Investment Banking Case Study Examples – A Guide
If you are preparing for an investment banking interview, you’ll probably need to conquer a case study interview. because case studies are a very crucial component in the investment banking hiring process. particularly if you have never completed a case study before, that will be very challenging for you to get into the investment banking field. this article has covered everything you need to know about investment banking and potential investment banking case studies. there are also tips and practice investment banking case study questions with examples of how to resolve them..
What is Investment Banking?
Investment banks are financial firms that perform a variety of tasks, including underwriting, assisting companies with the issuance of stock and debt securities through initial public offerings or fixed-priced offerings enabling mergers and acquisitions on both the buy side and sell side of the deal, corporate restructuring and many other tasks.
To efficiently complete these significant deals, a firm turns into an investment banker when it requires finance services. With some of the best benefits in the businesses, it is an extremely competitive industry.
How Does Investment Banking Work?
Investment banking offers services and serves as the middleman between businesses and investors and focuses mostly on shares and stock exchanges.
Investment banking services help big businesses and organizations in developing a successful investment strategy that includes accurate financial instrument valuation.
When a company conducts an IPO or initial public offering, an investment bank purchases the majority of the shares immediately on the firm’s behalf.
The investment bank, which is now serving as a stand-in for the company then sells these shares on the market. The investment bank improves the company’s revenue in this way while also making sure that all governing rules are observed.
The investment bank makes money by marking up the initial price of shares when selling them to investors, helping the organization in making the most profit possible from this activity.
If a circumstance in the market emerges where the stock becomes overpriced, the investment bank also runs the risk of losing money by selling the stock at a lower price.
An organization should assess its requirements and carefully consider all of its possibilities before seeking guidance from an investor banker. Before the company visits an investment bank, there are a few crucial considerations including the amount of capital being raised and the level of market competition. When the business has clarity in these areas, it can enlist the assistance of investment bankers to find new businesses to invest in.
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Benefits of Investment Banking
Investment banking assists big businesses in a variety of ways to make crucial financial decisions and make sure they maximize revenues. That’s the reason, Investment banks are a prevalent financial institution among these businesses and even governments.
Here Are Some of the Advantages of Investment Banking:
- Investment banks effectively manage their client and provide them with the information they require regarding the advantage and disadvantages of investing their money in other businesses or organizations.
- These banks serve as a bridge between the company and the investor, ensuring a rise in financial capital by helping in major financial transactions like mergers and acquisitions.
- It conducts an in-depth analysis of the deal and project that will be undertaken by its customer to ensure that the client’s money is invested safely and helps to reduce the risks involved with the mentioned deal or project.
What is Investment Banking Case Study?
You must have solved case studies during your investment banking training.
Analyzing a business condition is done in case studies during investment banking interviews.
You would be provided with all the necessary data and have adequate time to examine broad case studies. There you would be asked for your opinion on business-related issues.
Your Task Includes,
- Make the necessary deduction.
- Investigate the matter, which is typically a client’s business.
- Give suggestions for resolving the current issue along with an explanation.
Investment banking case studies are frequently used to evaluate a job candidate’s potential performance in real circumstances, where your interviewers would give you a problem and ask for a detailed recommendation.
By presenting them with a hypothetical scenario similar to those experiences while working in the field, your job is simply to analyze the scenario and give them justified reasons.
Case studies are typically presented at the end of the application process, most frequently at the final interview or during the assessment center.
The majority of questions in investment banking case studies revolve around acquisition, capital raising, or business growth.
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What Are the Types of Case Studies?
Take home investment banking case study.
- You will probably receive the case in advance so you have more time to work on it before the assessment day.
- In the case of take-home case studies, you are given a few days to work on them, complete your analysis, and showcase your recommendation to the bankers over a 30-45 minutes presentation.
- It involves a much deeper analysis including merger/LBO modeling, company procedures, and valuation.
On the Spot or Blind Investment Banking Case Study
- On the day of your assessment center, the case can be presented to you blindly with little time for preparation.
- These are given to you on the day of your interview and within an hour or two you are supposed to present it on the spot.
- The time split for this process would usually be 45-60 minutes of preparation, 10 minutes of presentation followed by a round of question and answer.
- It would not involve such deep study.
- Some case studies on investment banking may occasionally be given as a group task, where the employer will use this as an opportunity to examine the candidate’s analytical skills and teamwork qualities.
