STREET OF WALLSARTICLESTRAININGINVESTMENT BANKINGHEDGE FUNDPRIVATE

EQUITYINTRODUCTION

Street of Walls will remain the go-to resource for all Finance

interviews

SECONDARY PRIVATE EQUITY INVESTMENTS In summary, secondary investments provide the following: – Ability to sell illiquid assets. – Obtain cash and liquidity to limited partners. – Transfer obligations to fund commitments from a limited partner to a secondary private equity firm. – Eliminate or reduce managerial task and overhead costs. – Reallocate assets into new

areas

FINANCIAL MODELING

MERGERS & ACQUISITIONS (M&A) VALUATION PAPER LBO MODEL EXAMPLE An illustrative example of a paper LBO is provided below in 5 simple steps. In a paper LBO exercise, you will be expected to complete the important components of a working LBO model with the use of paper and pencil and without the use of a computer. Using a 5.0x entry multiple,

calculate the price

PRIVATE EQUITY FIRM HIERARCHY AND ASSOCIATE ROLE Here is a brief description of the primary roles in the Private Equity firm hierarchy: ASSOCIATE: Pre-MBA associates are typically the most junior professionals at the majority of PE firms. The associate handles most of the financial modeling and initial due diligence for investment opportunities, while assisting with the management and PRECEDENT TRANSACTION ANALYSIS THE RESUME OF THE QUANT ANALYST The short answer is: absolutely. Surprisingly, coursework in finance, while helpful, is not the most important skill set for a quantitative job searcher to have on his or her resume. Additionally, training talented quantitative job applicants in the core finance skills they need on the job is not that difficult—what is more difficult to do

is

LEVERAGED BUYOUT ANALYSIS BEST INVESTMENT BANKING RESUME Two words define the investment banking resume: results and details. Investment bankers are tough. They are looking for people who can deliver the goods and handle the stress. Period. Your resume must be as crisp and sharp as you are. Accountants bill hours. Lawyers bill

hours

STREET OF WALLSARTICLESTRAININGINVESTMENT BANKINGHEDGE FUNDPRIVATE

EQUITYINTRODUCTION

Street of Walls will remain the go-to resource for all Finance

interviews

SECONDARY PRIVATE EQUITY INVESTMENTS In summary, secondary investments provide the following: – Ability to sell illiquid assets. – Obtain cash and liquidity to limited partners. – Transfer obligations to fund commitments from a limited partner to a secondary private equity firm. – Eliminate or reduce managerial task and overhead costs. – Reallocate assets into new

areas

FINANCIAL MODELING

MERGERS & ACQUISITIONS (M&A) VALUATION PAPER LBO MODEL EXAMPLE An illustrative example of a paper LBO is provided below in 5 simple steps. In a paper LBO exercise, you will be expected to complete the important components of a working LBO model with the use of paper and pencil and without the use of a computer. Using a 5.0x entry multiple,

calculate the price

PRIVATE EQUITY FIRM HIERARCHY AND ASSOCIATE ROLE Here is a brief description of the primary roles in the Private Equity firm hierarchy: ASSOCIATE: Pre-MBA associates are typically the most junior professionals at the majority of PE firms. The associate handles most of the financial modeling and initial due diligence for investment opportunities, while assisting with the management and PRECEDENT TRANSACTION ANALYSIS THE RESUME OF THE QUANT ANALYST The short answer is: absolutely. Surprisingly, coursework in finance, while helpful, is not the most important skill set for a quantitative job searcher to have on his or her resume. Additionally, training talented quantitative job applicants in the core finance skills they need on the job is not that difficult—what is more difficult to do

is

LEVERAGED BUYOUT ANALYSIS BEST INVESTMENT BANKING RESUME Two words define the investment banking resume: results and details. Investment bankers are tough. They are looking for people who can deliver the goods and handle the stress. Period. Your resume must be as crisp and sharp as you are. Accountants bill hours. Lawyers bill

hours

MERGERS & ACQUISITIONS (M&A) VALUATION M&A transaction fees are 2.0% of the Purchase Price (i.e., the purchase of the Target’s Equity), or approximately $1.8 million. Financing fees include 4.0% of the $30 million in new Senior Debt raised and 6.0% of the $60 million in new Equity raised. These fees

FINANCIAL MODELING

Financial Modeling Overview. Remember, there are three main Financial Statements commonly used to analyze a company: the Income Statement, the Balance Sheet, and the Statement of Cash Flows. In this module, will dissect financial modeling primarily through the Income Statement. A financial analyst must understand how to evaluate the

historical

VALUATION: A CONCEPTUAL OVERVIEW Valuation: A Conceptual Overview. In this chapter we will introduce the reader to some key, high-level concepts required to understand valuation and how it’s done on Wall Street. We will cover three key topics: Enterprise Value: The 30,000-Foot View. Understanding Enterprise Value vs. Market Value. QUANTITATIVE RECRUITING Quantitative Recruiting Overview. Before you begin approaching Quantitative Hedge Funds and other firms with quantitative roles, make sure you are familiar with the introductory background we’ve written about Quantitative Hedge Funds.Learn who some of the major Quant Hedge Fund players are, and what types of trading/investing strategies they

employ.

QUANTITATIVE TRADING STRATEGIES Relative Value Trading vs. Directional Trading. Most Quantitative Hedge Fund trading/investment approaches fall into one of two categories: those that use Relative Value strategies, and those whose strategies would be characterized as Directional.Both strategies heavily utilize computer models and statistical software. INVESTMENT BANKING INTERVIEW QUESTIONS Listed in this chapter are a wide range of questions you should be prepared to face in investment banking interviews. In each case, we have provided a sample reply, or notes on what you should think about in formulating your reply. We encourage you to incorporate every thought that we’ve given STOCK IDEA GENERATION Stock Idea Generation. of Hedge Fund Training. How can you generate ideas that will produce robust annualized returns? This chapter will address what characteristics and types of trades to look for. An attractive long position typically has two characteristics: it is HOW A PRIVATE EQUITY FIRM WORKS How a Private Equity Firm Works. A private equity firm is called a general partner (GP) and its investors that commit capital are called limited partners (LPs). Limited partners generally consist of pension funds, institutional accounts and wealthy individuals. The general partner invests the fund’s committed capital in public and private DISCOUNTED CASH FLOW ANALYSIS In this case: FCF n = last projection period Free Cash Flow (Terminal Free Cash Flow); g = the perpetual growth rate; r = the discount rate, a.k.a. the Weighted Average Cost of Capital (WACC, covered in the next section of this training course); If we assume that WACC = 11% and that the appropriate long-term growth rate is 1%, we get: This is a very conservative long-term growth rate, and of BASICS OF AN LBO MODEL Basics of an LBO Model. During a private equity interview, analyst and associate interview candidates may be asked to build an LBO model at various stages of the interview process. Therefore, a well-prepared interview candidate must be able to successfully complete any variation of a LBO model prior to his or her interview process.

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