by Brian DeChesare Comments (31)

Your Own Private Equity Case Study Interview Template (The Dell LBO, Part 5 – Case Study Presentation)

Private Equity Case Study Interview

Today, we’re going to (finally) wrap up that Dell LBO case study that began months ago.

But more importantly, I’m also going to give you a private equity case study interview presentation template you can copy, paste, and re-use.

You’re also going to learn why you cannot believe much of what the mainstream media says when it comes to deal analysis and finance-related topics.

With this Dell deal, for example, 95% of the commentary in the media focused on the decline in the desktop / laptop markets, the unusual deal structure, Michael Dell’s sweet deal to claim ~75% of the company post-buyout, and so on.

However, those factors – particularly the market declines – make much less of a difference in this deal compared to points that few other people were even talking about.

It’s a classic example of everyone thinking one way about a deal or company when something else altogether mattered more.

Recapping This Case Study

In Part 1, we went through how to find data on the deal and set up the basic model.

Part 2 was about making revenue and expense projections, Part 3 was about how to set up the debt schedules, and Part 4 was about how to model post-buyout add-on acquisitions.

You can understand this article and tutorial without having read any of those, but you’ll get more of it if you’ve been through the first 4 parts.

The Deal is Done!

The main update since last time is that shareholders (amazingly) approved the deal in September.

Many firms already lost so much on Dell that they figured it was probably better to cut their losses at this stage.

Carl Icahn, of course, was pissed, but that always seems to be the case.

The Presentation, the Template, and the Video Tutorial

Here you go:

And here are all the files you’ll need:

I highly recommend full-screening this video in 720p so you can see everything better.

If you’re reading this via email, click here to view the video and this post.

Table of Contents

  • 0:00: Introduction & Case Study Structure Overview
  • 4:47: Overview of Private Equity Case Study Template Presentation
  • 5:48: Executive Summary
  • 7:47: Market Overview and Qualitative Factor Slides
  • 11:09: Discussion of Operating Scenarios
  • 13:09: LBO Model Output and Sensitivities
  • 17:10: What If We’re Wrong? What Factors Could Make the Deal Work?
  • 20:07: Conclusions and Summary

Previously in Private Equity Interviews…

You may have seen previous articles here on private equity interviews and case studies – this one is different for 3 big reasons:

  1. I’ve changed my mind about the most effective way to make case study presentations over the years.
  2. The recommendations I’ve given before are fine for relatively short/simple case studies, but they would not work as well for something as complex as this one.
  3. Oh yeah, and this is a real example + a template you can use and re-use.

My Recommended Structure

If you have a 20-slide presentation, you might divide it as follows:

Slide 1 – Executive Summary / Investment Recommendation

Slides 2 – 6 – Qualitative Factors That Support Your Conclusion

  • The Market
  • Competition
  • Growth Opportunities
  • Risks
  • Deal/Company-Specific Factors

Slides 7 – 16 – The Numbers

  • Valuation vs. Asking Price and/or Current Market Value
  • Revenue, Expenses, and the Scenarios You’ve Built
  • LBO Model Output
  • Commentary on the Numbers – Which cases are most / least likely? Why?
  • The Downside Scenario(s) – VERY important for buy-side modeling and analysis because you will lose your money if you’re wrong

Slides 17 – 19 – The Counter-Factual – Would anything cause your opinion to change? What could cause your recommendation to be incorrect? How can you hedge yourself?

Slide 20 – Conclusions – Similar to the first slide, but now you can reference more of the numbers and specifics you highlighted in the preceding slides.

You can see an example of this structure in the blank presentation template file right here.

If you only have 10 slides or 5 slides or some other smaller number, you could compress this and cut down on the number of slides in each section.

In this case study, we’re skipping over the valuation aspect because we’re analyzing a real deal that actually happened and we’ve been asked to offer our thoughts on it as-is.

You would have to do more work on that in case studies based on potential deals.

The Crux of the Deal: Who Cares About Market Growth – Got Margins?

In a “Base Case” scenario, this deal looks reasonable. We get fairly high IRRs with our baseline assumptions, ranging from 20% all the way up to 50% in the mid-range of the table:


But the “Base Case” scenario here is very rosy since we assume that the Operating Margin increases by almost 2% over 5 years… and that’s starting from a 3.5% margin, so 2% is an increase of over 50%.

The deal looks worse in other cases, including one where margins stay the same and one where margins decline by 1.5% instead:


And then things get really fun in both our own “Downside” case and the Street Consensus Downside case:


In contrast to margins, the decline of the PC and laptop markets barely makes a difference (see the Excel files and presentation for more on that).

