Investment Banking Case Studies
Investment banking case studies are a ritual followed by almost every bulge bracket Investment BankBulge Bracket Investment BankTop 10 bulge bracket investment banks are - Blackstone, Goldman Sach & co, Morgan Stanley, J.P Morgan Chase & co, Bank of America Merrill Lynch, Credit Suisse, Citi, Deutsche Bank, HSBC, UBS. (IB) in its hiring process. Is it a tough nut to crack? The answer is yes, but only if you have not prepared well. I am not here to frighten you but let’s get the fact clear, preparing for case studies is as important as personal interviews. Not clearing this round could endanger your dream of getting into an investment bank.
But you have nothing to worry about. With this article on investment banking case studies, we shall see what they are and how they are used to judge IB aspirants like you. Also, you will find out how to prepare and answer case studies confidently and get you your dream job…There, I already see you beaming with that bright smile, rejoicing your entry into Investment bankingInvestment BankingInvestment banking is a specialized banking stream that facilitates the business entities, government and other organizations in generating capital through debts and equity, reorganization, mergers and acquisition, etc. :-)
The case studies can be seen particularly when you are interviewing for senior analyst or associate level positions at IB. Also, they are quite common when you are appearing for lateral interviews i.e. while moving to another investment bank.
Pre-judging your inhibitions regarding investment banking case studies, I have listed down a few Investment Banking questionsInvestment Banking QuestionsThe purpose of this Investment Banking Interview Questions and Answers is simply to help you learn about the investment banking interview topics. below. Hopefully, my answers to them will help you learn about this interesting round at the IB assessment center.
- What are investment banking case studies?
- Why investment banking case studies?
- What are the types of case studies?
- How to prepare for investment banking case studies?
- Tips to perform well at Investment banking case studies
- Investment banking case study- Sample
What are investment banking case studies?
I am sure you must have solved case studies, particularly if you have been to a business school. The case studies at investment banks are similar wherein you would be given a business situation to analyze and provide detailed recommendations.
As it is in general case studies you would be given all the required information and also enough time to study. It would typically be a business problem which asks for your opinion. Your job is to;
- Make necessary assumptions
- Analyze the given situation which could usually be a client’s business
- Advise solution on the present problem with supportive reasons
While the majority of the time the case study round would happen on the day of your interview some recruiters also provide the material beforehand, for the candidates to prepare well at home. You are then expected to then discuss the case study at the time of your interview.
A typical case study would have the following features;
- It would be a hypothetical situation, although could resemble an existing situation of a corporate
- It attempts to recreate the strategic decisions that the company and its advisors had to face
- Financial information may or may not be provided depending upon the relevance of the analysis that needs to be done
- The suggestion’s you provide need to be your or your allotted team’s original work
- Financial Analyst Certification Course
- M&A Prep Course
Why investment banking case studies?
- The answer is simple. The bankers want to judge a candidate in real-world situations. They want to test the three most important skills required in a banker viz. analytical, communication and people skills. Due to these reasons the case study weighs much more than the other ways of judging candidates in the investment banking recruitment process.
- The investment banking job requirements are different than those of general finance jobs. Hence the bankers want to use the non-traditional way of interviewing candidates to identify the IB potential.
- Case studies give banking recruiters an indicator of how you would perform on the job and hence considered a better measure to judge candidates.
- You don’t have to worry if your answer is correct or not. The interviewers are basically eyeing the thought process of the candidate and their analytical skills to find a solution to the given problem in a creative way.
- Investment banking case studies are designed in such a manner that it enables the candidates to think on their own and brainstorm.
- One of the main skills that are required in candidates for such jobs is their ability to solve problems. Recruiters want to get a basic insight into how you would tackle challenging situations and apply your intelligence, education and work experience in successfully handling them.
- Case studies aim to appraise how you process information, react to new and surprising situations.
- Many times the case studies are to be solved with a group. Hence the interviewer here gets to test how you work within a team.
What are the types of Investment banking case studies?
Broadly there can two types of case studies that can be expected at the IB assessment center viz. the decision-making case studies and Financial ModelingFinancial ModelingFinancial modeling refers to the use of excel-based models to reflect a company's projected financial performance. Such models represent the financial situation by taking into account risks and future assumptions, which are critical for making significant decisions in the future, such as raising capital or valuing a business, and interpreting their impact. case studies.
