The world of private equity recruitment has become more competitive, with candidates showcasing advanced skills and knowledge. The shift is driven by a greater availability of online resources guiding aspiring professionals. Understanding the essentials of private equity has never been more important for newcomers and seasoned professionals alike. This review focuses on Wall Street Oasis’s (WSO) Private Equity courses, specifically the Interview Course and the Master Program. Here's a breakdown of what to expect from each: Wall Street Oasis Private Equity Interview Course Content Overview - Includes over 15 hours of LBO modeling tests, case studies, interview questions, and in-depth industry background. - The section covering fund strategies and the evolution of deal types is valuable for those needing clear, comprehensive answers in interviews. - Guidance on presenting past deal experiences helps refine how candidates showcase their qualifications. Content Quality - Developed by individuals with firsthand private equity experience, ensuring relevance and accuracy. - While its technical content is comparable to other providers, it remains effective in helping candidates prepare thoroughly. - Bonus materials like deal cheat sheets and sample recordings are practical for structuring interview responses. Course Reputation - Wall Street Oasis is a well-known name in the financial industry, frequented by those with career interests in finance. - Testimonials from over 9,000 successful candidates highlight the course's credibility. - Direct feedback from associates confirms positive experiences with the course. Community and Networking - Provides opportunities for connection with peers and industry professionals, offering a network for exchanging experiences and ideas. - Includes a Networking Course to assist candidates in securing interview opportunities, adding significant value. Wall Street Oasis Private Equity Master Program Scope and Structure

Working capital is a key element in understanding and enhancing free cash flow, which is why it is a priority for businesses aiming to optimize financial performance. To improve working capital, it’s essential first to understand how to measure and keep track of it. Consistent measurement allows evaluation of the success of initiatives and potentially uncovers ways to generate more cash from existing earnings. What Exactly Is Measured? The primary focus is on working capital absorption, which refers to the amount of cash tied up in working capital. Ideally, this figure should be negative, indicating cash surplus, while complete absorption suggests all cash is tied up, signaling financial distress. A commonly used metric for measuring this is the ratio of working capital to sales (WC/Sales), which indicates the proportion of sales revenue not yet realized as cash. Why Use WC/Sales? WC/Sales is favored for its simplicity and adaptability. It provides insights even as a company scales, helping monitor changes in working capital alongside growth. While an increase in company size could lead to improved metrics due to better customer and supplier leverage, it could also deteriorate if growth relies on less stringent credit practices. Monitoring WC/Sales frequently, such as weekly or daily, helps detect trends over time. Detailed Day Measures For a deeper analysis, day measurements like debtor days, creditor days, and inventory days are used. These are essentially ratios expressed as turnover periods. Debtor days, for instance, are calculated by dividing debtors by sales and multiplying by the number of days in the year, showing the average time it takes for debtors to pay. Similarly, creditor and inventory day calculations use COGS instead of sales, demonstrating how often inventory turns over in a year or how long it takes to pay suppliers. Integrated Monitoring Approach Combining WC/Sales with debtor, creditor, and inventory days provides a comprehensive view. If WC/Sales rises, examining day measures can help pinpoint the primary cause, allowing targeted management intervention. In some cases, external factors like market changes might affect a driver, prompting the need to focus on a different area to balance the overall metric.

In private equity, there are primary (or platform) investments and bolt-on investments. Primary investments involve direct cash infusions into new businesses, often in new industries. Conversely, bolt-on investments involve adding smaller, strategic businesses to existing portfolio companies, typically within the same industry. While primary investments often receive more attention, significant amounts are also allocated to bolt-on investments. These have the potential to generate substantial value, making them a key strategy for private equity professionals aiming for impactful yet understated results. Below are some key insights: - Smaller Scale and Lower Multiples: Bolt-on acquisitions usually target smaller businesses, which often come with lower purchase multiples and better deal terms. - Immediate Value Creation: Acquiring a lower-multiple business through an existing higher-multiple vehicle can provide immediate value enhancement. - Reduced Effort and Competition: Due to their smaller size, bolt-on acquisitions generally involve less work and attract fewer competing buyers. - Strategic Benefits: These acquisitions often bring revenue and cost synergies, allowing for slightly higher bids in competitive processes while still ensuring profitability. - Streamlined Due Diligence: Access to expertise within the primary investment vehicle facilitates easier and more thorough due diligence. - Prestige for Sellers: Owners of smaller businesses may prefer deals with established industry players, seeing value in joining a reputable firm rather than being acquired by purely financial buyers. - Expanded Market Reach: Bolt-on investments open opportunities in markets that might be limited by size-related restrictions. However, despite their potential, mergers and acquisitions frequently encounter challenges, including integration issues and cultural mismatches. Maintaining awareness of these risks is vital for ensuring bolt-on investments achieve their intended strategic objectives. For further exploration, see my post discussing the pitfalls of poorly integrated bolt-on deals, which I refer to as “clip-ons.”