This is not surprising: for a company with margins in the ~5% range, you would expect margin changes to make much more of a difference.

So this deal comes down to a very simple question: how certain are we that Dell will maintain its margins?

The answer is “not very” since 1) Margins have fallen in the most recent fiscal year, 2) It’s under a lot of pricing pressure in all markets, and 3) Even its acquisitions have traditionally had < 5% yields. There is very, very little evidence to support margins staying the same or increasing and a lot of evidence to support the opposite case.

As a result, we recommend against buying the company because those Downside cases represent too much risk, the company provides limited information on margins by segment, and there is almost no way to hedge against a risk like pricing pressure in the company’s core markets.

Slide 1: Executive Summary

Keep this simple – 5-6 bullets at the most. State a clear recommendation in the first bullet, followed by a few supporting factors (the numbers work / don’t work, the market is growing / shrinking and the company is well-positioned / not well-positioned, etc.).

Slides 2 – 6: Qualitative Factors That Support Your Conclusion

In these slides, you can focus on the overall market, the company’s competitors, potential growth opportunities, and deal/company-specific factors.

Here, we point out how Dell is in many different markets, each of which has different profile:

  • PCs and Laptops: Flat to negative growth, with a declining market share for Dell.
  • Servers & Networking: Growing modestly and Dell’s share is increasing.
  • Services: Unclear how big the market is, but Dell’s backlog is growing at a good clip and this has been an area of focus for them, especially overseas.
  • Software & Peripherals: Flat growth due to falling hardware sales but rising software sales.
  • Storage: Very small, but also essentially flat growth.

Dell has performed well against the competition in services and software, but it’s unclear how well it will do as an end-to-end IT provider against the likes of IBM and HP. And, of course, it’s a bit of a disaster against lower-priced desktop/laptop competitors and premium competitors (e.g. Apple).

Dell’s best growth opportunities are to increase its Servers/Networking market share, grow indirect sales (i.e. products sold via distributors rather than sales reps), increase Services revenue via bundling, and make large, solid acquisitions.

The biggest “deal” factor here is how Michael Dell’s ownership increases from ~15% to over 75%, invoking the rage of shareholders everywhere.

It’s also unclear exactly why Dell “needs” to go private to turn itself around, given that IBM and HP both did this as public companies.

Slides 7 – 16: The Numbers

The biggest problem here is that Dell doesn’t disclose much information on margins by business segment. Some older investor presentations have numbers, but there’s nothing very recent / helpful.

The most likely outcome is that their performance will be somewhere between the “Street Consensus” case and our “Base Case” – in other words, revenue will decline modestly and margins will also decline.

If Dell really earns very little Operating Income from its declining business segments, we might be more confident of its ability to maintain its margins over 3-5 years.

As it stands, though, the data is ambiguous at best.

Interestingly, the numbers “work” at first glance because:

  • The company still generates $3.0 billion+ of Free Cash Flow each year, even in more pessimistic scenarios.
  • It traded at an EV / EBITDA of 3.9x before the deal was announced, meaning it was very cheap for a tech company.
  • Dell is repatriating close to $10 billion of overseas cash to fund the deal.
  • Michael Dell is rolling over his equity.
  • And as a result of all that, Silver Lake barely contributes any of its own equity – $1.3 billion on a total deal size of $24 billion. It gets over 2x that equity contribution in FCF in just the first year!

Of course, the “Downside” cases here don’t look too pretty, which is the main reason we’re recommending against investing.

Yes, on a bright sunny day when leprechauns are dancing in the forest every deal looks great… but some deals fall apart in the Downside cases, while others hold up better.

This one falls apart even with very modest market share and margin declines.

Slides 17 – 19: The Counter-Factual

If we were making an “INVEST” recommendation, we might look at the risk factors in more detail here, explain why we might lose money on the deal, and how we could hedge against those risks.

Since we’re arguing against the deal, though, we list several factors that might make it work instead:

  1. If we were more certain of margins in future years;
  2. If we found out for sure that desktops/laptops contributed very little to the company’s margins;
  3. If it were a simpler company with a clear buyer (we might have to sell off business lines separately here, which adds to the exit risk);
  4. If there were other viable acquisition candidates with higher yields (15-20%) that weren’t incredibly expensive.

So it’s possible that our recommendation might be wrong – and you want to show interviewers and firms that you’ve thought through that possibility.

Slide 20: Conclusions

This slide restates the Executive Summary slide slightly differently.

