation .

To make a go / no-go recommendation, keep in mind that the  numbers in your model do matter , but they are best used to test key assumptions for whether the deal would work. If your model shows the IRR below 15% over a 5-year hold even under very aggressive assumptioms, for example, the deal isn’t going to work. By contrast, if it shows the IRR over 25% under even the most conservative assumptions, then the deal is likely quite attractive.

With your model as a sanity check against your biggest assumptions, your ultimate decision should likely rest on more macro factors about where the market is going, the growth prospects of the industry, and the company’s outlook given its strengths and weaknesses, etc. Use your LBO analyses (valuation, returns scenarios) to  support  your arguments around these macro factors, not to drive your entire investment decision.

Ideally, you want to say to your interview committee: “I recommend we invest in TargetCo because consumer spending in this sector is recovering quickly, and the industry as a whole has experienced double-digit tailwinds over the past 2 years, with no signs of slowing down. Moreover, TargetCo is already the leader in its category with 4 additional new products in the pipeline that will likely reinforce its market leadership over the next 18-24 months. Given base case assumptions, TargetCo can easily produce a 22% IRR if it simply maintains trend line growth, without even factoring in extra share capture expected to accrue from the release of these 4 new products.”

In the next post of this series, we’ll cover how to deliver the  oral presentation  of your investment thesis to the interview committee,  how to practice  for the LBO modeling test, and how the modeling test is  evaluated  in the context of other recruiting considerations .

Found this series useful?

Check out our step-by-step  PE modeling training videos  for walk-through tutorials on how to build an LBO model, navigate Excel with ruthless efficiency, and rapidly create an LBO PowerPoint deck to present to your PE interviewers.

Also check out our PDF guide “ How to Nail Your Private Equity Interview (whether you have finance training or not) ” for much more in-depth tips and strategies on how to successfully interview for top private equity jobs!

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Dissertations / Theses on the topic 'Leverage buyout (LBO)'

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Consult the top 24 dissertations / theses for your research on the topic 'Leverage buyout (LBO).'

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Gille, Evelina, and Josefine Karlsson. "What determines leverage in leveraged buyouts? : A study of debt levels in European LBOs." Thesis, Uppsala universitet, Företagsekonomiska institutionen, 2019. http://urn.kb.se/resolve?urn=urn:nbn:se:uu:diva-388942.

Mlynarczyk, Wiktor, and Erik Holm. "What are the main drivers of leverage in leveraged buyouts?" Thesis, KTH, Industriell ekonomi och organisation (Inst.), 2013. http://urn.kb.se/resolve?urn=urn:nbn:se:kth:diva-171405.

Strandberg, Carl-Johan. "Leveraged Buyouts : An LBO Valuation Model." Thesis, Karlstad University, Faculty of Economic Sciences, Communication and IT, 2010. http://urn.kb.se/resolve?urn=urn:nbn:se:kau:diva-5776.

During the eighties a new type of financial transaction started to emerge on an increasing basis. It was the so called “leveraged buyout” also known as the LBO. In the US private equity firms made it to the headlines in financial media from engaging in leveraged buyouts with small equity investments and large amounts of borrowed capital, their targets where large solid multinational corporations. Much has happened since the eighties. Back then leveraged buyouts where often associated with terms such as “Slash and Burn” or “Buy, Flip and Strip” often meaning hostile takeovers and huge layoffs. Today private equity firms focus more on active ownership, fast decisions without the bureaucracy of the stock market and long term value creation in order to profit from their buyouts.

As private equity firms today invest tremendous amounts of capital through their private equity funds. Leveraged buyouts have become one of the major areas within investment banking. Even though the LBO is a common transaction it is often hard to find models used for valuation of such a deal. Private equity funds and investment banks all have their own valuation models but these are regarded as strictly confidential and seldom revealed to the public. Therefore the creation and publication of an LBO valuation model should be of great interest for everyone aiming at a future career within private equity, corporate finance or investment banking.

This thesis derives a complete LBO valuation model including a framework for finding a suitable LBO target. The LBO valuation model is created in cooperation with the debt capital markets department at one of the leading investment banks in the Nordic region. The framework is based on a qualitative study conducted on seven of the most distinguished private equity firms active in Sweden. In order to show how the LBO valuation model and the framework works, both are applied on the retail company Björn Borg listed on NASDAQ OMX. To verify the accuracy of the framework, calculated return from the model is analyzed and compared to the indications given by the framework.

