Breaking Into Wall Street Courses

Guide to Case Studies in Interviews

Mastering “The Art of the Case Study” in Interviews

This document will serve as your quick reference guide

for case studies and modeling tests in interviews. Case
studies are extremely common in finance interviews
because they test your knowledge in significantly more
depth than traditional interview questions do.

Before we jump in, please note that a "case study"

means something different depending on what you're
interviewing for.

Investment banking case studies differ from private equity case studies, which, in turn, differ
from hedge fund and equity research case studies.

I'm going to walk through each of those one by one and explain what to expect, how to allocate
your time, and how to structure your case study responses to maximize your success.

Plus, I'll point you to examples of case studies, models, and tutorials from our courses that you
can use to save time and get better results.

Table of Contents:

• Private Equity Case Studies

• Hedge Fund / Asset Management / Equity Research Case Studies
• Investment Banking Case Studies

Private Equity Case Studies

What to Expect: Most “long-form” PE case studies will resemble the following:

"Here's Company X, along with its financial information, a market overview, and [whatever else
they want to include].

Review the information and then create a 10-20 slide presentation, or written Word document,
where you recommend for or against buying the company."

Sometimes, they'll give you the assumptions to use, such as the purchase price, the % debt, and
even the revenue growth and margins. Other times, they'll ask you to come up with some or all
of those on your own.

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The case studies where they supply all the assumptions tend to be "speed tests" where you
only have 30 minutes up to 2-3 hours to complete everything; you might get a few days up to a
week with the open-ended, longer form case studies.

Recommended Structure: The length differs depending on whether it's a "long form" case
study or a shorter one, but a similar structure works for both:

1. Executive Summary / Recommendation –

Should you buy the company or not? What are the
3 key reasons why or why not?

2. Market Overview – What's the total market

size? Is it growing? Are certain segments growing
more quickly than others? How is the company
positioned relative to its competition? What are its
growth opportunities?

3. Your Assumptions and Projections – Lay out

your assumptions for revenue growth, margins,
and other key items like CapEx, and explain what the 5-year profile of the company looks like.

4. Potential IRR and Sensitivities – At reasonable valuation ranges and exit assumptions, what
is the range of potential IRRs? Does it seem likely that the deal could work, or would the IRR be
too low – i.e. under 20% – regardless of the scenario(s)?

Yes, you need to create at least 1-2 sensitivity tables – otherwise you will be grilled on how you
can be certain that your single set of assumptions is correct.

5. What If You're Wrong? / Risk Factors – How might you reduce risk, or, if you're
recommending AGAINST investing, what might cause you to change your mind?

Ways to Hedge Against Risk / Limit Possible Losses in a Downside Case:

• Acquire less than 100% of the company

• Acquire the company for a very low or “bargain” multiple
• Sell off non-core assets or divisions of the company
• Provide a management option pool / rollover or other incentives for strong performance
• A large cash balance or high net tangible assets can also reduce risk

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Factors That Might Change Your Mind If You’re Recommending Against Investing:

• Assurances around market size, revenue growth, or margins

• Major M&A deals or partnerships involving peer companies
• Cost-cutting or restructuring plans that make it easier to meet debt obligations

6. Conclusions – Summarize everything and restate your recommendation from the beginning.

Example Private Equity (and Growth Equity) Case Study Presentations and Models:

• Coles – Recommendation for “Additional Due Diligence”

• Great Canadian Gaming Corporation – Recommendation FOR Leveraged Buyout
• Viridor – Recommendation AGAINST Leveraged Buyout
• Viridor – Recommendation FOR Investment by Unsecured Lenders
• [Link] – Recommendation FOR Leveraged Buyout
• Silver Lake / Dell – Recommendation AGAINST Leveraged Buyout

How to Allocate Your Time: If you have 7 days, here's what I recommend:

Day #1 and Day #2: Read through all the background information
and study the company and its market. Start forming your own views
about whether or not the qualitative signals are positive (e.g. is the
company a market leader? Or does it lag behind its competitors in
certain areas?)

Day #3: Conduct channel checks. Contact real people in this market,
such as suppliers and distributors, via LinkedIn and ask a few
questions on their views of the company, its products/services, and
its market. Yes, you can and should do this and it will set you apart
from everyone else in interviews.

Day #4: Do some basic valuation analysis to determine an appropriate purchase price, and then
spend the rest of this day building the LBO model and the sensitivity tables.

