Questions I Was Asked During the Interview Process Questions I was given more than once (in blue) TECHNICAL 1. 2. 3. 4. How does the income statement relate to the balance sheet? How do you compute free cash flows to the firm? How would you value a company? Of the different valuation methods you suggested (DCF, Trading Comps, Transaction Comps), which will give you the highest number? WHY? Which would give you the lowest number? WHY? 5. How would an increase in accounts payable affect your DCF analysis? 6. How do you compute WACC? 7. How do you find terminal value? 8. How do you compute enterprise value? 9. What multiples might I use in spreading comps for an industrial company? A tech company? 10. Why do you never see P/EBITDA or EV/EPS? 11. Which would have a higher debt multiple (Debt/EBITDA), an LBO of an industrial company, or an LBO of a tech company? 12. Company A has a P/E of 25, Company B has a P/E of 15. If A acquires B in an all-stock deal, would the acquisition be accretive or dilutive? 13. What are the advantages/disadvantages of issuing equity? Of issuing debt? 14. What does an investment bank do? 15. What is an LBO? 16. What is the 10-year treasury note trading at? 17. What is an LBO? 18. How would the issuance of a zero coupon bond be reflected on the balance sheet? 19. Tell me about something interesting you recently read in the WSJ? (Expect technical questions to follow your answer.) 20. If you were to use an exit multiple to find the terminal value, from where would you get that exit multiple? BEHAVIORAL/OTHER 1. Why would you want to work for our bank? 2. Referring to the items on your resume, is there anything you wish you had done differently? 3. Why should we choose you as opposed to other qualified candidates? 4. Imagine you and a VP/MD are on the way to a presentation and you notice one of the numbers from your analysis is wrong. What do you do? What if it is someone else’s (someone you are responsible for) fault?
BRAIN TEASERS 1. Estimate how many barbers are there in Salt Lake City 2. If you had a piece of paper infinite in length, how many times would you have to fold it in half to be as high as Mt. Timpanogas? (assume the paper can be folded, etc.) 3. How much does a Boeing 747 weigh? 4. How much does the Hinckley Building weigh? 5. If I gave you the choice of receiving $5 a year forever, or $100 now, what would the interest rate have to be for you to be indifferent. (think PV of a perpetuity)
OTHER THINGS I THINK HELPED ME ASKING GOOD QUESTIONS Whether going into an interview, or an informational visit, I always tried to have a couple good questions to ask. Usually these questions related to (1) the culture at the firm, or (2) a deal the bank had recently worked on. For cultural questions, I would ask about something specific to that firm’s culture. In addition, I would usually ask something simple, like “what do you like about working at _________?” Or if it is someone who came over from another firm, “I know you used to be at _______, what attracted you to ___________?” I feel that letting them talk about themselves is important. I learned a lot from their answers. Then I would ask about a deal I knew they had worked on, which required me to do some homework. For example, before meeting with someone in Citi’s tech group, I studied four or five deals that group had worked on. I then brought one of the deals into our conversation and asked questions about it. STUDYING DEALS I found that it isn’t always easy to know what deals a certain group had worked on. I would first go to the firm’s website. For example, Credit Suisse had a press release at the end of the year that listed the biggest M&A deals they advised on in 2007. Once you know the bank advised on a specific deal, it is easy to find details about the deal. The trick is finding out who the advisers are. For IPOs, it is easy to find out who the underwriters are. I would go to www.ipohome.com and see who the underwriters were on the most recent IPOs. Look at the recently filed IPOs too. This helped me in one situation when I was in a conversation with a an MD in equity capital markets at Credit Suisse. I asked him about blank-check IPOs (SPACs), which were becoming popular, and he mentioned they had filed one that same day. I responded, “I noticed. Greenstreet, right?” I had just read about it on ipohome.com.
To save time, I would study deals/IPOs that I knew a lot of banks worked on. For example, I studied the Vmware IPO, which I knew both Citi and CS worked on. Because I knew I would meet people at two different banks that worked on that IPO, I made sure I knew it well. Keeping myself updated on deals was important. For example, in a CS interview I was asked, “tell me about something interesting you recently read in the news.” I mentioned Microsoft’s bid for Yahoo which was made that same morning. I did my best to track deals on the web. The following resources were very useful to me. 1. Wall Street Journal 2. WSJ Deal Blog (the best of all, in my opinion) 3. NYTimes DealBook 4. DealZone (Reuters) 5. FierceFinance 6. Deal.com For all of these sites, I had RSS news feeds sent to my computer. That way I could constantly see the headlines of each site. BOOKS I READ (LISTENED TO ON MY IPOD) Vault Guide to Investment Banking Liar’s Poker – Michael Lewis Moneyball – Michael Lewis Barbarians at the Gate – Bryan Burrough Mergers and Acquisitions – Dana Vachon (not highly recommended) The Warren Buffett Way – Robert Hagstrom To save time, I listened to all of the above books (except the vault guide) on my iPod. I listened to them at the gym, in the car, walking from the parking lot to class, etc. I highly recommend this approach if you are short on time. After getting my offer, I decided to read Monkey Business (by John Rolfe and Peter Troob) and The Accidental Investment Banker (by Jonathan A. Knee). If I were to do things over again, I would have read these books instead of some of the others listed above, as I believe they are much more helpful resources for learning about IBD. These books are not available in audio form; however, you could probably read Monkey Business in a day or two (even if you’re a fairly slow reader, as I am). PREPARING FOR TECHICAL QUESTIONS For me, the first step was being able to present a DCF valuation. During the months leading up to interviews, I always kept in my wallet a printout of an IBC powerpoint slide explaining the steps of a DCF. Whenever I had a few spare minutes, I would pull it out and memorize it, and think about what each step meant. I also studied other questions that might come up in an interview, and I regularly asked IBC officers questions about certain things I didn’t understand.