We point out the crux of the deal: everyone was worried about the PC and laptop markets, when margins and margin contributions by business segment matter a lot more.

Without further insight into those, and more clarity around how its older acquisitions are now performing, this is a tough deal to recommend.

What Next?

Download all the documents above, including the template I gave you, and get to work picking this presentation apart and using it in your own case studies. The “blank template” file will also come in handy.

Oh, and subscribe to our YouTube channel to get even more tutorials and videos.

Between now and the end of the year, I’m going to add more shorter 5-10 minute clips for quick review of key topics.

That’s All For Now

With that, we’re done with this case study. The full 24-part case study that goes into more granular detail is already available on BIWS if you’ve signed up for one of the modeling courses there.

We’re gradually adding more YouTube videos to the M&I / BIWS channel, and I may do another case study like this one next year.

But it’s really up to you: articles/tutorials like this one tend to get a poor response rate since they’re so dense and packed with information.

Do you want to see more case studies? Shorter and simpler videos and examples? Or do you prefer to read about non-technical topics on this site?

Let me know when you have a chance.

The Rest of the Series:

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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Read below or Add a comment

  1. Hey Brian, just want to let you know that this is truly invaluable. I know it took a lot of time and effort into doing such detailed case study though the response rate isn’t always great. But I do want you to know that with ones who read and study it, its value is just immense. For a sophomore from a non target, I learnt so much from this which otherwise wouldn’t be available if it wasn’t for your time and effort. Thank you so much!

  2. A PE quizlet with some accurate information said that PE usually invests in preferred equity. Would you say that is true?

    1. Impossible to say without more context (what’s the source? What else did they say? What type of PE are they discussing? What type of preferred stock?). If by “preferred stock” you mean VC-style preferred stock, which is basically common stock but with a higher seniority and possible liquidation preferences, sure, PE firms would always prefer to do that when possible. If by “preferred stock” you mean the debt-like financing source that some public companies use, which offers a coupon that is like non-tax-deductible interest, then that is far less common.

  3. If you were doing a tuck-in for a portfolio company of a PE firm would you use an LBO model or accretion/dilution model to analyze the transaction?

    1. An LBO model because tuck-in acquisitions don’t exist to boost EPS accretion… they exist to boost the PE firm’s IRR in an LBO. So you look for deals where the yield is favorable and will meaningfully boost the combined company’s EBITDA and possibly its exit multiple so the IRR goes up.

      1. If you sought to sell the combined company to a strategic buyer, would you do an M&A Analysis showing them the combination would be accretive or dilutive (at the PE shop)?

        1. Possibly, but it wouldn’t be your main focus because that is the job of the buyer and the bankers advising them… your goal is simply to present the combined company as favorably as possible.

          1. Brian,

            I believe I asked this on your course and forgot the location of the question but what would a PE firm consider when buying a company to add on to its portfolio company other than whether it makes money or not and would synergies be a big part of the consideration when purchasing the company?

          2. Industry fit, potential revenues from the other company’s products/services, possibly synergies if the companies are complementary in some way… see the new/revised Atlassian case study.

  4. Great effort. I really learned a lot and enjoyed your explanations. Your way of explaining is clear and organized. Thank you so much

  5. Brian, could you pls help me with below:

    I am interviewing with a small PE backed start-up company operating in the infrastructure space. They have asked me to do a 3 hour test which will be a ‘standard IB/PE’ type of modeling test and will be emailed to me. When I asked a bit more detail about kind of modeling i should expect on the test they just replied saying ‘it would be a standard test for PE type recruiting based on acquisition of asset/company and would entail making projections etc’.

    So they have been very vague in their instructions and I don’t want to keep going back to them asking for more clarity. From your experience and based on above, what kind of test do you think I can expect? Appreciate if you could shed some light on ths at the earliest convenience. Thanks a lot.

  6. Hey Brian,
    I have a question about LBO analysis. If the PE firm is buying out a firm with only cash…would lbo model be needed?

  7. Avatar
    Unable to access

    Hi guys,

    I have an account as I have purchased courses in the past. But I am not able to access this case study on the link you provided after I logged in. Is this something I need to purchase separately?


    1. If you’ve signed up for the Fundamentals or Advanced courses, you should be able to access it directly – I just looked up your username by your email address but couldn’t find anything.

      If you can email with your username, we can look into it and make sure your account is set up correctly.

  8. This is fantastic material. Thank you for posting it and please keep more coming like it.

    1. Avatar
      M&I - Nicole

      Thank you for visiting the site.

