Tuesday, May 13, 2008

Investment Banking Interview Case Questions

Here is a sample of case questions I was asked in an interview with a leading middle market full-service investment bank. In these case interviews you are asked to assume the role of an investment banker. What do you advise each client to do?

  1. Case 1: A client of yours owns 100% of his own business. It is worth $500M and would like to get some liquidity out of his company, but still wants to continue working. How do you advise your client to get the maximum valuation, while still retaining some ownership?

  2. Case 2: A public company is currently trading at it's 52 week low. The companies current quarterly reporting is on schedule with analyst's and management's predictions. The management team is looking to raise money to fund a project, which they believe will double the companies EBITDA. What options do you advise the company to pursue in order to raise the necessary capital?

  3. Case 3: Your client has a company, which manufactures and sells propellers and is preparing to sell the entire company. The company is comprised of three divisions: boat, air, and windmill propellers. The boat and air divisions comprise 80% of the company, while the windmill division makes up only 20%. The boat and air divisions are losing money, while the windmill division is making money, so the net effect of the company is to break even. What do you advise your client to do in order to help them sell their company at the best price (ie. best valuation)?

Please post your comments to these case questions.


Anonymous said...

For the first scenario, I would have my client restructure his company and sell some equity to a strategic buyer. This way he still gets to keep ownership of his company, but he also gets to cash out some of his wealth.

Anonymous said...

Actually, in the first situation, I would want to know what kind of business he was in first. Also, you will not maximize the value of the company by selling off equity -- you will just split the same $500m pie. Instead, I would leverage the company as far as I could -- this would increase the value of the company due to tax benefits of debt, and allow the gentlemen to get some of his dough.

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Anonymous said...

What's the best answer to each of the situation?

Case 1 - ?

Case 2 - Take on debt as a source of financing for the project.

Case 3 - Breakup the company 80% & 20% (unprofitable vs. profitable) and sell them.

Mahmoud Ibrahim said...

For the first case I would recommend that the owner sells the company to its employees through an employee stock-ownership plan (ESOP). This way he can remain with the company while taking money out of it. Also, it’s a way to reward employees and provide a long-term incentive for loyalty and hard work.