Why You Should Prepare for Investment Banking Case Study?
The theory behind these case studies is that because the qualification for various professions varies, bankers don’t trust the conventional method of interviewing applicants.
Case studies are preferred by banking recruiters as a better way to evaluate applicants because they show how you should perform in the workplace.
You don’t need to worry about whether your response is right or wrong in this situation because the interviewer is more interested in how the candidate thinks and how well they can use logic and analysis to come up with an innovative answer to the challenge at that time.
Investment banking case study writers aim to inspire applicants to come up with their ideas and apply critical thinking.
Candidates for these positions must have a variety of skills, but problem-solving ability is one of the most important.
Recruiters are interested in learning how you would approach difficult circumstances and use your intelligence, education, and professional experience to handle them successfully.
Additionally, candidates get an amazing chance to practice their other abilities including presentation, communication, and interpersonal skills.
These factors make case studies significantly more important than the other methods of evaluating applicants in the investment banking hiring process.
How to Prepare for Case Studies Before Assessment Day?
- Read as much deal news as you can while preparing and going through the daily market and business news in popular publications.
- Discover the many valuation methods, how they are calculated, and how they are evaluated then try out your calculations after watching YouTube videos or reading information on valuation methods.
- You must prepare a structure using PowerPoint and Excel consistently, especially for modeling and valuation-based case studies.
- Also, improve your familiarity with software like Microsoft Excel so that you can use spreadsheets effectively.
- You should practice the kinds of questions you might get during your presentation.
- Real case study interview questions used by banks might not be available to you.
- But, knowing that you need to practice, consider contacting a colleague or friend, or mentor you know who has gone through case study rounds for the types of questions they were asked.
How to Solve It and Perform Well During Assessment Day?
- To solve the case study, take an organized strategy.
- Before making a conclusion or deciding how to solve the problem, carefully analyze the case and the questions.
- Professionally prepare Excel and PowerPoint while modeling case studies.
- Every assentation you make should be supported by solid logical arguments, and the first few points should address that case’s most important issues.
- Even if is not necessary, it would be advantageous to have a specialized understanding of the industry being studied.
- Do not beat around the bush as you have limited time and hence be precise as you speak.
Investment Banking Case Study Examples and Answers
The decision-making case and the financial modeling case are two main types of case studies used in investment banking assessments.
Modeling – Investment Banking Case Study
Modeling case studies are typically take-home tasks that require you to perform straightforward valuation and financial modeling.
So rather than being a case study, it is more of a modeling exam.
The investment banker gives an overview of creating models as well as developing a variety of methods for an in-depth and useful understanding of the subject.
The modeling case study will either use a simpler merger or leveraged buyout model or a free cash flow to the business valuation.
To assess whether the firms are overvalued or undervalued, you would be asked to examine their valuation multiples.
In most cases, you will be given a few days to finish your analysis. Then on the day of the interview, you must spend 30-45 minutes presenting your case to the bankers.
Because you will have more time to work on it, the analysis will be considerably more in-depth than in a client case or decision-making case study.
Evaluating Strategic Alternative: Case Study 1
To maximize shareholder value, a magazine publisher is deciding whether to sell, grow organically or make tiny “tuck-in” acquisitions. It is looking for an investment bank to assist it with its alternatives and has asked for a presentation from your company.
They would provide you with a firm summary with financial statements and five-year forecasts, a ten-page market analysis with main competitors, minor acquisition candidates, and recent transactions.
- First, go through everything to get a sense of the industry, where it’s going, and how much this firm is worth in comparison.
- Complete a quick assessment using publicly available rivals and prior transactions and a DCF.
- Evaluate the figures provided by the value, the company’s potential for organic growth, and the availability of suitable targets for acquisition.
Decide what to do, in most cases it is advisable to say “Sell” unless the industry is expanding rapidly (Above 10% annually) the company is completely undervalued, or these are acquisition candidates that will increase revenue or profit by at least 20-30%.
After you have come to a decision, you must prepare your presentation and decide what to tell the bankers.
If you are analyzing scenarios like this during a 30-minute presentation, choose 10 slides with 3-4 important themes each and attempt to spend 3-4 minutes on each slide.