  9. Hi, I go to a semi target university and I am freshman. There is a branch of J.P. Morgan’s private bank in the town near us. I want to try and get an internship next semester (or over winter break) in addition to my class schedule. How do you suggest that I go about contacting them and arranging something like that? I know most internships occur exclusively during the spring, but I have friends at other schools who have been able to arrange for something like that.

    Should I stop by the office and speak to them, or find someone at the branch on linkedin and email them? If they say they do not have any programs for school year interns, should I offer to work for free?

    1. Avatar
      M&I - Nicole

      I’d give them a call and tell them you’re currently a student at XX university. Tell them you’re interested in gaining some finance experience and would love to intern for them in their (XX divisions). I’d give the office a call first. Yes I may drop by the office after you’ve had a call with them. LinkedIn and contacting people in the office will also help. Try all avenues. It is likely that they may not pay you so I wouldn’t mention the pay part yet. If they say they don’t take in school year interns, then you say what about working for you for free for maybe around 10-20 hours (this is a subjective number) a week.

  10. Do you think social security will eventually be privatized?

    1. No, and it is probably the lowest priority entitlement for them to address since it is much smaller than Medicare/Medicaid. Unlikely unless there’s a massive crisis with 50%+ unemployment and the US GDP falling by over 50% or something similar.

  11. I really enjoyed this article and the previous ones about this case study. It’s rare you get an idea of what’s going on behind valuation to see what is substance and what is the intangible that is often reported on in the headlines.

    Reminds me of an earlier article you featured that linked to a story about the deck that was made about Green Mountain Coffee’s fast and loose assumptions on their numbers for the market size. Granted maybe the train didn’t crash completely in that case either, but I don’t buy into a lot of the romance surrounding some of these companies.

    Great article as usual. Thanks.

    1. Thanks! Yes, a lot of what’s reported in the media is false or misleading or simplified or some combination of all 3.

  12. Haven’t had time to do the case yet, but I am really looking forward to it.

  13. Hi Brian,

    I am currently an undergraduate freshman at the University of Michigan. I will be applying to the Ross School of Business after this year. I had a few questions:

    On my resume is it okay to write that I am a business major, despite not being admitted or applying to the business program yet? Or should I just write that I’m prebusiness/economics?

    I was also wondering what types of internships I should be looking at as a freshman?

    How soon after getting a business card at a career fair should you contact the recruiter? I went to our campus career fair and got business cards from a couple of mutual funds and financial advisory companies that were there.

    I have a cousin who is in the back office of JP Morgan’s IBD. Should I contact him and try to see if he can arrange anything? Or would it be a waste of time since he’s in the back office?

    Thanks for the help!

    1. 1) You can write that but just indicate you’re set to start the program next year.

      2) Anything business/finance-related you can find, even at small/local companies… budgeting, corporate finance, wealth management, at this stage the exact experience doesn’t matter as much.

      3) I would follow-up sooner rather than later, try to do it within a week so they remember you.

      4) You can contact him and ask, but it’s better to do something more front office-related at this stage even if it’s at a small firm.

      1. When I follow up, should I include a copy of my resume in the email. I currently have the contact info of a few mutual funds, a financial planning firm, the FDIC and an insurance company. In my area there is a local branch of Morgan Stanley’s wealth management firm that offers internships. Should I just submit an application online, or should I try cold calling the office first to make sure that they know who I am?

        What is the best way to get in touch with smaller investment banks that don’t recruit through the college of arts and sciences(which I am in now)? Should I just cold call and email analysts whose contact info I find on linkedin?

        Thanks for all the help!

        1. Avatar
          M&I - Nicole

          If the recipient responds and asks for your resume, yes you may want to include your resume in the email. Otherwise, I would just follow-up with a brief email. You can include your resume if you want but I doubt they will open the attachment (it takes more time).

          I’d suggest you to submit your application online and call the office. The best way to get in touch with banks that don’t recruit on campus is through cold calling/emailing via LinkedIn and perhaps through your personal contacts

          1. Thanks for the advice, I was also wondering should I call recruiters who are maybe 5-6 years older than me by their first name in my emails? Or is it best to simply refer to them as Mr./Mrs. ______. Should I ask them directly about internship opportunities or just request an informational interview?

          2. Avatar
            M&I - Nicole

            I’d call them by their first name. I’d probably request an informational interview if you have time. If you’re pressed for time, I’d just ask for opportunities at their firm. Sometimes it doesn’t hurt to be straightforward

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