Decision making Investment Banking case studies
- They are more commonly asked as compared to the modeling type case study. In this type of case study, you need to make decisions for your client and advise them in a certain situation.
- The client case studies could be based on finding sources through which capital should be raised, whether the proposed mergerMergerMerger refers to a strategic process whereby two or more companies mutually form a new single legal venture. For example, in 2015, ketchup maker H.J. Heinz Co and Kraft Foods Group Inc merged their business to become Kraft Heinz Company, a leading global food and beverage firm. should be undertaken and why.
- You should expect these questions to be made available on the spot. This means that the case study is given to you on the day of your interview. You need to solve and present the case within the given time frame.
- For this entire process, you would be given around 45-60 minutes for preparation and 10 minutes presentation followed by a round of questions and answers.
- On the spot case studies would not involve a deep study of the case as the time required to do the same is not sufficient and would be more about presentation and teamwork skills put to test.
Decision-Making Case Study Example:
One of your clients is a global corporation that manufactures and distributes a wide range of perfumes. They are contemplating ways to expand their business. There are two ways to do so; either introduce a new range of perfumes with the current distribution channels or start a completely new business with different sets of stores.
You are supposed to find out which would be a better solution for the business. To solve this you need to compare the returns of the investments and decide the solution with supportive reasons.
Modeling Investment Banking case studies
- These are the take-home case studies wherein you would have to do financial modeling and simple valuation. It is more like a modeling test rather than a case study.
- The case study would be more of performing FCFF valuation on a company or prepare a simple merger or leveraged buyoutLeveraged BuyoutLBO (Leveraged Buyout) analysis helps in determining the maximum value that a financial buyer could pay for the target company and the amount of debt that needs to be raised along with financial considerations like the present and future free cash flows of the target company, equity investors required hurdle rates and interest rates, financing structure and banking agreements that lenders require. model.
- You would be expected to analyze the corporations’ valuation multiples and decide whether they’re undervalued or overvalued.
- Here you are given a few days to complete your analysis. On the day of the interview, you need to showcase your recommendations to the bankers over a 30-45 minute presentation.
- Compared to the client case studies the analysis would be much deeper as you would be given enough time to work upon.
Modeling Case Study Example
A pharmaceutical company has decided to make an acquisition. It has identified the company and has approached you for your advice on the deal and determine how much should they be paying for the deal. You are provided with the necessary financial informationNecessary Financial InformationFinancial Information refers to the summarized data of monetary transactions that is helpful to investors in understanding company’s profitability, their assets, and growth prospects. Financial Data about individuals like past Months Bank Statement, Tax return receipts helps banks to understand customer’s credit quality, repayment capacity etc., metrics and multiples and the overview of the buyer and seller company.
To solve this first you need to find if the acquisition is possible. If the buyer has sources to finance the deal, how the deal structure and synergies would be. After this, you need to use the multiple and valuation metrics to decide the price range of the deal.
How to prepare for investment banking case studies?
- Make sure you read business news often and are aware of a focus on reading about how and what about business transactions discussed.
- Learn about various valuation techniques, their calculation and how they are interpreted.
- Especially for modeling and valuation based case studies, you need to be prepared as to how you would format it consistently while using PowerPoint and Excel.
- Yes, that’s all you need to do. Read and solve as many case studies as possible so that you get the knack of understanding business scenarios and solving them.
- You may not find real case study questions that is used by banks for interviews. But since you have to practice, try asking a friend or any colleague you know who has been through such case study rounds for the kind of questions they received.
- If even that is possible create your own case study. Yes, you could simply do that by taking up a company, build up a hypothetical situation and ask yourself questions like should they merge with company ABC? What kind of capital structure the company should have?
- Check the company’s website to see if it has sample case studies available for reference.
To practice more on case studies and tests at the assessment center check out
Tips to perform well at Investment banking case studies
While working on the Investment Banking Case Studies
- Make a concrete decision and base your recommendations for logical reasons.
- Use a structured approach to tackle the problem.
