Thanksgiving Interview

Tell me about yourself 

xxx

Why IB

xxx

What is a deal you have been following?

Veolia, a French Waste Management Firm, is set to buy Clean Earth, a US Waste Management Firm, for $3 billion. The deal is set to close mid 2026. Clean Earth is currently owned by Enviri.

What are the M&A Process Steps?

• Win the deal 

• Teaser 

• Prepare the CIM 

• Management Presentation 

• Due diligence and Closing 

What is working capital? (equation and what is it)

Current Assets - Current Liabilities; it shows the cash in day 2 day activities

What is deferred revenue?

Prepayment; you have received the payment, but you can’t recognize the revenue until the service or good is provided

Walk me through how a $10 increase in deferred revenue affects the 3 financial statements.

IS: nothing BS: cash is up $10, liabilities is up $10 (balances!) CFS: $10 increase in CFO, making total change in cash up $10

What about when that revenue is recognized?

IS: Revenue up $10, taxes are down $2 (20% tax rate), NI up $8.

CFS: NI up $8, Deferred Revenue is down $10, change in cash is down 2

BS: cash down $2, deferred revenue is up $10, retained earnings are up $8

You sell a product worth $50 for $100. How does this affect the 3 statements?

IS: Revenue is up $100, COGS down $50, Pretax income up $50, taxes down $10, NI is up $40.

CFS: NI is up $40, A/R is up $100 making cash decrease by $100, Inventory is down $50 making cash increase by $50, for a total change in cash of a decrease of $10

BS: Cash is down $10, A/R is up $100, and your inventory is down $50 making your assets side equal to -$40, and your NI of -$40 flows into your R/E to make the balance sheet balance

Walk me through a DCF

• DCF is an intrinsic valuation method using the PV of its future CFs plus the PV of its TV 

• Step 1: Projecting out financials and calculating FCF 

• Determine the WACC for the discount rate 

• Use WACC to find the PV of projected future cash flows 

• Calculate the terminal value using the Gordon growth model (perpetuity formula) or the EBITDA exit multiple 

• Discount the CF and Terminal value by the WACC to get their present value 

• Sum the PV of future cash flows with the PV of the terminal value to get the enterprise value 

Calculate WACC. and what is the difference between cost of debt and cost of equity.

How do you calculate FCF? (equation)

Operating Cash flow - capex

When would you use EMM vs. PGM (also called gordon growth method)

Use EMM when the market and comps are reliable (restaurants, retail). You would use the Gordon Growth Method with a stable mature business (utility).

Rank the valuation methods from highest to lowest value 

1. Precedent Transactions

2. Comparable Companies Analysis

3. DCF

4. LBO

What is Equity Value?

share price x # of shares and that gets us the market cap of a company

What is Enterprise Value?

total value of a company’s core operations

How do you get to Enterprise Value from Equity Value

Equity Value + Debt + NCI + Preferred Stock - Cash and Cash equivalents = Enterprise Value