Will A still want to buy B knowing this? Drugmakers generally buy each other out to gain competitive advantage in patented drugs. Internal Reasons (Target) – Analyze if B is an attractive company to buy. Usually, private equity firms like to give small case studies to judge your business sense, gauge your understanding of the way companies operate, and to test your understanding of what drives return in an investment. Take the mobile phone industry for example. Disclaimer: Again, this is by no means the correct or complete framework to solve cases. He also advises getting friends who've been through case study interviews before to put you through some mock questions on your presentation. It is probably the most famous of all of them. As an additional preparatory material, below is a private equity acquisition case taken from Consulting Job Academy, one of the best online courses for management consulting applicants. The consumers are extremely fickle and will rush to the next ‘cool phone’ in the market. The points above will give us an idea of B‘s general performance in the industry. Where are we in the cycle? This type of interview aims to assess how you apply logic in resolving an ambiguous and stressful situation. Both competitors will be able to benefit from economies of scale, and they have already priced their walking canes lower. "It's a cheat sheet for some of my friends," he says. Objectives – We need to keep objectives in mind while doing our analysis. Will Greystone be able to meet its return hurdles (about 20% IRR)? Can they band together and demand higher prices for raw materials? You would want to comment that an analysis of suppliers and customers is also necessary to make a sound recommendation. You have already discussed market performance and also done some analysis on Deluxe Cane. We spoke to another private equity professional who's helpfully prepared a checklist of points to think about when you're faced with the case study. He told the interviewer that this was a terrible investment and shouldn’t under any circumstances be taken any further," she says. " Can’t say, I have never had a Palm. ), - The ability of the company to pass on price increases to customers. To answer this question, you need to analyze the target company, market performance, strategic fit and deal economics. ( Log Out /  Suppliers – How much power do the suppliers in this industry hold? In short – do not forget the OBJECTIVE when doing your analysis!! If you're interviewing for a job in a private equity firm, then you will almost certainly come across a case study. - How long before revenues are booked and received? interviewing for a job in a private equity firm, How to make it through private equity interviews and get the job, The perfect resume for breaking into private equity. Don’t be tricked by the fact that they are able to charge slightly higher prices. They may be regretting the investment themselves. "You will almost certainly be asked what you would pay for the business included in the case study," she says. When you decide to pursue a career in management consulting, you accept the fact that you will need to ace a few case interview rounds before you can sign the employment contract. ", Get the latest career advice and insight from eFinancialCareers straight to your inbox, Please click the verification link in your email to activate your newsletter subscription. Knowing that Deluxe Cane’s competitors are a part of larger organizations selling mobility devices should worry you. Profitability – Has the company been profitable? Sorry, your blog cannot share posts by email. Make sure that you have your own opinion. Now you can do the actual calculations. Lastly, McManus says you need to use your common sense. Consulting Case Interviews: How Well Am I Really Doing? Competencies – Maybe company B has some assets that make it an attractive buy. B would most probably be a mid sized company in a certain industry. One private equity insider cautions bankers from going overboard on the modelling element of the analysis: "Nobody actually checks the model, they only look at the printouts/screenshots.". Synergies – Can A & B find operational or financial synergies? You need to argue why certain industry is good, and why you have a competitive advantage or not. - Which outside factors might influence the industry (eg. Does this matter? Post was not sent - check your email addresses! What is its size, growth rate? Once you understand A‘s objectives, go ahead with case analysis. This entry was posted on June 17, 2010 at 3:48 pm and is filed under Consulting Interviews. This would give us a sense of how attractive the industry is to enter. Based on this analysis, the market seems attractive. Maybe to gain entry into the huge smart phone market? There is no need to analyze possible synergies if the acquirer only wishes to strip the target of its assets. Take full advantage of the free resources on the websites of top consulting firms such as McKinsey, Bain, BCG, and other reputable firms. When you're considering the revenues, you need to think about: - How stable the revenues are (are they cyclical? When you're faced with a case study, he says you need to think in terms of: the industry, the company, the revenues, the costs, the competition, growth prospects, due dliligence, and the transaction itself. To strip them of their assets and cash. Goldman Sachs' engineers insist FAANG jobs aren't better, It's clear who banks' winners were in the third quarter, Goldman Sachs hiked pay, but could still disappoint its traders. Familiarizing yourself with various business cases and frameworks equips you with an in-depth understanding about the nature, requirements, and process of the interview. Other