Investment Banking Division - Your Dream Job!
IBD is a Dream Job of many students! First, because it's wage and bonus is relatively high, which makes it the best in the investment bank industry! Second, it is because the work content is challenging enough. You can learn a lot from working in M&A, Pre-IPO Deals, DCM and ECM, which is a good starting point for Career! However, due to the high difficulty of IBD work, interviews are also very technical and difficult! Today, we would like to teach you to answer 3️⃣of the most difficult IBD common interview questions! In addition, many students wanted the Free IBD Valuation Booklet, to get it read till the end! ⭕️Frequently asked questions in the Investment Banking Division? How to answer? 1️⃣Startup valuation questions: Example: If there is a High Tech Startup that does not provide the company’s EBITDA, Earnings Before Interest, Taxes, Depreciation, and Amortization data, how will you evaluate the company’s value? 📍When answering questions that are related to Valuation, there are two things to look at: 1.Did the company launched any products in the market? 2. Will the product it sells appreciate in the future? In addition to considering the company’s total revenue, there are many aspects to assess whether the company is worthwhile, such as the number of users, the growth rate, and the client’s sense of belonging to the product (whether customers will come back and buy it again?). As there are so many technologies to record such information and data nowadays, making it easy for the company to make corrections in product sales and promotions ⠀
2️⃣ Indicators that can help you value a company ⠀
📍Commonly used Valuation indicators: ⠀
✅ Scorecard Value (scorecard valuation method): helps you compare the similarities between companies, stages (if all getting financing), the type of company’s Average pre-money valuation (Average pre-investment valuation)
✅Berkus method: Breaking down the characteristics of a company, including entrepreneurial speculation, Model (prototype), establishing team, marketing strategy, product production and sales. Example: As it is important for a High Tech Startup to talk about Business Model, if a company scores full marks on any of the above criteria, it will get a valuation of $500,000. In other words, the highest valuation will go. 2.5 million ⠀
✅The risk factor summation method: Dividing the company’s risks into 12 types and then evaluate the level of risk ⠀
✅Venture Capital Method (Venture Capital Method): to calculate the Terminated Value (not suitable for companies with no income) ⠀
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3️⃣ Use Discounted cash flow (a discounted cash flow model) to evaluate a company’s worth of investment: ⠀
📍When answering questions related to DCF, you can refer to the following methods: ⠀
✅Assess the cash flow in five to ten years based on the company’s assets ⠀
✅Calculate future cash income, and then discount it into the current value (net present value)⠀
✅Calculate the terminal value of the company. Assuming that future cash flows are positive, the company’s capital structure and market interest rates need to be assumed to be stable ⠀
✅Use the Weighted Average Cost of Capital (WACC) to calculate the discount rate and the value of the discounted time ⠀
✅Add the discounted number to the enterprise value, subtract the net debt and divide the diluted EPS, which would then be equal to the intrinsic value of the stock. ⠀
Of course, if you want to prepare for a difficult IBD interview, it’s definitely not enough to just look at the 3 questions solved above. HKCareers 💡 prepares the Investment Banking Valuation Methodology Guidebook 📓 for you. If you want to further prepare for the IBD interview. 1️⃣Like this post; 2️⃣the three friends below the tag before noon on 23/12, and HKCareers will share it with you for free! ⠀
We help university students like you to get into Investment Banking, Banking, Property/ Conglomerate and Advisory/ Consulting. Follow us on Instagram (ig: hkcareers) to know insider tips about grad job/ internship hunting. Visit hkcareers.hk to know more about the result-based career coaching program.