If you choose to write “Sell the company”, consider the following steps in preparing a presentation:
- List the three main reasons for recommending selling
- Overview of the industry- Is it expanding? Falling off? Or Being Inactive?
- Position of the company in the industry? Leader or Second level position? Or is it strong or weak?
- What would organic growth look like in five to ten years? How much larger or more valuable would the company be?
- Prospective tuck-in acquisition candidates
- Why organic growth and acquisition are not the answers.
- Why selling now will generate the most shareholder value
- Show prior transactions and public comparable valuations
- Display the DCF output and the sensitivity chart valuation
- Summary- State again that the best course of action is to sell your company right away and that neither organic development nor the acquisition of smaller firms would increase your company’s valuation in five to ten years.
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Decision Making- Investment Banking Case Study
Case studies that include decision-making are more common than case studies that involve modeling.
In this kind of case study, the applicant is required to decide for their client and offer advice.
The client case study can center on locating financial sources or determining whether or not a proposed merger should go forward.
At the interview, you should be prepared for these questions. Because you will have a set amount of time in which to examine and present the case. You will be given a total of 45-60 minutes to prepare and beforehand 10 minutes presentation with a Q&A round.
Case Study 1
A customer owns her company fully and wants to release some liquidity while keeping a stake in it (Worth £400 million) what suggestions would you provide the client to get the best possible price?
A corporate overview and details about the company’s performance over the last three years are provided.
Examine all financial information thoroughly and forecast the company’s organic development.
Consider the breakdown of the present valuation if you are provided with the relevant facts.
Think about the client’s industry and the expected trends for that market.
- How does the valuation stack up against others in the field?
- Is the current valuation backed up by reliable industry forecasts?
- Given the slow development of the industry, would it be wise to give up more equity?
- Is it expected that this industry will keep growing?
Consider present customer portfolios, projects, etc., while deciding whether any actions could be performed to boost the company’s value.
Think about suggestions for the client’s negotiation strategy:
- How much equity should they be prepared to give up?
- What number should the client choose as their actual reserve price, in your opinion?
Case Study 2
A publicly traded firm contacts you in the hope to raise money. Analysts’ expectations were met by recent profits and the latest financial report, but the company’s market values are lowest throughout the year. The management of the company has developed a project that it hopes would significantly boost EBIDTA and is looking to raise funding for it. What should the business do to raise the required capital?
A summary of the business and its financial statements will be provided to you to prepare for this question.
You must think about whether the organization should raise debt or stock.
Think about the market capitalization, share count, and share price:
- How would the company be affected in this environment if it issued fresh shares?
- In terms of dilution of ownership, would equity financing be an appropriate option?
- How would the effect currently differ from what it would be if the share price were back to normal?
Then examine the provided financial statements:
- Would increasing debt be a better course of action if they are actually under management’s predictions?
- How much they could possibly raise?
- What potential problems could a debt increase bring about?
- How could the cost of interest be reduced?
Prepare your presentation by organizing your ideas clearly and go through your questions and thought process to get at your recommendation.
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Potential Acquisition: Case Study 3
A software company is considering a large acquisition. It has chosen the company it wishes to acquire and has contacted a number of investment banks to obtain their thoughts on the transaction and how much they should pay. Based on these presentation, it will choose an advisor and decide what to do.
Two page summaries of the buyers and seller, each containing financial data as well as statistics and multiples for similar organization.
With a recommendation on whether to move forward with the acquisition and if so, how much to pay for the target, create five minute presentation.
For the very first, you should consider this two question to solve this,
- Should they purchase that target business?
- What price should they want for the target business?
For an example,
Let’s assume that the comparable companies are trading at EBITDA multiples that range from 4 to 8 times, with the median at 6 times and the 75th percentile at 7 times, respectively. You choose the 25th to 75th percentile range of 5x-7x and apply it to the target company’s $10 million EBITDA since the target company’s profit margins and revenue growth are comparable.
Therefore, the purchase price should range between $50 million and $70 million.
If you have access to a computer, you can also design a DSF, but if you are short of time, keep it straightforward and use multiples.
To answer the question “Should they buy?” take note of the following:
- Will the buyer be able to purchase the seller with enough cash, debt, or stock issuances?
- Will the vendor increase the buyer’s revenue and profit?
- Will the buyer benefit from new consumers, new goods, new markets, or other kinds of benefits as a result of the seller’s acquisition?