Do NOT go crazy with adding bells and whistles. If you're pressed for time, you don't even need
a full 3-statement model – you could always run a quick LBO model and skip the Balance Sheet
projections (estimate the change in working capital as a % of revenue and track cash and debt
separately).

Day #5: Outline your presentation and what you'll say in each section. Generally, you should let

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the numbers drive your conclusion and then support the conclusion with qualitative factors.

For example, if your analysis shows that you cannot achieve a 20% IRR unless the company
grows 30% more quickly in future years than it has over the past 3-4 years, then that might
form the backbone of your argument. And then any negative qualitative signals would support
your conclusion.

If, on the other hand, your analysis shows that you can achieve a 20% IRR even if the company’s
growth rate slows or its margins decline by 10%, then you might use that and say, “Even in the
downside case, we can still achieve solid returns – and in the base case, the numbers look really
good.”

Day #6: Write your Word document or create your PowerPoint presentation summarizing
everything. Two or three slides for each section above is usually sufficient, though we include
more than that in the sample case study presentations linked to above.

Day #7: Practice giving your presentation and answering the most likely questions.

Questions about operating and transaction assumptions are very common, as are questions on
what you found during channel checks or your own research.

Hedging against the downside risk is tricky when you buy and sell entire companies, so that's
another area likely to generate many questions (see the recommended methods above).

Return to Top.

Hedge Fund / Asset Management / Equity Research Case Studies

What to Expect: These are very similar to PE case studies, but instead of recommending for or
against acquiring an entire company (or over 50% of a company), you recommend longing or
shorting a company (i.e. buying or selling a small percentage of its outstanding shares).

Stock prices are more important because most ideas you present will be in the form of public
companies. Yes, there are other fund types such as global macro, distressed, fixed income, and
so on, but here we are focused on long/short equity case studies.

In most cases, the firm will ask you to pitch your own ideas and you should try to tailor your
ideas to the focus of that group... so if it's a long-only asset management firm, you don't want
to pitch a distressed short idea.

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You could have anywhere from a few hours to a few days or up to a week to research, pitch,
and present your findings. They assume you are already passionate about investing and already
have your own ideas, so taking TOO long to come up with something might seem suspicious.

Recommended Structure: We recommend this 6-point structure for extended discussions:

1. Recommendation – Long or short? And what are the 3 key reasons why?

2. Company Background – Current multiples, product segments, recent history, and future
events on the horizon.

3. Investment Thesis – What are the top 2-3 reasons the

company is mispriced, and what is the approximate per
share impact of each factor?

4. Catalysts – Which events over the next 12 months will

push the stock price in the direction you think it is headed
in? If you cannot name specific events that will cause this,
the stock may stay mispriced for years and this will not be
a compelling idea for most funds.

Example Catalysts:

• M&A deal or partnership (either announced or potential)

• Expansion strategy
• Cost-cutting or restructuring / turnaround plan
• Launch of new product or service
• Raising debt or equity, refinancing debt, issuing dividends, or repurchasing shares
• Divesting an asset or business division

5. Valuation – What do public comps, precedent transactions, and the DCF imply about the
company's valuation? For “long” ideas, you want to show that the company is undervalued, and
for “short” ideas you want to show that it’s overvalued.

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Also, demonstrate how your own views about the company – e.g. higher or lower revenue
growth compared to consensus estimates – will impact its per share value (plug in different
numbers into the valuation and refresh the model to see how the output changes).

6. Investment Risks – What could cause your recommendation to be

wrong, and how could you hedge against these risks? These risks must be
company-specific to be effective. If possible, you should estimate a
potential per share impact for each risk factor.

Example Risk Factors:

• M&A deal or partnership fails to close

• Company’s margins decline because cost-cutting plans do not work
• New product launch is delayed, resulting in lower revenue growth
• Two competitors merge, reducing the company’s market share and potential customer
base
• Planned expansion strategy does not work and company’s CapEx spending increases,
with nothing to show for it

Examples of Ways to Hedge Against Investment Risks:

• For “Long” ideas, buying protective put options or longing a competitor

• For “Short” ideas, buying protective call options or shorting a competitor
• Selling off non-core assets or business lines
• If the company has a high cash balance or high net tangible assets, those can also limit
your potential losses

You do NOT need to go crazy listing different risk factors: 2-3 solid factors with well-thought-
out explanations are much better than a laundry list of 10 factors without much support.