- Focus on the most important issues prevalent in the case.
- Understand the case and questions carefully before interpreting and think twice before you finalize the decision for the problem.
- Do not panic is the solution to the case is not obvious.
- For modeling case studies format the excel and PowerPoint professionally.
- Prepare about the type of questions you may be asked during your presentation.
- Assess all the relevant factors and possible problems but keeping in mind the resources you have.
- The solutions you provide should be realistic and be aware of the implications of the organizations under study.
- Have strong logical reasons behind every statement you make and cater to the critical issues of the case at the beginning itself.
- Having specific knowledge regarding the industry under study is not necessary but we would be an added advantage.
- When preparing, focus on reading deal news and practice as many scenarios as possible.
While presenting your Investment Banking Case study
- Practice public speaking.
- Speak slowly and clearly.
- The presentation needs to be structured in a logical way.
- While working in groups interact with everyone. The interviewer’s usually eye leadership skills and teamwork.
- Not just try to show your ability to talk finance but also business knowledge in an applied sense.
- Keep in mind that you do not exceed the time limit allotted to present the slides.
- Rehearse well before so that it goes through smoothly.
- In case it’s a group presentation, make sure everyone gets the chance to speak and express their views. The assessors surely would mark you on your behavior while working in a team.
While answering Questions
- Do not hurry to provide the answer. Always organize your thoughts and then answer.
- Be attentive throughout the process.
- Expect the interviewer to ask additional questions to test how you can deal with the unexpected.
- Be creative and think “out of the box” to get the banker’s attention towards you.
- The next important step is to collect your thoughts and bring them across the main points. Do not beat around the bush as you would have limited time and hence be precise as you speak.
- There is nothing right and wrong but at times of arguments (which surely happen if there are group discussions) strongly mention why you did not opt for those possibilities.
Investment banking case study- Sample
Now you must be wondering how we actually apply all this in a case study. Let’s understand investment banking case studies thorough an example discussed below;
Investment Banking Case Study – Situation:
Simons Ltd, a software company wants to maximize its shareholder value. It has three options to look forward to i.e. sell the company, make small acquisitions or keep growing organically. Argus Ltd. Requests a piece of advice from your bank on the right course of action.
What you have to do:
- To review the company you would be provided with an overview of the business, its competitors, probable acquisition candidates, financial statements and future projections.
- Read through the provided information and understand the industry.
- Try to gauge the worth of the company compared to its peers.
- Conduct a valuation analysis using DCFUsing DCFDiscounted cash flow analysis is a method of analyzing the present value of a company, investment, or cash flow by adjusting future cash flows to the time value of money. This analysis assesses the present fair value of assets, projects, or companies by taking into account many factors such as inflation, risk, and cost of capital, as well as analyzing the company's future performance. and relative valuation techniques.
- Compare the three options with the valuation and the impact of acquisitions.
- Prepare a presentation giving our recommendation on what could be the best method to maximize the shareholder valueShareholder ValueShareholder's value is the value that company shareholders receive as dividends and stock price appreciation due to better decision-making by the management that ultimately results in a company's growth in sales and profit. in this situation.
The solution to the Investment Banking Case Study
The answer to this case study is rather subjective. You could take a stand and support it with reasons. However here, for understanding purposes, we assume to sell the company. Let’s now see how you could proceed with sell as the suggested option.
We recommend selling because of the following reasons;
- The industry is growing rather very slowly (less than 5% a year).
- The companies are overvalued.
- The acquisitions would not increase the revenue or profit significantly.
Presentation of Investment Banking Case Study
- Keep it simple and straightforward with the reasons for your recommendation to sell.
- A brief overview of the industry, its growth characteristic, and the company’s position.
- How would the company grow organically in the next 5-10 years?
- Briefly explain the acquisition candidates and opportunities with them.
- Justify why both the options of growing organically and the acquisitions do not work out.
- Explain the DCF analysis you performed and show how selling is the best feasible option.
Since investment banking case studies are an important element in the interview process, messing it up will mean merely missing the offer. Consider investment banking case studies as an opportunity to showcase your skills and talent to investment bankers. Those minutes could change your career so make them count and give your best :-)