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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.

Investment Banking Case Study Examples (1)

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 

Example: 

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.

Given Materials: 

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.

Solution:

  • 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

Example:

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?

Given Materials:

A corporate overview and details about the company’s performance over the last three years are provided.

Task:

Examine all financial information thoroughly and forecast the company’s organic development.

Solution:

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

Example:

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?

Given material:

A summary of the business and its financial statements will be provided to you to prepare for this question.

Solution:

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 

Example

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.

Given Materials: 

Two page summaries of the buyers and seller, each containing financial data as well as statistics and multiples for similar organization.

Task: 

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.

Solution:

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 is an intern at IIM SKILLS as a Content Writer. Always being the happy kid whenever it comes to nature, she holds a Master’s degree in wildlife. She is a weeb and passionate about arts and crafts, reading, journaling, dancing and solo travel. For her interest she is always ready to explore new things against her better judgment. At the same time also being the person who will meow back to stray cats just to get their attention.

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