Example Hedge Fund Case Study Presentations, Models, and Tutorials:

• Coles – Recommendation for “Additional Due Diligence”

• EasyJet – Debt vs. Equity Recommendation and Company Analysis
• Steel Dynamics – Stock Pitch and Full Critique
• Jazz Pharmaceuticals – How to Use Valuation to Outline a Buy-Side Stock Pitch
• Jazz Pharmaceuticals – Stock Pitch for Jazz Pharmaceuticals

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The EasyJet example is not a direct “stock pitch,” but the 3-statement model setup there and
analysis of debt vs. equity and key metrics and ratios is the type of work you might complete at
fundamentals-focused hedge funds.

The simplified valuation and DCF for Steel Dynamics might also be helpful if you’re pressed for
time and looking for an easier template to adapt:

• 3-Hour Valuation and DCF Case Study from Blank Sheet (Steel Dynamics)

How to Allocate Your Time: Let's say you have 7 days to

research, analyze, and present an investment idea.

Aim to spend Days #1 and #2 doing research and figuring

out the market drivers, what makes the company tick,
what the competition looks like, and possible assumptions
to use for your valuation.

Then, spend Day #3 on channel checks and contact people

at key suppliers, distributors, and other partners of the
company via LinkedIn and see what they can tell you
about it. Even 2-3 very quick phone calls or messages is 10x better than nothing.

Spend Day #4 on the valuation – do NOT obsess over finding non-recurring charges or making
adjustments or anything like that. Speed is the name of the game, so spend the bulk of your
time picking the right comps and determining the correct DCF assumptions to use.

Do build in options for different growth and margin scenarios so you can see what your analysis
looks like under different conditions.

Spend Day #5 coming up with your investment thesis, the catalysts, and key risks, and sketch an
outline of what you'll say in each part of the presentation.

Then, on Day #6, turn that outline into the real written document or slide presentation. This
will take at least a few hours, so don't underestimate the time required.

On Day #7, review your work for holes, errors, logic gaps, and anything they might ask you
questions on.

Common Questions to Be Prepared For:

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• Where did you get that revenue growth or margin assumption from?
• Why is the discount rate / terminal FCF growth rate / terminal multiple / other key DCF
assumption set that way?
• Why has the stock been mispriced for a relatively long time and no one else has
noticed?
• What if you're completely wrong – will the hedging strategies you've recommended
really work?

If you have only a few days – or only a few hours – condense this timeline and still allocate your
time in the same proportions, but over hours instead of days.

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Investment Banking Case Studies

What to Expect: It is harder to generalize what to expect in IB case studies because:

• They are less common in interviews than buy-side case studies; and
• They are less standardized – you might have to complete a modeling test, you might
have to give a company advice, or you might have to recommend something specific,
such as the sale of a specific asset or the entire company.

Here are the 3 most common formats for IB case studies:

1. Here’s a 3-statement model. Complete the projected years using the following
assumptions… (another variation: you could be asked to complete an LBO model rather
than a 3-statement model)
2. Value this company and estimate what an acquirer might pay for it, backing up your
estimate with qualitative factors.
3. A company is facing Situation X –what should it do?

"Situation X" could be a hostile takeover, interest from a friendly acquirer,

increasing price pressure, debt that is about to mature and needs to be
refinanced, or anything else.

IB case studies tend to be shorter than buy-side case studies, and

sometimes they focus more on the mechanics behind a model or
valuation instead of your opinion on a company.

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It’s not particularly interesting to show you these “mechanical / speed tests” because the
courses on the site already cover pure modeling in detail.

Instead, we’re going to focus on case study type #3 above – the “Situation X” one – and address
the structure to use for that one and how to allocate your time.

Recommended Structure: Suppose that you get a company’s profile and you’re asked what the
company should do to maximize its share price within the next 12 months. Bankers often
advise companies on these types of issues, especially when the company’s stock has been
underperforming the overall market.

Options might include selling the entire company, spinning off a division, raising debt or equity,
buying a smaller company, or growing organically. Here‘s one structure you could use:

1. Overview and Recommendation – Summarize the

company's current valuation and key market trends,
and give the top 2-3 reasons why you're
recommending what you are.

For example, let's say that you're recommending that

the company spin off an under-performing division
to maximize its share price over the next 12 months.

You first slide or first few paragraphs might include

the company's current stats and valuation multiples,
how the overall market has been doing, what this
division might be worth if it's spun off, why it will
increase the company's share price, and the 1-2
reasons why this is better than other alternatives.

2. Current Valuation – Include 1-2 slides on the

current valuation multiples and the output from your DCF, and then explain how your
recommendation will impact the valuation.

