Great case interview example. Thanks for sharing! I do have to point out that the team should be valued as it stands at the time of purchase. This means that the fair market value is 1 billion (100m on earnings at a 10x multiple). It is true that the team could be valued at 1.4B with added synergies (assuming the synergies are realized within a year of acquisition), but the value add is purely due to the operational efficiency produced by the PE fund. To say that this is a good deal since the FMV of team with synergies, 1.4B, is greater than the offer price of 1.1B would be incorrect. If the deal were to happen at 1.1b, it would imply a 10% premium over fair market value. Therefore, it is a bad deal. The current owner(s) shouldn’t be compensated for the value added by the PE firm.
Hey there, while I do understand where you are coming from - I believe your answer would be right for a pure financial investor with no expertise whatsoever to exploit synergies from value creation initiatives to increase profits. You should look at it from the buyer’s perspective. Assuming that the P/E ratio remain constant at 10x at exit (e.g. client sells the team to another PE fund 3 years later), the profit of $140m would value the company at $1.4b - which is still a $300m profit for the client (1.3x MOIC). And given that there are no IRR requirements in the client’s end - this would be a green light for me.
The guy did a good job.
Thank you for that example of Private Equity case! Cheers from Peru
Great case interview example. Thanks for sharing!
I do have to point out that the team should be valued as it stands at the time of purchase. This means that the fair market value is 1 billion (100m on earnings at a 10x multiple). It is true that the team could be valued at 1.4B with added synergies (assuming the synergies are realized within a year of acquisition), but the value add is purely due to the operational efficiency produced by the PE fund. To say that this is a good deal since the FMV of team with synergies, 1.4B, is greater than the offer price of 1.1B would be incorrect.
If the deal were to happen at 1.1b, it would imply a 10% premium over fair market value. Therefore, it is a bad deal. The current owner(s) shouldn’t be compensated for the value added by the PE firm.
Hey there, while I do understand where you are coming from - I believe your answer would be right for a pure financial investor with no expertise whatsoever to exploit synergies from value creation initiatives to increase profits.
You should look at it from the buyer’s perspective.
Assuming that the P/E ratio remain constant at 10x at exit (e.g. client sells the team to another PE fund 3 years later), the profit of $140m would value the company at $1.4b - which is still a $300m profit for the client (1.3x MOIC). And given that there are no IRR requirements in the client’s end - this would be a green light for me.
Awesome. Could you briefly do a summary of Asda takeover by private equity?
Is there a recommended framework to debrief these cases?
Great job it was a great interview
amazing case
Do you have to do math on paper during these interviews or can you use a calculator?
math in head or on paper. no calculator
Great case: shouldn’t we consider post-tax profit in the valuation?
This interviewee doesn’t take feedback well and keeps trying to rationalize why he did what he did.
This guy called it Fighting Phillies and minor league. It’s PHILADELPHIA AND ITS MAJOR LEAGUE BASEBALL
relax not everyones an american
Why does this interviewer look so disheveled and unkempt? I know it’s a mock interview, but come on man.
Because he owns a bank what do you need more
@@anandtiwary621 which bank?
mehn, you are werid