• 091 01/23/2020
    The LBO case study and financial modeling test are now live as part of the LBO Video Series. Please see the link that follows for the updated files: LBO Case Study: BabyBurgers LLC. The introductory video is also available below. 


    I wrote this case study after over a decade in private equity with the objective of designing a LBO test that would help me identify talented junior team members. I have also personally used this test in a live hiring process. The case study was sent to a group of second-round interview candidates to help us evaluate each candidate's skill set before making an offer to a senior associate.
    There are two things that I believe make this case study unique:
    1. The first is the level of detail provided in the operating model, which allows the candidate to decide how much detail to include in their analysis. As an analyst or associate this is a common challenge. You will be bombarded with data (far more that what has been provided here), and you will need to identify what is important. It is your job to synthesize the information available into a cohesive narrative that will help the investment team make the appropriate decision.
    2. I also wanted to use this case study as an opportunity to introduce the legal documents that guide a transaction towards a close. The attached document describes all of the documentation required to secure a transaction under letter of intent. To complete this exercise you will have to pull information from two term sheets (one for a subordinated lender and one for a senior lender) and from a letter of intent. We have also included a massively condensed Confidential Information Memorandum to give you a better feel for how this process moves forward. If there is one thing I wish I had been exposed to earlier in my career, it is the significance of this documentation. Hopefully it will give you a leg up in interviews or on the job.

    These two variables make it possible to use this case study across a broad skill set. If you are a novice you can build a simple projection using the summarized financials available in the workbook. If you have a more advanced skill set you can use the information in the operating model to build a far more detailed model.

    We hope you find it useful!

    Please see the link that follows to download the associated notes and Excel workbook: LINK




  • 090 11/15/2019

    Evaluating the appropriate capital structure for a particular acquisition is critical. In this post we will explore how to build a schedule to facilitate this process, and then demonstrate how to link this schedule to a LBO model.

    As the video highlights, this can be helpful to the underwriting process because a private equity firm will generally contact multiple lenders in an effort to secure attractive financing terms. Having a schedule that facilitates cycling through the relevant information in each term sheet received can save a substantial amount of time.

    Part 2 will also demonstrate how to use this schedule to quickly determine the most attractive term sheet as it relates to both returns and risk. The second video highlights that the debt profile that maximizes returns may not always be the most prudent option. The outcome needs to be measured against both returns and the debt convenants put in place. 

    Capital Structure Toggle Part 1 of 2 (Template for Download):


  • 089 11/13/2019

    I have always tried to use arrays in Excel without creating what is referred to as an "Array Formula." An array formula is easily identified by the fact that you have to press Ctrl+Shift+Enter to create one, which is why they are sometimes referred to as CSE formulas. It has been my opinion that you can accomplish everything an array formula is capable of by nesting functions that create arrays in other functions.* The formulas this creates are more flexible, which makes building large models a little simpler. 

    The first video below explains the difference between an array (as it is used in this post) and an array formula (as it is used by the Excel community). It then demonstrates how you can use regular formulas with nested functions. The second video demonstrates how this knowledge might be applied in a financial model, and the third video provides a more complex example. If you are new to advanced formulas I would recommend starting with the first video.

    VIDEO 1 (Template for Download):

    VIDEO 2 (Link to Template):

    VIDEO 3 (Link to Template):


    *Applies to my experience building financial models. 




Models are:
A) really boring
B) pretty sweet
C) super important
D) somewhat easy
E) kind of hard
F) fun
G) all of the above



*Answers a, b, c, d, e, f and g are all correct.