In this example, you'd have to specifically address how spinning off the division may reduce the
company's revenue and EBITDA... but also how it might, in fact, increase the company's value in
the long-term because the cash received would be worth more than the amount by which this
division was depressing the company's value.

3. Why Your Solution is The Best – Continuing with this same example, you need to explain

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why spinning off a division is superior to selling the entire company, or raising capital, or buying
a company, or doing something else entirely.

Examples of Reasons Why This Solution Might Be the Best One:

a) First and foremost, the amount of cash the company would receive exceeds the amount
by which this division is depressing the entire company's value.
b) It's easier, faster, and less risky to spin off a single division than to sell the entire
company (well, maybe – it depends on the company).
c) By spinning off this division, the company would receive funds that could be spent to
expand into higher-growth areas.
d) Raising capital would not boost the company's share price, nor would buying another
company – plus, there are no promising acquisition candidates with reasonable
valuations at the moment.

4. Address Other Solutions – Finally, explain that you have considered other solutions but do
not believe they would be superior.

Examples of Reasons Why Other Solutions Would Not Work As Well:

a) Selling the entire business would be more costly and time-consuming, and right now it is
undervalued – so the company would get an inferior price by doing this.
b) Raising equity would dilute shareholders at an already low valuation, and raising debt
would result in overly restrictive covenants given the company's cash flow profile.
Neither one would necessarily increase the company's value.
c) Buying a more promising, smaller company might solve some of the company's woes,
but there aren't many viable candidates at attractive valuations right now.

5. Conclusion and Summary – Sum up everything above and put forth your recommendation,
the current and potential future valuation, and a few sentences on why your proposal is
superior to other possible solutions.

Example Investment Banking Case Study Presentations, Models, and Tutorials:

Since investment banking case studies are so varied, almost everything on the site could be
applicable.

But here are the lessons most likely to represent actual case studies:

• 30-Minute and 60-Minute 3-Statement Modeling Case Studies (Entire Module)

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• 2-Hour 3-Statement Model from a Blank Sheet (Entire Module)

• 3-Hour Valuation and DCF Case Study from Blank Sheet (Entire Module)

• 20-Minute Accretion/Dilution Exercise

• 20-Minute M&A Exercise for Equity Value, Enterprise Value, and Multiples

• 60-Minute Merger Model (Builders FirstSource / BMC Stock Holdings)

• 3-Hour Merger Model (Entire Module)

How to Allocate Your Time: As with the other case studies, you might be tempted to spend all
your time on the modeling and not as much time on preparing your presentation... which is a
big mistake.

If you have 3 hours to complete this case study, here's what I'd recommend:

First 45 Minutes: Read about the company and all the information they give you, and plan out
how you'll value it, the comps to use, and the DCF assumptions (if applicable).

Also review market trends, competitors, potential buyers, potential sellers, and so on.

Next 60 Minutes: Run the technical analysis – keep this VERY simple and use only the
information that's provided for the comps. If you do a DCF at all, keep it simple as well. Forget
about multiple scenarios; just use simple percentage revenue growth and margin assumptions,
only calculate Terminal Value one way, and so on.

Continuing with the example above, if you have the information, you should do a separate
valuation of the division that you're recommending spinning off.

But again, keep it simple, re-use your templates, and don’t do more than a “back of the
envelope” analysis if you only have 60 minutes.

Next 60 Minutes: Create your presentation or Word document, or if you're presenting these
arguments verbally, write an outline of what you'll say. You could use 10 slides for the example
above – around 2-3 slides per section of the presentation.

Last 15 Minutes: Read through everything once again, and plan your answers for the top 3-4

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most likely questions in the Q&A session afterward.

Common Questions in “What Should This Company Do?”-

Type Case Studies:

• What about Option X? (Where X is something you

haven’t thought of – make sure you consider
everything)
• Why are you confident that your valuation is correct?
• How long will this process take to complete? (An M&A
deal or IPO might take 6-12 months or more… so don’t
walk in and say it will take 2 months)
• What could go wrong with your recommendation and how can we avoid that? (For
example, you might not be able to find a buyer for a single division of the company – so
you might consider selling the entire company, or offering an incentive to attract
buyers)

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If you have any questions or want to submit a case study you've gotten in interviews or
recommend a new case study, just reply to my original email, and let me know.

-Brian

Brian DeChesare
Breaking Into Wall Street
Mergers & Inquisitions

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