risks could be threat of substitutes, entry/exit barriers and sensitivity to the economy. The target here may just be doing a bad job of selling itself. ( Log Out /  Google the term – Strip and Flip. How To Find An Oil And Gas Recruiter For Your Company, Reasons Your Company May Want to Release a Press Release, When Your Parents Help You with Your Assignment, You May Need a Professional, Assignment Help Australia from the Best Experts, Conquer Your Insurance Needs with Intelligent Decisions. How intense is the competition? Your communication skills will also be evaluated as this ability is crucial in conveying important messages to both client employees and top management. Undergrads interviewing for consulting positions will probably not have to go too deep into the case. Because you do not have any information about suppliers and customers, you would make your analysis based on the remaining two factors. - Is the industry cyclical? What motivated HP to buy Palm? Palm is in my opinion one of the deteriorating tech giants of yesteryear and HP just provided it a lifeline when agreeing to buy it for a little more than a billion. Market Share – Is B a big or small player in the industry? What are its growth rates relative to its competitors and the industry in general? What are you willing to pay for B? Resources/Competencies/Financing – Does A have the managerial resources or expertise for the acquisition? Fintech / regtech solution sales to asset managers (New York or East Coast remote). You should also comment that the gross margin is significantly lower for Deluxe Cane than for its competitors. B may be a market leader now, but may not be one in the future. What other issues would you want to analyze before making an investment decision? On that note – I find the acquisition of Palm (ex smartphone innovator and leader =) by HP an extremely interesting deal. Though now I hope to see some more competition in the smartphone market =). Or do you say NO – making it look like you disagree with the judgement of your potential employer? MBA students however will probably be expected to do an in depth analysis and valuations. Change ), You are commenting using your Facebook account. What are its key products and markets? Assuming that the average life of a cane is 5 years, one-fifth of these 18 million buys one cane every year. Below are the questions you should answer to resolve the case: Below are the detailed answers to the aforementioned questions: Firstly, you need to establish the structure you will use for estimating market size: Secondly, you will make the estimations. A good analytical overview will be very appreciated. ), - The power of pension schemes and unions, - The effectiveness of IT and operations systems, - The basis for your valuation (have you used a Sum of The Parts (SOTP) valuation or another method - why? ), - How much of the revenues are coming from associates and joint ventures. When you're considering the growth prospects, you need to think about: - Change of asset usage (Leasehold vs. freehold, could manufacturing take place in China? I am an investment banker at a BB bank looking to prepare for upcoming Private Equity interviews. Does Greystone have related portfolio companies that might allow for procurement synergies along the lines of what the competition is able to achieve. Legal risks encompasses anti-trust laws, country laws & regulations (if entering a new country market) & sensitivity to political changes in the country. Porter’s Five Forces is a high-level framework that you can draw upon to perform a market landscape and competitor dynamics analysis. Another case was about a company that targeted a firm whose profits were deteriorating. Tags: Bain, BCG, Booz, Business, Case, Consulting, consulting case frameworks, consulting interviews, Frameworks, Interviews, Management, McKinsey, Questions, Structure for consulting cases, Structures. Greystone Partners has engaged your team to help determine whether to proceed with the investment. Discuss that revenues are larger than the share of volume. The conclusion is that Deluxe Cane is not competitively positioned – although it is in an attractive market. How are they faring in the market? Competitors – Who are B‘s competitors and how are they performing relative to B? Which top private equity firm should you work for? Its just something that I have come up when practicing case interviews. Consumers – How sensitive is the market to consumer demand? Porter’s Five Forces has become an incredibly well known framework in the business strategy world. Mergers & Inquisitions. Don’t. How is the financial performance of Deluxe Cane? "The fund could have changed the numbers in the case study, added or taken away detail. The questions from his checklist are below. Industry Coverage: oil, gas, petroleum industry. Written by . He should have said – this looks really odd – maybe I’ve made a mistake. If there’s one thing you can be sure of, it’s that if you dither around on pricing you won’t get the job," she warns. - What's the working capital requirement? Deluxe Cane is losing share to two competitors who are lower-priced and have significant built-in cost advantages. Preparing for a PE case study has distinctive challenges for consultants and bankers. So, the two major issues left for analysis are the deal economics and exit strategy. Are their products competitive/proprietary? Deluxe Cane has lost 9 percentage points market share in the last 5 years to these competitors. Create a free website or blog at WordPress.com. As a PE investor, hence as a case solver, you need to highlight and discuss risks, and whether you are ready or not to underwrite them.

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