Updated 24 May 2020
When going through the application process for a graduate role at an investment bank, you will likely be faced with a case study interview. Investment banking roles are highly competitive and you must be properly prepared.
This article, along with our comprehensive article on case study interviews, will ensure you know what's coming and can prepare with confidence.
Investment banking case studies are commonly used to assess how a job candidate would perform in a real situation, by presenting them with a theoretical scenario similar to those encountered working in the role.
You will normally encounter case studies at the final stage of the application process, likely during an assessment centre or final-stage interview.
Most investment banking case study questions centre on acquisition, raising capital or company expansion. The case may be given to you ‘blind’ on the day of your assessment centre with only a short amount of time provided for preparation.
If the case is likely to involve deep analysis, financial modelling or company valuations, you will likely be given the case in advance, to give you more time to work on it before the assessment day.
While general interview questions can give a surface impression of a candidate’s skills and suitability, case study questions enable interviewers to assess the candidate’s ability to approach a multi-layered client problem.
Case study questions are not only testing a candidate’s analytical skills but also their ability to reason and communicate. They are useful for assessing how candidates tackle complex problems, make key judgements and present their recommendations.
With many case study questions, there will be more than one way to successfully approach the problem and more than one possible solution. Investment banks are looking for decisive candidates who can present their solution clearly and logically, and defend their decisions under scrutiny.
These questions are not designed to test in-depth sector knowledge but are an opportunity to display the commercial awareness investment banks seek.
Facing a case study exercise can be daunting. Here are some key tips to help you get started:
Candidates will likely be asked to give a presentation of their findings at the end of the task.
When preparing your presentation, make sure you outline the path you have taken clearly. It is important to display why the choice was made to discard other courses of action in favour of the selected recommendation.
The case study questions are not necessarily about finding a correct answer, but rather the thought process and analytical skills used to tackle a problem.
Case studies for investment banking interviews come in two forms:
Take-home case studies are usually given to candidates up to a week before they are scheduled to attend an interview or assessment day.
You will be expected to work on it at home and then present your analysis and recommendations in a 30- to 45-minute presentation when attending your interview. The level of analysis must reflect the amount of time allowed to complete the task.
Due to the extra time allowed, a take-home case study will usually be a financial modelling case study which will require more in-depth research. Financial modelling and simple valuation will be required.
This may be preparing a straightforward merger, presenting the process for a Leveraged Buy Out (LBO) or performing an FCFF (free cash flow to firm) valuation.
Candidates will need to be confident with valuation multiples; for example, looking at equity and enterprise value to determine accurate, over- or under-valuation.
For more help and advice on investment banking valuations, see our article on Company Valuation Interview Questions.
Blind case studies will be given to the candidate on the day of an assessment centre or later-stage interview.
During a blind case study assessment, a candidate will normally face a decision-making case study, which will not require in-depth research.
These may focus upon whether a particular merger should take place, how to achieve the best valuation or identifying sources through which capital could be raised. These questions are looking more at a candidate’s problem-solving skills and commercial awareness, rather than deep analysis.
Candidates will be given around one hour to complete their analysis and approximately 10 minutes to present. They should be prepared for a substantial round of questions after completing their presentation.
Regardless of which investment banking case study type a candidate is presented with, the thought process and deliverables are the same. The best way to prepare for an investment banking case study is to practise completing similar questions.
Investment banks do not tend to publish case study questions for practice. However, it is possible to formulate your own questions by looking at business scenarios involving possible mergers, necessary valuations or raising of capital.
As mentioned above, candidates will need to be confident with valuation skills. They will also need to display a good level of commercial awareness. Presentation skills and successful team working also need to be considered.
Before your case study interview, keep up-to-date with developments in the investment banking sector, both relating to company conduct and external impacts. This background knowledge is key when demonstrating your knowledge and enthusiasm for investment banking.
Thinking about work experience completed and even any extra-curricular activities from a commercial perspective is also a good way to start to interrogate different types of client relationship and look at the common factors for success.
Candidates should ensure that they can display a full understanding of key business concepts and can use the associated terminology comfortably in a conversation. Make sure you can confidently discuss the following:
Candidates must practise streamlining their thought process so judgements can be made under time pressure if required.
Candidates should also practise presenting their process of analysis clearly and justifying the recommendations they have made, to prepare for the scrutiny of the interviewer.
“A client owns her business (worth £400m) outright and is looking to release some liquidity while retaining a percentage of ownership. What recommendations would you make to the client to achieve maximum valuation?”
Accompanying information is likely to be provided with a question of this kind, such as a company overview and data on the company’s performance over the last three years. Go through any financial data carefully and make predictions as to what organic growth would look like for the company.
If you are given the relevant information, consider the breakdown of the current valuation.
Consider the industry of the client and predicted sector trends:
Think about whether any steps could be taken to make the company of increased appeal – consider current client portfolios and projects, etc.
Consider how you would advise the client to negotiate:
“A public company approaches you as they wish to raise capital. Recent earnings and the quarterly report have been reviewed and found to be in line with analyst predictions but the company is currently trading at an all-year low. The company’s management has designed a project it believes will substantially increase its EBITDA and wishes to raise the capital to advance. How should the company go about raising the capital necessary?”
For this question, you would be given an overview of the company and their financial statements to review.
You must consider whether the company should raise debt or equity.
Consider the share price, volume of shares outstanding and the market cap:
Look over the financial statements provided:
Organise your ideas clearly for your presentation, working through your thought process and the questions you posed to reach your recommendation. Around five PowerPoint slides should be ample.
“A renewables company is looking to make a significant acquisition. You have been asked to review the deal and make your recommendations.”
You will be given an overview and the financial information for both the buying company and the potential acquisition. You will also be provided with information relating to other companies similar to the proposed acquisition.
You will need to decide if the target company should be purchased and, if so, at what price.
You will be expected to use the data provided from comparable companies and apply multiples to the target company to settle upon a purchasing price.
Consider the financial situation of the purchasing company:
Consider the benefits of acquiring the target company:
Think about how any risks to the buyer can be mitigated.
Present your strategic recommendation clearly and concisely.
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