After concluding these, you can complete your presentation.
Investment Banking Case Study: FAQs
Q. what is an investment banking case study in short terms.
By presenting candidates with a hypothetical scenario that is comparable to those they might face on the job, investment banking case studies are frequently used to evaluate how the candidate would function in real circumstances.
Q. Which skills are tested in investment banking case study interviews?
Candidates’ analytical and financial skills as well as problem-solving, presentation skills, critical thinking, and interpersonal skills are tested during investment banking interviews.
Q. Is there any way to practice investment banking case studies?
There are various tools, financial modeling online courses, and investment banking textbooks accessible to practice investment banking case studies. Additionally, there are certain career services offered at universities and institutions that provide investment banking programs with case studies.
Investment Banking Case Study: Conclusion
The opportunities to demonstrate your abilities and expertise to investment bankers are provided by investment banking case studies, which are a crucial component of an interview process.
We have covered some of the investment banking case study examples that will help you in preparation for an investment banking interview.
No doubt it is a very competitive yet tough field to break into but we hope, through this article you achieve the success ladder in the investment banking industry.
Author: Swati Varli
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Investment Banking Case Studies – Job Application
By Ivy Wang |
Reviewed By Rebecca Baldridge |
November 21, 2022
What are Investment Banking Case Studies
Candidates will normally encounter case studies at the final stage of the application process, likely during an assessment or final-stage interview. Investment banking roles are highly competitive, and candidates must be properly prepared.
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 on the job.
Most investment banking case study questions center on acquisitions, raising capital, or company expansion. The case may be given to you ‘blind’ on the day of your assessment with only a short amount of time provided for preparation. If the case is likely to involve deep analysis, financial modeling, or a company valuation, you will likely be given the case in advance to give you more time to work on it before the assessment day.
Key Learning Points
- Investment banking case studies are often used to assess how job candidates would perform in a real situation by presenting them with a theoretical scenario like one they would encounter on the job.
- While general questions give the interviewer a superficial impression of the candidate’s skills and fitness, case study questions allow the interviewer to assess the candidate’s ability to handle multiple levels of analysis and problem-solving.
- Case study questions test reasoning and communication skills as well as analytical skills. They are useful for assessing how candidates approach complex issues, make critical judgments, and deliver recommendations.
- With many case study problems, there will be more than one path to success and more than one possible solution.
- Investment banks are looking for decisive candidates who can articulate and logically present their solutions and defend their decisions under scrutiny.
What are the Types of Investment Banking Case Studies?
In general, there are two types of case studies during an investment banking assessment, the decision-making case, and the financial modeling case.
Decision-Making Investment Banking Case Studies
Decision-making case studies appear more frequently than modeling case studies. In this type of case study, the candidate must make decisions for their client and provide advice. The client case studies could be based on finding funding sources, or whether a proposed merger should proceed and why or why not.
You should expect these questions to be given to you at the interview. Therefore, you must analyze and present the case within a given time frame. Throughout, you will have 45-60 minutes of preparation time and a 10-minute presentation, followed by a round of Q&A.
These case studies do not involve in-depth analysis of the case, given the short amount of time available.
Decision-Making Case Study Example
One of your clients is a global corporation that manufactures and distributes a wide range of perfumes. They are contemplating ways to expand their business. They may either introduce a new range of fragrances with their current distribution channels or start a completely new company with different stores.
You need to determine which solution is better for the business. To do so, you need to compare the return on investment and decide on a solution. Be ready to support your reasoning.
Modeling Investment Banking Case Studies
Modeling case studies are usually take-home assignments where you must do financial modeling and a simple valuation. Thus, it is more of a modeling test than a case study. The Investment Banker provides an introduction to building models, developing multiple techniques for a comprehensive and practical understanding of the topic.
The modeling case study will either employ a free cash flow to the firm (FCFF) valuation on a company or require a simple merger or leveraged buyout model. You would be expected to analyze the corporations’ valuation multiples to determine whether they are undervalued or overvalued.
Generally, you will be given a few days to complete your analysis. Then, you need to spend 30-45 minutes on the day of the interview presenting your case to the bankers. The analysis will go much deeper than a client case study because you will have more time to work on it.
