Investment Banking Interview Questions Company Valuations

During your investment banking interviews, it is likely you will be asked to, "explain how companies are valued?"

The valuation methodologies you should be familiar with include:

• Discounted Cash Flow (DCF)
• Comparable Companies
• Precedent Transactions
• Multiples Method
• Market Valuation

These are the top ten valuation method questions.

• Name some valuation methods.
• What are some of the multiples used in valuation?
• Can you use Equity Value / EBITDA as a multiple?
• What are some other invalid multiples?
• How do the valuation methods work?
• Which valuation method gives the highest valuation? Comparable companies, DCF, Precedent transaction, or LBO?
• If you use numerous valuation methods that produce different results, how do you come up with on final value?
• A company similar to mine has a P/E ratio of 10. My EPS is $4. What should my share price be?
• Three Precedent Transactions had EBITDA multiples of 12x, 8x, and 10x. My company has EBITDA of $1 Billion. What is my company’s Enterprise Value?
• A comparable company has an equity value / EBITDA multiple of 14x. My company’s EBITDA is $40 million. What’s the value of my company?

To be familiar with a valuation means:

• Be able to walk someone through the steps/process of performing this type of valuation
• Know and understand any and all related finance equations
• Know which method gives the highest or lowest valuation
• Have a minimum of three pros and cons of each type of valuation

Investment Banking Interview Questions Example Case Study Questions

The following are three case study example questions from actual investment banking interviews. Please answer the questions by explaining what you would advise each client to do in the comments section below this article and you will be given feedback.

Case Study Question 1 - A client of yours owns his own business 100% outright. It is worth £500M and he/she 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?

Case Study Question 2 - A public company is currently trading at a 52-week low. The company's 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 company's EBITDA. What options do you advise the company to pursue in order to raise the necessary capital?

Case Study Question 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)?

Investment Banking Interview Questions Tell Me About Yourself

To tackle the very common investment banking interview question "Tell me about yourself" effectively, you must describe yourself in terms of the skills and competencies your prospective employer is looking for in candidates, and illustrate how and when you have demonstrated these skills and competencies during education or previous work experience.

Preparing for this Question

[Edit] Before your interviews, consider the core skills and key competencies that all investment bankers need to possess. For example, investment bankers need to be:

• Hard workers - An Analyst will work approximately 100 hours a week.
• Strong team players - Deal teams consits of analysts, associates, vice presidents and managing directors.
• Analytical - Analysts will need to consult large companies on complicated business strategy.
• Quantitative - Analysts need to build financial models and review financial statements.

During (or after) your interview, your interviewer will almost certainly complete a sheet about your specific abilities, competencies and skill set. Make sure you "tick all the boxes" for your interviewer, in your interview.

Also, make sure that you are very clear about your CV. You should be able to talk about any experiences listed, and be able to answer any question that your interviewer may have about dates, activities, or anything else.

Answering the Question

[Edit]

When introducing yourself at the start of this question, be yourself. Your interviewer wants to find out about your personality (and if you will be a personality "fit" within the company) as much as your skills, competencies and experiences.

Qualify your skill-set by using pertinent examples from your educational, life and work experiences. For example:

• Hard worker - "I have completed a academically challenging course in Economics and Finance at the University of Manchester, where I also worked part-time for an insurance company and captained the university debating team. During Christmas and summer vacations I completed internships at Goldman Sachs and Lehman Brothers respectively".

• Team player - "Whilst at university I captained the debating team, was treasurer for the finance society and was top goal scorer for the University of Manchester football team".

• Analytical - "During my work experience at Lehman Brothers I took part in a consultation project".

• Quantitative - "As treasurer for the university finance society I helped arrange a financial process discussion group".

When walking your interviewer through your CV just give basic details of the job and then more detailed descriptions of the skills and competencies used and developed. If your interviewer is interested in a particular period of work or other experience from your CV they will ask you to tell them more. When the interviewer asks you follow on questions like this, give more detailed responses and explain what you enjoyed most.

To conclude your answer, explain that you think with all your skills and competencies you think you would make a great hire for the firm.

• For more investment banking interview questions, see - Investment Banking Interview Questions.

Investment Banking Interview Questions Why Investment Banking?

When answering the question "Why do you want to work in investment banking?" you must make it clear that you are only interested in working in investment banking (even if you have an interest in other jobs in other industries). Your interviewers are only looking for people focussed on a career in investment banking. You should also be prepared for questions asking why you have applied for the position you have applied for, rather than others. You should not say you are interested in multiple positions - just the role you have applied for.

You must also have a great explanation of how and why you became interested in investment banking, (other than financial!)

Answering the Question

[Edit]

The most successful candidates will be able to construct a unique and developed answer to this question with little thought. To get to this level, consider the following regarding investment banking:

• The growth and development opportunities available to graduate in investment banking;
• Learning about structuring M&A deals;
• Finding out about Strategic Advisory and other aspects of investment banking;
• The transactional nature of the business;
• Working with some of the world's smartest people;
• The educational experience and world class training;
• Developing a fuller, more well-rounded business acumen;
• The extremely challenging nature of Analyst and Associate positions, and;
• Working in what you believe is the pinnacle of the financial system.

At interview, be prepared to explain why you are interested in these things, for example, by explaining a long-term interest in finance, the city, economics and mathematics.

Emphasize that you know investment banking is what you want to do as a career and that you are ready for this opportunity. Enthusiasm, passion and career motivation is thoroughly important during your investment banking interviews.

When answering this question, try to drive home your main points from your initial "Tell me about yourself?" response. Explain that you want to work hard, work in a strong team, and be involved in analytical and quantitative problems on a daily basis. Always be concise and try to make your points as quickly and as intelligently as possible.

Investment Banking Interview Questions Why Work For Us?

This article is about answering the question, "Why do you want to work for this bank?"

Preparing For This Question

You must be thoroughly engaged with each company you interview with before interview to really impress your interviewer. Researching companies is fairly simple. Company websites host a great deal of useful information. For example, many companies have a careers section and a "Why Work Here" section, which you will need to look at.

You should also study bank's graduate training programmes specifically, so that you can discuss things such as secondments and training that may interest you.

You can also use websites like WikiJob to find out about companies, and discuss companies in greater detail with other candidates and current employees.

Further Research

It is important to do some in-depth research in to the companies you interview at. This can be done through Google, searching for the company's name in financial papers and magazines (such as the Financial Times) and reading articles in trade press. You need to do this to keep you commercial awareness knowledge up to date. Good things to research include:

• The bank's position globally.
• Their broad financial platform.
• Any major international company developments.

Company Culture and Contacts

It is always a good idea to discuss how much you enjoyed meeting people from a company you are interviewing at, and what a good impression you have of company culture and working life there. Bringing up employees names (that you may know through friends, or have met at company careers fairs or on-campus company presentations is also a very good idea.

Answering The Question

Most companies will sum themselves up in a simple phrase or paragraph on their website. For example, a company may describe itself as: flexible; approachable; and, entrepreneurial. If this is the case, you should describe yourself with these adjectives during your interview, and importantly qualify this by giving examples from your life, academic and/or work experiences.

You should also come up with a list of things you want for from your job/internship and a goal to be achieved in the next five/ten years. You can then answer the question by talking about what you want from your job/internship and how the firm offers that and how it fits in with your goal.