Almquist, Magnus, and Edvard Byström. "Leveraged Buyout : En studie av den operativa lönsamhetsutvecklingen under hela LBO-cykeln." Thesis, Uppsala University, Department of Business Studies, 2006. http://urn.kb.se/resolve?urn=urn:nbn:se:uu:diva-9031.

Syftet med denna studie är att undersöka om riskkapitalbolagen på den svenska marknaden skapar högre operativ lönsamhet i de företag de förvärvar och om den är bestående på längre sikt, det vill säga efter avyttring. Studien omfattar 16 svenska företag som förvärvats av riskkapitalbolag mellan åren 1990 till 2002. Samtliga har studerats självständigt med hjälp av nyckeltalen: Rörelsemarginal, kapitalomsättningshastighet och räntabilitet på totalt kapital och har även jämförts med dess respektive bransch. Vi finner bevis för att lönsamhetsmåttet räntabilitet på totalt kapital visar endast en signifikant förbättring då hänsyn inte tas till branschen under den tid då företaget ägs av riskkapitalbolaget. Rörelsemarginalen förbättras dock signifikant både med och utan bransch. Detta sammanfaller med att kapitalomsättningshastigheten försämras, då den signifikanta rörelsemarginalförbättringen inte lyckas skapa en signifikant förbättring i räntabiliteten. Vilket visar att riskkapitalbolagen är duktiga på att minska företagets kostnader men sämre på att nyttja företagets totala kapital effektivt. Utifrån ett agentperspektiv är det möjligt att det är lättare för riskkapitalbolagen att minska eventuella agentkostnader som belastar rörelsemarginalen men svårare att minska agentkostnader som är sammankopplade med nyttjandet av företagets totala kapital. Vi finner med andra ord ingen signifikant lönsamhetsförbättring i företagen på kort sikt. Däremot på längre sikt, det vill säga efter en börsintroduktion, ser vi en signifikant försämring i lönsamheten år tre. Detta kan bero på att rörelsemarginalens agentkostnader återigen infinner sig. Och även agentkostnader som är relaterade till kapitalomsättningshastigheten uppenbarar sig igen, då ledningen för det publika företaget investerar mer än vad försäljningen ökar. Sammanfattningsvis finner vi inga bevis för att riskkapitalbolagen på den svenska marknaden skapar en kortsiktigt eller långsiktig operativ lönsamhetsförbättring. Huruvida de påverkar avkastningen på eget kapital, det vill säga till ägarna låter vi vara osagt då detta inte omfattas av studien.

Algotsson, Daniel, and Esa Nyyssölä. "Leveraged Buyout : Vilka förutsättningar finns för en LBO av Cloetta Fazer AB?" Thesis, Linköping University, Department of Management and Economics, 2005. http://urn.kb.se/resolve?urn=urn:nbn:se:liu:diva-96.

The number of LBOs in Sweden has increased during the last years and the current market trend is positive. MostLBOs involves private companies, but a few concerns public corporations on the national share market. In this thesis we will examine the conditions of a LBO of Cloetta Fazer AB. The purpose is to study existing conditions of Cloetta Fazer AB and to examine pros and cons with the deal. Based upon information presented in the frame of reference and in the empirical part, two cash flow valuations have been carried out. The first valuation is a regular discounted cash flow valuation while the other is a specific LBO valuation. In a LBO valuation the debt terms and the changed capital structure is taken into consideration. The valuations are followed by an analysis where LBO conditions as well as pros and cons are examined.

Positive conditions for Cloetta Fazer AB are insensitiveness of market fluctuations, a strong market position, stable cash flows, low risk and strong product trademarks. There is also a possibility of increasing the expected rate of return with more leverage since the current financial structure can take on more debt. We argue that a LBO of a public corporation is surrounded by limited information due to legal restrictions such as insider rules. Limited information makes it difficult to motivate value creation. Other factors that obstruct a LBO of Cloetta Fazer AB is increased market competition, indistinct possibility of rationalising the business and a high EV/EBITDA multiple. We have also found that the IRR value is too low. Due to the fact that a LBO requires a premium of at least 20 % over market value, it is difficult to argue for a LBO of Cloetta Fazer AB.

