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How to Ace your PE Case Study


Many young professionals undergoing the PE recruiting process will go through a case study at some point in the interview process. While other interviews with a firm will be largely behavioral with a few technical or investment acumen questions thrown in to test your knowledge in these areas, the case study is your opportunity to show the firm you are capable of performing the technical duties of an analyst or associate and that even if you aren’t perfect, you can identify and learn from mistakes during a debrief discussion. It is also a chance for the firm to test you on how intelligently you can speak about investment assumptions, how flexible your models are, and how easy it is to change inputs. Since you generally have several hours to a few days to complete these types of case studies, firms expect to see a great amount of thought and attention to detail in your submission.

When we refer to a case study here, I am referring to a situation in which you are given a CIM of a sample company and asked to create an LBO model as well as formulate thoughts on this company as a potential investment opportunity given what is presented in the CIM. Each firm administers the test differently, but this is generally the “hardest” type of case study you’ll see across firms, hence why we focus on it for the purpose of this article. These tips and learnings can also be applied to shorter-form case studies.

While the most obvious tip is to prepare and practice as much as possible for this type of case study, here are some general tips about how to effectively read a CIM, build a clean model, and present your conclusion on whether the company would be a good investment or not.


Reading the CIM

The first thing you’ll want to do in the case study is take stock of the materials provided. As you look through the CIM, know where to generally find relevant bits of information. Look for the pages with a company overview, key investment highlights, and financials first. Skim through the rest of the document, but don’t put pressure on yourself to memorize every single detail. As you read, you’ll want to gain an understanding of the underlying trends driving company growth as well as the fundamental business model. This understanding will help you build a model that is easy for you to work with and easy for your interviewer to understand.

For the underlying trends, the first half of the CIM will likely provide the answers. Look for both industry- and company-specific tailwinds and headwinds in this business. Jot down the big ideas you can talk about in a debrief or put into a presentation (depending on how the firm will want you to walk through your conclusions, but a brief presentation doesn’t hurt if you can have access to PowerPoint). Look for key drivers of revenue and costs and think about how these drivers will impact the business going forward, which will inform your projections in the model.

In order to determine the company’s business model, first look to see if it has several revenue-generating business segments. If it does, identify what they are and how revenue is generated for each one of them. Ask yourself questions like, what type of business model is it? How much of total revenue is recurring vs. variable? Then move on to the company’s cost structure. How are costs calculated at the company? What is the proportion of fixed vs. variable costs? Lastly, look at growth initiatives. This will likely be towards the end of the CIM or in an EBITDA bridge showing growth from current EBITDA to projected EBITDA in several years. Evaluate how realistic you think these growth opportunities are. You’ll want to include these growth levers as additional upsides in your model and be able to turn them on or off to show the incremental growth received from them.

Beyond this, search the CIM for anything unique to this company or any intricacies in this industry that may be worth noting when you present your case study.


Building the LBO model

While some firms provide templates, a greater number are now asking candidates to build models from scratch. It is essential to practice building models from scratch beforehand so that you’re not crunched for time on the day of (or during your time allotted) due to formatting or trying to remember what goes into basic outputs like sources & uses. Your time should instead be spent on the analysis of the CIM and your model assumptions.

When you first start the model, make sure to follow a clean structure so that your interviewer can follow along, whether you present the model live or send it to them via email. Start with assumptions towards the top, followed by sources and uses, the income statement, cash flow build, debt schedule, and finally returns. Using section headers goes a long way to enhance the formatting of your model, as well as using the correct color codes (blue for hardcodes, black for formulas, green for links to other tabs, etc.) and formatting for numbers, dollars, and percentages.

As you fill in the model, think about the growth projections you saw in the CIM for the income statement. Remember that a sellside’s projections will almost always be more aggressive than a PE firm will underwrite, so you’ll want to haircut them significantly. Make sure to have a rationale behind why you’re haircutting growth for each line item you apply this to and that the numbers are consistent with the overall investment rationale you will be presenting. Put simply, you shouldn’t be projecting 10% YoY EBITDA growth if you present that this business will actually decline in several years. Simple sense checks like this will help you tell a consistent story throughout your analysis.

Lastly, build in the company’s growth initiatives as you see fit. If several of them feel like they could legitimately happen, build those in, and perhaps build in the others with an on or off switch so that it’s easy to isolate their contribution. This is a bit of an advanced mechanism if you haven’t done much LBO modeling before, so nail the basics before you get into adding in growth projects.


Presenting your conclusions

Whether you are asked to present your conclusions live or send them via email in presentation format, be ready as if you will be asked to explain your work as well as your investment thesis for the company. For the presentation, be sure to structure it clearly so that you lead with a general overview of the company, followed by an explanation of what you believe are the key investment highlights, risks, and potential mitigants, and finally, a proposed valuation for the company based on your model. Lastly, state whether you think this would be a good investment for the firm to make or not, and why.


Good luck preparing for your case study! Remember to keep practicing to keep your skills fresh and trust your instincts!


Are you preparing for the buyside? Schedule a call now with our top coaches or submit your application directly here and we’ll be in touch! Our experienced coaches will work with you to set and achieve your goals and provide support and guidance along the way.

You can also check our various course curriculums for different careers (i.e. investment banking, private equity, VC, etc.) and how our process works.

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