Modeling Investment Banking Case Study Example
A pharmaceutical company wishes to make an acquisition. It has identified the target company and approached you to determine how much they should pay. You will be provided with the necessary financial information, metrics, and multiples, as well as the buyer and seller company profiles.
To complete the case study, you need to determine if the acquisition is feasible. Second, what would be the structure and synergies of the deal if the buyer has access to capital? You need to use multiples and valuation metrics to determine the price range for the transaction.
Access the three-statement case study example to practice a modeling case study.
How to Prepare for Investment Banking Case Studies
Regardless of which type of case study a candidate is presented, the thought process and deliverables are the same. The best way to prepare is to:
- Ensure that key business concepts are well understood and that you can use the associated terminology comfortably in a conversation.
- Learn about various valuation techniques, how to employ them, and how to interpret them. Prepare for case studies by mastering valuation for investment banking with the online investment banker course . Learn how and when to utilize key valuation methodologies and the supporting calculations
- Make sure you read business news regularly and focus on discussing the details of banking transactions in the news.
- Read as many case studies as possible so you get the knack of understanding business scenarios and analyzing Especially for modeling and valuation-based case studies, you must be prepared to format your work using PowerPoint and Excel.
- Check company websites to see if sample case studies are available for reference. 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, valuations, or capital raises.
- Candidates must practice streamlining their thought process so judgments can be made under time pressure.
- Read through the scenario carefully before beginning to form an opinion on how the problem should be tackled. This will ensure that no intricacies are missed, and your response addresses all facets of the case.
- Learn how to stand out from the crowd in your interview with the investment banker interview skills course , designed to prepare you for your interviews and enable you to make a great impression.
- Investment Banking Case Study Example
A magazine publisher is evaluating whether it should sell, continue to grow organically, or make small “tuck-in” acquisitions to maximize shareholder value. It is selecting an investment bank to advise on its options and has requested a presentation from your bank.
Review the company’s financial and market information and create a 30-minute presentation analyzing its options. Recommend a specific course of action – selling the company, continuing to grow organically, or making smaller acquisitions.
The answer to this case study is rather subjective. You should take a stand and support it with well thought out reasons. Here’s how you should approach it:
- First, read through everything and get a sense of the industry, where it’s heading, and how much this company might be worth based on comparables. If they don’t give you much information on comparable public companies or precedent transactions, you’ll have to do your own research.
- Complete a brief valuation using public comps, precedent transactions, and a DCF.
- Weigh the numbers the valuation gives you, the company’s organic growth prospects, and whether there are any good companies to acquire.
- Make a decision-it’s usually best to say “sell” unless the industry is growing quickly (over 10% per year), the company is extremely undervalued, or there are acquisition targets that would boost revenue or profit by at least 20-30%.
- Keep this simple and straightforward-the numbers should back up your reasoning, not take over the entire presentation.
- You could get much fancier with the analysis and look at the company’s valuation now, 5 years from now, and if it acquires 1 or 2 companies, but that isn’t necessary and it may just make your presentation more confusing.
4. Sample Answer
If you decide to sell, you can write:
Slide 1: Recommendation to sell and the three key reasons why.
Slide 2: Industry overview – Is it growing? Shrinking? Stagnant?
Slide 3: Company’s position in the industry – Leader? Tier 2 player? Where is it strong / weak?
Slide 4: What organic growth would look like 5 or 10 years in the future – how much bigger / more highly-valued would the company be?
Slide 5: Potential tuck-in acquisition candidates.
Slide 6: Why neither organic growth nor acquisitions are the answer.
Slide 7: Why selling now produces the greatest shareholder value.
Slide 8: Valuation – Show public comps and precedent transactions.
Slide 9: Valuation – Show DCF output and sensitivity table.
Slide 10: Conclusion – Reiterate that selling now is the best option and that neither organic growth nor acquiring smaller companies will result in a higher valuation 5-10 years from now.
If you come to a different conclusion – for example, that acquisitions are the best strategy, you would reverse the order and list the solutions you’re not recommending first, concluding with the one you are suggesting.
Investment banking case studies are an important element in the interview process, it is an opportunity to showcase your skills and talent to investment bankers. In general, there are two types of case studies, the decision-making case study and the financial modeling case study. Candidates will need to be confident in their valuation skills. They will also need to display a good level of commercial awareness. Presentation skills are also critical.
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