Deva, Saloni. "Determinants of Leveraged Buyouts in Europe : LBO Financing and Country Legislature." Thesis, Jönköping University, JIBS, Economics, 2010. http://urn.kb.se/resolve?urn=urn:nbn:se:hj:diva-13269.

The focus of this empirical paper is to outline and evaluate certain determinants of lever-aged buyouts (LBOs) in Europe. The paper begins by providing a detailed description of LBOs, with particular emphasis on the European markets. This allows for the development of the four determinants that are studied in greater detail, specifically interest rate, out-standing stock, anti-director rights, and creditor rights. The conclusions indicate that coun-tries with more outstanding stock have larger LBO markets since equity is more liquid in these countries. Further, the results suggest that long-run interest rate is negatively related to the size of the LBO market. The paper goes on to test whether anti-director rights and creditor rights, as developed by La Porta et al. (1998) are related to the size of the LBO markets, but no evidence is found to support this notion. It is thus concluded that deter-minants focused on financing the buyouts play the most significant role in European LBO transactions.

Jiang, Yutao (James). "Leveraged Buyouts: The Predictive Power of Target Firm Characteristics." Scholarship @ Claremont, 2019. https://scholarship.claremont.edu/cmc_theses/2059.

Durdil, Lukáš. "Aspekty financování akvizic formou LBO." Master's thesis, Vysoká škola ekonomická v Praze, 2008. http://www.nusl.cz/ntk/nusl-9063.

Philippi, Andreas S. "Real Estate LBOs Eine Typologie der aktiv beeinflussbaren Werttreiber /." St. Gallen, 2007. http://www.biblio.unisg.ch/org/biblio/edoc.nsf/wwwDisplayIdentifier/03600095002/$FILE/03600095002.pdf.

ELMBERGER, HENNING, and FABIAN MALLY. "A Study of the Characteristics of Firms Undergoing Leveraged Buyouts in Europe." Thesis, KTH, Industriell ekonomi och organisation (Inst.), 2018. http://urn.kb.se/resolve?urn=urn:nbn:se:kth:diva-236761.

Lenz, Richard K. "Post-LBO development : analysis of changes in strategy, operations and performance after the exit from leveraged buyouts in Germany /." Wiesbaden : Gabler, 2010. http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&doc_number=018923593&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA.

Lenz, Richard K. "Post-LBO development analysis of changes in strategy, operations and performace after the exit from leveraged buyouts in Germany." Wiesbaden Gabler, 2009. http://d-nb.info/99854440X/04.

Santos, Isabela Travaglia. "Gerenciamento de resultados em fechamento de capital." reponame:Repositório Institucional do FGV, 2010. http://hdl.handle.net/10438/8135.

Asplund, Johan, Henrik Norrman, and Therese Rodger. "Hur investmentbolag påverkar kapitalstrukturen i sina innehav : En fallstudie av Ratos." Thesis, Linnéuniversitetet, Institutionen för ekonomistyrning och logistik (ELO), 2017. http://urn.kb.se/resolve?urn=urn:nbn:se:lnu:diva-65779.

Ericson, Carl, and Magnus Forsmark. "Private equity firms : And the management of their portfolio companies." Thesis, Jönköping University, JIBS, Business Administration, 2006. http://urn.kb.se/resolve?urn=urn:nbn:se:hj:diva-417.

Bakgrund: I slutet av åttiotalet blev leveraged buyouts, högt belånade företagsuppköp, ett frekvent förekommande företeelse i Amerikanskt näringsliv. Det gigantiska uppköpet av RJR Nabisco är fortfarande omtalat bland världens investerare. Det senaste årtiondet har mängden kapital i private equity fonderna ökat till att idag motsvara ett kapital på runt 7% av Stockholmsbörsens värde. Samtidigt som dessa fonder kontrollerar en stor mängd kapital är det relativt okänt hur de sköter och tillför värde till sina portföljbolag.

Syfte: Syftet med denna uppsats är att analysera hur private equity bolag tillför värde till sina svenska portföljbolag.

Metod: Denna uppsats har utgått från en kvalitativ studie för en mer genomgående och djup analys av private equity marknaden. Författarna har valt att genomföra intervjuer med personer i ledande positioner hos portfölj bolagen. Totalt deltog sex stycken företag i studien. Eftersom vissa delar av informationen som insamlats kan anses vara av känslig karaktär så är alla företag anonyma.

