CONFIDENTIAL Investment Banking Analyst Western Investment Club (WIC) November 8, 2007 Ali Nensi & Harish Venkatesh I. Functional Overview Financial Modeling Easy Example: Comparable Company Analysis Example: Merger Consequences Analysis Example: LBO Valuation Model Difficult Formatting, Formatting, Formatting… Comparable Company Analysis Company Market Cap Price (Mar 1, 05) Shares Outstanding LTM Net Debt LTM TEV LTM Revenue LTM EBITDA Imperial Oil Ltd. 89.7 349320145 31334.01701 164 31498.01701 21153 3899 Petro-Canada 69.55 260237506 18099.51854 2410 20509.51854 14442 4777 Suncor Energy Inc. 46.71 454293646 21220.0562 2159 23379.0562 8699 1890 Shell Canada Ltd. 86.6 275118462 23825.25881 45 23870.25881 11288 2633 Talisman Energy Inc. 42.27 371378490 15698.16877 2419 18117.16877 6479 2844 Canadian Natural Res. Ltd. 68.85 268180123 18464.20147 3704 22168.20147 7179 3928 Husky Energy Inc. 36.6 423673264 15506.44146 1874 17380.44146 8540 2623 **indicates millions of CDN$ Appearance Matters Formatting, Formatting, Formatting… Comparable Company Analysis Company Market Cap Price (Mar 1, 05) Shares Outstanding LTM Net Debt LTM TEV LTM Revenue LTM EBITDA Imperial Oil Ltd. 89.7 349320145 31334.01701 164 31498.01701 21153 3899 Petro-Canada 69.55 260237506 18099.51854 2410 20509.51854 14442 4777 Suncor Energy Inc. 46.71 454293646 21220.0562 2159 23379.0562 8699 1890 Shell Canada Ltd. 86.6 275118462 23825.25881 45 23870.25881 11288 2633 Talisman Energy Inc. 42.27 371378490 15698.16877 2419 18117.16877 6479 2844 Canadian Natural Res. Ltd. 68.85 268180123 18464.20147 3704 22168.20147 7179 3928 Husky Energy Inc. 36.6 423673264 15506.44146 1874 17380.44146 8540 2623 **indicates millions of CDN$ Comparable Company Analysis ($ in millions, except per share amounts) Company Price (Mar 1, 05) Shares O/S Market Cap LTM Net Debt LTM TEV LTM Revenue LTM EBITDA Imperial Oil Ltd. $ 89.70 349,320,145 $ 31,334 $ 164 $ 31,498 $ 21,153 $ 3,899 Petro-Canada 69.55 260,237,506 18,100 2,410 20,510 14,442 4,777 Suncor Energy Inc. 46.71 454,293,646 21,220 2,159 23,379 8,699 1,890 Shell Canada Ltd. 86.60 275,118,462 23,825 45 23,870 11,288 2,633 Talisman Energy Inc. 42.27 371,378,490 15,698 2,419 18,117 6,479 2,844 Canadian Natural Res. Ltd. 68.85 268,180,123 18,464 3,704 22,168 7,179 3,928 Appearance Matters And the rest… All part of the job II. A Day in the Life A Day in the Life… 8:00 a.m.: This is a good time to start for first-year analysts; everyone else comes in a half an hour or an hour later. 8:03 a.m.: Upon entering cube/office, check to see if voice mail light is on. If it's Monday, pray to God it's not on, because that means you didn't check it over the weekend and someone might have had work for you to do and wants it in an hour from now (or worse, wanted it yesterday). 8:05 a.m.: Get hot coffee or tea; you'll need it to wake up. Also, out of camaraderie, get one for other analyst guy who didn’t go home in the first place. He'll thank you for it, though he probably won't know your name in his current state. 8:30 a.m.: Look nervously around the corner to see if associate or director has arrived, so nobody catches you surfing the web for yesterday’s football game highlights (that you missed…). Keep a random spreadsheet open you can alt-tab between just in case. 9:15 a.m.: After waiting for five minutes for slow network to load, find your files and continue on research/model? Whatever you didn’t finish the night before because you knew you still had this morning. 9:17 a.m.: Phone rings. Director/associate calls you for status on the one thing you haven't finished yet. Hold him off until you can finish it and curse yourself for not finishing up last night. 9:30 a.m.: Phone rings again. You know what director/associate is going to say so right off the bat you say, "I’m almost done." Then in between a lot of "okays" you curse your computer for being so slow. A Day in the Life… 10:00 a.m.: Conference call with deal team, which may include people from other product and industry groups who work in conjunction on a project with you. Managing director is likely to read over material that you were 90 percent responsible for? But only your associate and director know this. Pray nothing’s wrong with numbers and grammar. 11:10 a.m.: Too early for lunch but you're already hungry. 11:15 a.m.: Call up any other analyst buddy in some other group or office and make small talk. He won't have time to talk to you anyway, but it beats having to look at the model again. 12:45 p.m.: Lunch across the street or, if you feel rich, pick up food from some fancy sandwich place a few miles away as a sign of your protest to the cafeteria's overpriced salads. Always take cell phone with you. 3:00 p.m.: New business coming in through another managing director. Your task, should you accept (and you will), is to fill out the first in a long series of forms that will be submitted to one committee after another for review. You will agonize over the outline and dig through countless sources to extract information and dump it, re-formatted, into your growing file. This will take the rest of the week if your managing director planned ahead. Otherwise, the loan commitment is due in two days and you will not sleep. A Day in the Life… 4:30 p.m.: Managing director calls and asks you something you could not possibly know. Sound as smart as possible and then defer question to your associate. 6:00 p.m.: Order dinner. Any dinner ordered before this time is not eligible for refund. Adjust stomach and eating habits accordingly from day one. Everyone asks you to put it on your corporate Amex card. Make sure you have enough on your personal bank balance to pay the full amount when the bill is due later, since your refund through the expense system will take a month to process. Run around with list of who wants what, don't make suggestions, don't write down the wrong thing, and get on with it. 6:35 p.m.: Wait for dinner. (An alternative to waiting might be: A managing director/executive director gives a director a call. The director calls an associate. The associate calls you, and you’re evening/week/weekend is ruined because a client wants presentation and model X by the end of next week.) 7:45 p.m.: Eat dinner, chat with other analysts about what's up. Take great interest in rumors, gossip and all kinds of BS that would get you fired if you spoke about it outside the conference room you’re all huddled in. 8:35 p.m.: Return to work. Call up internal library for some research you don't have access to and hope someone's still there, or it will be a tight morning tomorrow. 10:00 p.m.: Associate leaves, giving you a couple more things to do on way out. "Take your time, no rush," he assures and thanks you for the good job you've been doing in advance. You appreciate his gratitude but would also like to go home at some point. A Day in the Life. 11:00 p.m.: Discounted cash flow model inputs take very long and the model still doesn’t balance. It will be a long night. 2:00 a.m.: You check your e-mail one more time (in fact, you never close it in the first place, as this is the first rule of survival for anyone in investment banking), then you make sure everything is saved, and log out the computer. Call a car or and get some sleep.
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