How do you value a football (soccer) club?
Football (soccer) clubs are typically valued using EV / revenue and comparables analysis. This is because many weaker-performing teams do not make positive EBITDA or net income, so it would be difficult to compare EV / EBITDA or EV / EBIT as widely as you’d like. it’s difficult to do a DCF because many football […]
If we are the private equity firm, when should we use management assumptions / projections in an LBO model? When shouldn’t we?
It’s important to due diligence management projections as they tend to be overly optimistic. On the revenue side, each growth opportunity can be evaluated by examining the assumptions driving each growth opportunity. For example, if the company wants to increase penetration in an existing geography, it’s worth understanding the density of their current presence in […]
If a PE portfolio company does a sale leaseback, how does this affect EBITDA?
Overall, EBITDA is lower, although the company receives cash proceeds from the sale of the property. A sale-leaseback increases rent expense, typically found in SG&A, so we would adjust the first half of the income statement as if they were renting the properties already. By selling the asset, we are also reducing our depreciation and […]
What is the formula for TVPI?
TVPI stands for Total Value divided by Paid-In Capital. The numerator, Total Value, can be calculated as Distributions + Net Asset Value. This represents the total value that the investors are receiving. Distributions include any dividends that may occur throughout the holding period, such as a dividend recapitalization. Net Asset Value represents the total equity […]
How does a capital call affect IRR?
A capital call is when a portfolio company needs to go back to its investor(s) to ask for more equity investment. This could be to finance an add-on acquisition or a new growth strategy. A capital call may also occur if the company is simply low on cash and needs more capital to stay afloat […]
What should you do if senior management of a portfolio company does not agree with your growth strategy? (Private Equity interview)
As the owner, the private equity firm gets the final say on what decisions should be made. However, it is very important to not alienate senior management in these decisions and to make them feel unheard, especially if their presence and expertise are crucial to the functioning of the business and are hard to replace. […]
Why is ESG important when evaluating a private equity investment?
ESG is becoming more and more important, and investors care about this more and more as any ethical or environmental conflict could result in a negative backlash from consumers / customers, a tarnished reputation, or even legal consequences. It is, therefore, crucial to avoid investing and / or buying companies with poor ESG practices. It […]
You can make more money in investment banking and it’s much easier to get promoted, it’s a lot more stable than PE. Why not stay in IB? (Private Equity interview)
In reality, you can often make more money in a megafund PE firm, but certainly, some mid-market PE firms will pay less than investment banking. It’s also true that IB is more stable and has a clearer runway to getting promoted. However, the key here is to emphasize what you like about private equity and […]
Do you prefer to work in big teams or small teams?
The key here is to be genuine about the rationale behind your preferences while also catering your answer to the size of the team you are interviewing for. If the PE firm you’re interviewing with is a megafund, then it would make sense to highlight the advantages of big teams more. These advantages include more […]
Do you invest in stocks? What are some stocks you own?
The purpose of this question is to see if you are truly passionate about investing and are following the markets. Most individuals with a passion for investing will be actively following the markets, even if it just means investing in a paper portfolio if they are limited by capital or regulatory limitations. Presumably, if you […]