Slutsatser: Författarna kunde urskilja tre områden där private equity bolagen skapade värde i sina portföljbolag, genom förbättrade marginaler, ökad försäljning och minskade skulder. Private equity bolagen använde olika metoder för att skapa värde inom dessa områden, ett sätt är att ge ledningen i portföljbolagen ökade incitament, ett annat är att skapa strikta återbetalningsplaner för portföljbolagen vilket tvingar dem att effektivisera verksamheten. Private equity bolagen fungerar även som bollplank och assisterar vid förvärv.

Background: Through the late eighties leveraged buyouts were frequent in America and the giant buyout of RJR Nabisco became world renowned among investors. In the last decade the capital committed to private equity and leveraged buyouts have risen and in Sweden an amount equal to 7% of the market capitalization on the Stockholm stock exchange is placed in private equity funds. Although Private Equity firms control large amounts of capital it is relatively unclear how the private equity firms manage and add value to their portfolio companies.

Purpose: The purpose of this thesis is to analyze how private equity firms contribute to their portfolio companies in Sweden.

Methodology: This thesis has taken a qualitative approach for more in depth analysis of the private equity market. The authors have chosen to interview man-agers at portfolio companies acquired by private equity firms to gather data. Six portfolio companies participated in this study and the interviews were performed in a semi structured manner. As some of the information gathered could be of sensitive nature all respondents are anonymous.

Conclusion: The authors identified three areas in which the private equity firms added value; improving the margins, increasing the turnover and reducing the debt. The private equity firms used different techniques to accomplish the value improvements, both by giving the executives at the portfolio companies incentives and by forcing them to increase the efficiency in the organisation in order to be able to repay debts. The private equity firms also supports their portfolio companies by giving assistance and support in i.e. acquisitions.

Schmidt, Doris M. "The leveraged management buyout : concept, nature, macro- and microeconomic factors and take-over models in the UK and Germany and the development of LMBO company performance in Germany under difficult economic conditions." Thesis, De Montfort University, 1998. http://hdl.handle.net/2086/4166.

Ng, Dennis Richard. "Three essays on going private transactions: management buyouts versus leveraged buyouts." 2014. http://hdl.handle.net/1993/23539.

Ramos, Mariana Serra Flora. "Select medical holdings corp - leveraged buyout." Master's thesis, 2021. http://hdl.handle.net/10362/122745.

Jesus, João Pedro dos Santos Monteiro de. "Leveraged buyout spreads : a focus on loan maturity." Master's thesis, 2018. http://hdl.handle.net/10400.14/26373.

Jamal, Erik Jadavji. "Alliance boots’ leveraged buyout: is KKR a true barbarian at the gate?" Master's thesis, 2018. http://hdl.handle.net/10362/36282.

Camacho, Diogo Salvador Da Cruz. "Private equity challenge: analysis of Vidrala as an Lbo target." Master's thesis, 2021. http://hdl.handle.net/10362/122863.

Rugeroni, Gonçalo Trigo Garcia. "Private equity challenge: Vidrala as a glass packaging Lbo target." Master's thesis, 2021. http://hdl.handle.net/10362/122905.

Sá, Frederico de Brito Branquinho d'Orey de. "A proibição de assistência financeira e a sua compatibilização com os Leveraged Buyout no Ordenamento Jurídico Português." Master's thesis, 2020. http://hdl.handle.net/10400.14/32091.

Schroff, Jan Laurens. "The gym group private equity challenge–group F capital structure, financial forecast & LBO, returns, exit strategy and due dilligence." Master's thesis, 2020. http://hdl.handle.net/10362/105566.

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300 protesters arrested at Columbia University and City College of New York

• Hundreds of arrests have been made at Columbia University and the City College of New York.
• Pro-Palestinian protesters had barricaded themselves in Hamilton Hall, a main campus building at Columbia.
• The arrests were confirmed by an NYPD official who took part in a press conference.

Three hundred people have been arrested at protests at Columbia and City College of New York, police said.

Columbia has been rocked by protests for days over Israel's war on Gaza following Hamas' October 7 terror attack on Israel.

While students and faculty have been urged not to go onto campus, the school's president, Nemat Minouche Shafik, said that "a working group of Deans, university administrators, and faculty members will try to bring this crisis to a resolution."