Here’s a concise summary highlighting the human aspects of working at mega-funds versus middle-market private equity firms: Learning Curve - Mega Funds: Focus on becoming a polished dealmaker, emphasizing top-tier communication skills and integrating with a competitive environment. Junior roles often involve more specialization, leading to rapid mastery in specific tasks like financial modeling but with limited exposure to broader deal processes. - Middle-Market Funds: Emphasis on becoming a relatable dealmaker who can connect with business owners and provide practical advice. Broader involvement across deals fosters versatility but might come with a slower pace of deep technical specialization. Compensation - Mega Funds: Significantly higher earnings that grow disproportionately over time compared to middle-market peers. Large base salaries and meaningful carry potential, though true returns from carry may take years to realize. - Middle-Market Funds: Base pay is lower with smaller percentages of carry offered to close the gap, though the long vesting period and complex terms often reduce the actual benefits. Quality of Life - General Outlook: Private equity typically offers more manageable hours compared to investment banking, but workload can be similar across fund types depending on specific firm culture. - Mega Funds: Often likened to “banking 2.0,” with heavy workloads similar to their investment banking roots. - Middle-Market Funds: Lean teams mean associates often take on a broad range of tasks, which can lead to equally demanding hours. PowerPoint-heavy firms are a red flag for long hours. - Firm Conditions: The financial health of the firm affects everything from workload to expenses, impacting morale. Hierarchy - Mega Funds: Defined roles with less autonomy, especially at junior levels. Teams operate in a structured environment, focusing on specialized contributions. - Middle-Market Funds: Greater autonomy and broader responsibilities at junior levels, leading to faster professional growth. However, this can come with feelings of being under-compensated if junior staff are significantly contributing to firm success without proportional financial recognition.

endor financing, a common structure in private equity, allows a buyer and seller to bridge gaps in valuation expectations by deferring part of the purchase price. In this arrangement, the seller agrees to receive part of the sale price over time instead of in full at closing. This can be an appealing option for sellers looking to complete a deal and for buyers who wish to spread financial commitments and manage cash flow effectively. For instance, in a scenario where a business is valued at $100 million, the buyer might pay $60 million upfront and defer $40 million, which may come with interest, depending on the terms negotiated. The timeline and structure for the deferred payment can vary, ranging from a lump sum after several years to installments over an extended period or even tied to the eventual sale of the business by the new owner. In private equity, vendor financing is used strategically to meet the needs of both parties. If a seller wants a specific price—say, $85 million—but the buyer can only justify a $70 million valuation, deferring part of the payment allows the buyer to align the deal with their financial targets. This deferred payment has a lower present value due to the time value of money. For example, if the deferred $35 million is due in three years with an assumed discount rate of 20%, its present value calculates to $20.25 million. The buyer, who pays $50 million upfront, effectively values the deal at $70.25 million when considering the discounted future payment. Vendor financing differs from earnouts, where future payments hinge on achieving certain financial milestones. With vendor financing, the payment is typically fixed, though it may carry an agreed-upon interest rate to balance the risk for the seller and ensure a favorable arrangement for the buyer. An illustrative case could involve a private equity firm evaluating a purchase based on EBITDA and a multiple. If the seller seeks more than the buyer’s maximum justified price, vendor financing can bridge the gap. For example, if the firm is interested in buying a company with an EBITDA of $10 million and determines a valuation limit of 7x EBITDA ($70 million), but the seller demands $85 million, the buyer could offer $50 million upfront and defer $35 million for payment in three years. With a 20% discount rate, the deferred $35 million is presently valued at $20.25 million, making the overall perceived value approximately $70.25 million.