Case Study Transaction Services

Question

Hi Guys,

First time user as i am looking for some help!

I've managed to land an interview with KPMG for a role in transaction services as an Assistant manager. I was hoping if anyone has any advice on what to expect for the case study? I've had a read through on the forum but it's the level of detail on what to prepare myself for.

I have an understanding of key metrics and how to calculate them but i've never used them in a case scenario. This is my first attempt so i'm quite new to the whole process!

If anybody is able to help or shed some light on what to expect that would be much appreciated! The role itself is due dilligence so i would expect to see a heavy valuation sort of scenario.

Thanks

Rob

Answer 1

Hi,

Based on the description, it may be closer to the PE / IB M&A interview that is much more technical and detailed in the financial part. Usually, they give you much more time to prepare and do the valuation on paper / excel. Depending on the company you'll need to:

Find the relevant information in P&L, Balance sheet, CF statement
Do the simplified valuation using NPV: calculate cash flows and make assumptions about growth rate and discount rate
Do the valuation using comps - you'll have to explain which comps you will use and why
Do the valuation of the synergies
Play with different scenarios (e.g. how the stock-price will change if the deal terms leak into media, or how should the companies behave in a bidding process)

There are two types of frameworks you may use:

Commercial due-diligence of the target company
Synergies calculation of two merging companies

Note also that it can be a mix of both.

1. For Due Diligence you can use the following structure:

Market

Size
Growth rates
Profitability
Segments
Distribution channels

Competition

Market shares of competitors and their segments (see the next point)
Concentration / fragmentation (Fragmented market with lots of small players is less mature and easier to enter from a scratch. Concentrated market is hard to enter but has potential acquisition targets)
Unit economics of the players (Margins, relative cost position)
Key capabilities of the players (e.g. suppliers, assets, IP, etc)

Company

Unit economics (Margins, costs) in current or target markets
Brand
Product mix
Key capabilities

Feasibility of exit (in case of a PE company):

Exit multiples
Exit time
Existence of buyers
Risks

2. For Synergies Calculation you can use the following structure:

Revenue synergies - here you calculate the synergies in price and quantity (depending on the case it may be new geographies, new products, new distribution channels, bigger share on shelves crosselling opportunities, etc.)
Cost synergies - typically you use a value chain structure tailored to the industry (e.g. supply-production-distribution-marketing-after sales support)
Financial synergies - working capital, capital structure, tax
Risks - major risks that can decrease the synergies (tip: don't underestimate the merging companies culture factor)
Total synergies potential in $, adjusted by risk (probability of failure)

Good luck!

Answer 2

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