NYPD officials took part in a press conference on Wednesday when they confirmed the number of arrests.

How it started

The protests at Columbia began on Wednesday, April 17, which coincided with Shafik testifying before Congress about antisemitism on campus .

A coalition of student groups — Columbia University Apartheid Divest, Columbia Students for Justice in Palestine, and Jewish Voice for Peace — took part in setting up "Gaza Solidarity Encampments" in the center of campus.

One of the goals of the protest was to convince the university to divest all its "finances, including the endowment, from companies and institutions that profit from Israeli apartheid, genocide, and occupation in Palestine," according to Columbia University Apartheid Divest's website .

Police were called in

On Thursday, April 18, Shafik authorized the New York Police Department to clear the encampment. "Attempts to resolve the situation were rejected by the students involved. As a result, NYPD officers are now on campus and the process of clearing the encampment is underway," she said in a statement.

This resulted in the arrest of more than 100 people on suspicion of criminal trespass, New York City Mayor Eric Adams said in a news conference.

Related stories

Protests have continued since then.

President Joe Biden weighed in

Chabad at Columbia, a group that supports Jewish students, released a letter on social media that said Jewish students were targeted with offensive rhetoric during the protests.

President Joe Biden also called out antisemitism on campus in his Passover statement in April.

"We've seen harassment and calls for violence against Jews. This blatant Antisemitism is reprehensible and dangerous — and it has absolutely no place on college campuses, or anywhere in our country," he said.

Columbia student organizations participating in the protests have insisted that their protests are peaceful.

One student group, Columbia Students for Justice in Palestine, said in a statement on X last month that they are frustrated by the attention paid to "inflammatory individuals who do not represent us."

"We firmly reject any form of hate or bigotry and stand against non-students attempting to disrupt our solidarity," the statement said.

On Monday, Shafik released a statement that said the university would not "divest from Israel." The university also ordered protesters to leave their encampment by 2 p.m. on Monday and threatened students who defied the order with suspension.

Protesters took over the Hamilton Hall

In the early hours of Tuesday morning, dozens of protesters barricaded themselves in Hamilton Hall, one of the main buildings on the Manhattan campus. They used metal gates, tables, and chairs as barricades and zip-tied the doors shut.

The protesters maintained their demands of "divestment, financial transparency, and amnesty," Columbia University Apartheid Divest said in a press release on X.

NYPD in riot gear were called to clear the protesters

On Tuesday evening, NYPD officers in riot gear entered Hamilton Hall, where protesters had been camping out for around 20 hours.

According to CNN , the NYPD used loud distraction devices, "flash-bang grenades" to disperse the protesters who had barricaded themselves in the building.

Shafik released a letter to the NYPD on Tuesday, which requested that police remain on the campus until May 17, two days after the graduation ceremony.

"The takeover of Hamilton Hall and the continued encampments raise serious safety concerns for the individuals involved and the entire community," the letter read.

The protests have spread to other campuses across the country. In Los Angeles, police were called to the UCLA campus early Wednesday after violence broke out when counter-protesters showed up to tear down barricades at the pro-Palestinian encampment, the LA Times reported.

Watch: Black Lives Matter wins historic police brutality lawsuit over George Floyd protests; NYPD to pay $13 million

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Outline for an investment thesis?

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I recently graduated undergrad with a degree in finance from a non-target with a 3.4 GPA. I've been focusing this summer on networking and set a goal of landing an analyst position come September.

Recently I met with a PM at an Asset manager, we had a good chat about the metrics he uses in the selection process and we talked about a few stocks. He assigned me to analyze a few stocks and I want to go above and beyond and impress the hell out of him.

Any advice on what to look at for the structure of an investment thesis? I have a general overview, but my coursework never required me to pitch or create a thesis on a security.

Thanks in advance!

Free Hedge Fund Pitch Template

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https://seekingalpha.com/stock-ideas

Go here and look for some analyses done on stocks in the sector you're interested in researching. See what types of things the authors think are important, how they structure their analyses and what data they include. That should be a good start for understanding how to put together a cohesive analysis.

What I include and what others have told me to include for a short 1-2 page pitch: company name at the top followed by bear, base, and bull case targets in the next line. Then company overview, industry overview, the valuation method you use (if you do comps then put the table there), valuation, catalysts, variant view, risks & mitigants. People include management overview as well so maybe you could put that at the beginning as well

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