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QUESTIONS ABOUT LIFE (frequently asked; you should have answers practically memorized for these) How did

d you get to where you are today o Keep life story concise. Focus on experience i F G a dw y h t u i e-- things n E , n h ta n u s q you should probably mention even if o d n b lv : ad s go pt g t t, i y u o ee e h re t ru o e i o h h t i n g exposure to execution, F G u u l rn o to l g d a , E s ay u s p i n a e e l exposure to many l n r s industries, many products, good group culture,

Why do you want to go into PE o Buy-side (want to be on side that is calling shots), more analytical, requires more in depth analysis that matters more, more of a fundamentals-based approach than hedge funds, w n t g t r p rt n le p r n eb following portfolio a to e moe o eai a x ei c y o e companies, figuring out exit strategy, heightened sense of responsibility because fmo nc p a a p y every day is different i s w a ilt l , r t a

Why are you interested in this PE firm in particular o E.g. size of fund, number of professionals, location, focus on complex transactions, industry focus, people, reputation, track record, deal stage, af i fru d i u t f t o fn n s y iy n s d r fc a a s oq i rs ac o tefm b fr tei ev wa dg t s n efr o i l y d u k e e rh n h i eoe h n ri n e a e s o w c r t e what industries they focus on

Key differentiating factors o Industry silos vs. generalists, value vs. growth focused, operationally focused (vs. pure financial engineering), management partners, international focus, cross-border staffing, role in deals (i.e. leads club deals)

FINANCE / ACCOUNTING / BRAIN TEASER QUESTIONS (rarely asked) Explain DCF, WACC o Believe it or not, these still get asked, albeit rarely; embarrassing to not nail these so take a few seconds to review these basic concepts

Impact of some kind of event (e.g. $100m D&A increase) on all 3 main financial statements If you could pick only one of the main financial statements to look at when evaluating a company, which would you choose? (>> CFS); What if you could have two statements? (>> IS + BS because you can get to CFS from these 2)

U u l ri ta es eg o ma y i p n b l c nyuf i tiro s a ba e s r (..H w n p g o g as a o in h o m?, How would n n l t s you go about estimating the number of Red cars in America right now? you had to use ,If exactly 50 coins to make $1.00, how would you do it? ) The economy, your view on PE trends o E.g. interest rates still low by historical standards (though yields on corporates have risen, especially for weaker credits), credit crunch is mainly a result of supply/demand imbalances, ST/MT headwinds mainly from global inflationary pressures (commodities at record highs) and housing market turmoil, potential for non-US markets (e.g. emerging) to soften US recession, weak dollar should provide a boost to exports, attractive valuations in certain sectors (but oftentimes difficult for PE firms to convince targets to relinquish control because management/owners now fee a i i e v l t n f m ay a a oaeteu a ai s, l sf g r a ai s r hh u o o e r g r h t e v l t n )pending tax r u o c a g s oh war d i ee t t ae , h n e t o c re n rs i r td glory days are behind us but PE is here i t se t s y b c u eis w s me o t (e a s t a e o ) a i PE outlook next 12 months: deals will be smaller, larger equity checks, alternative financing sources, focus on industries least affected by recession (i.e. healthcare, energy), emerging markets, minority stakes and PIPEs, portfolio rationalization, return to the equity markets, depressed IRRs What has caused the rise in credit (distressed) funds and how do they make money

LBO-RELATED QUESTIONS (asked in 1 out of every 4 interviews) Mechanics of an LBO (how do you create value, i.e. IRR) o Sales growth, margin expansion, multiple expansion (e.g. by somehow making a subpar company trade more inline w/ peers), FCF generation (results in debt paydown, dividends, )

Be able to answer IRR related questions using basic math (i.e. if you are giving an entry EBITDA, entry multiple, debt amounts, etc. what multiple would you have to exit at to get a 25% IRR) o trick: doubling your money in 3 years is ~ 25% IRR, doubling your money in 5 years is ~15% IRR

Why do companies trade at the levels they do (i.e. why does car parts manufacturer trade at 5.0x and a refinery trade at 10.x) What to look for in an LBO target

Management team, debt capacity, FCF generation, limited cyclicality, downside protection, leading/defensible market positions, strong and consistent operating performance, plausible strategic growth initiatives, low investment needs, exit opportunities, barriers to entry, attractive industry outlook, ec t

Why would a company want/choose to go private Difference between maintenance vs. incurrence covenants, between TL and sub. Notes Understand implications of maintenance vs. growth capex o Companies can always scale back growth capital, but how will this effect the top line (i.e. what is organic growth) Heavy debt loads generally increase cost of capital and raise hurdle rates for capital expansion projects, debt investors much less concerned with growth, thus less pressure to expand

Understand how to project FC vs. VC o You might be g e ac mpc tdc s s d i w i yul a et rc g i w i i n o lae a e t yn h h o h v o e o n e h h v i u c l z c costs are fixed vs. variable, then explain how you should project them (e.g. % of sales, grow @ inflation rate) KEY sponsor focus is cost cutting always keep in mind when given case studies

How do sponsors maximize cost cutting (beyond what public companies can achieve) o Deep industry experience, operational partners that are experts in their fields, synergies with portfolio companies - sponsors tend to scale back top-line growth and focus on margin expansion

Determine the ways in which an event affects sponsor returns o e.g. special dividend in year 1 would give the sponsor more ROI sooner; however, equity at exit would likely be lower, and use of CF also implies that less debt would be paid down, so interest expense would be higher in remaining years

DEAL SPECIFICS (asked 90% of the time; most of your interviews will focus on this topic) Describe company, how does it make money, how do you get from sales to EBITDA (basic cost breakdown, have an idea of FC vs. VC), what does CapEx consist of, etc... How did this deal come about, explain steps (e.g. auction process)

What was/were your role/responsibilities on this deal? (e.g. pitch, go to committees, market the deal, interaction with management) o Always emphasize technical aspects of analysis. Try to communicate that modeling is like breathing to you. Valuation work also looks good.

Basic cash flow buildup (approximations are fine) o EBITDA, cash taxes (if any), CapEx, Working Capital, any meaningful other items

Valuation DCF, comps, precedents, other a a s s n l e y o Need to be able to explain if the deal value makes sense, and if not then why not; why did the sponsor pay what it paid How does valuation compare to its comps need to explain why purchased this company instead of one its comps

Deal le ea e(rs a u t mu ie , e c v n ns pin ) v rg go s mo ns l l k y o e a t r i , t s p , cg IRR: explain the basic math involved in figuring out projected IRR for this deal o Comes down to comparing equity value at exit vs. at entry; think sales growth, margin expansion, multiple expansion, debt paydown

Explain key revenue/expense drivers in the model o Be sure to memorize revenue CAGR, EBITDA margin and CAGR

Big picture overview: would you have done this deal if you were the sponsor? o What was/is tes o s r i e t n te ifrh d a D y ua rewt i h p n o n s s v me th s o te e l o o ge i t s ? h ?(e.g. good financial engineering target, existing portfolio companies in the industry >> sn ri , e dt c t o t yeg s n e o u c s ) e s Main risks of the deal (e.g. reliance on few customers, industry cyclicality, u fv rb L go t po p c , v ra frag t na oa l T rwh rs e t o ep i o tre) e s d Be able to explain some mitigants to these risks if you believe it was a good deal