Evercore Interview Prep

What multiples would you use for certain companies?

EV/EBITDA strips out debt costs, taxes, and depreciation, sometimes giving a company an overly optimistic outlook. PE Ratio could be affected by stock price manipulation and individual investing. EBITDA is more useful for equity investors, as they are looking not only for market value but overall growth of a company

Rights Offering

Existing shareholders are given the right to buy new shares at a discount to the current market price; Dilutes ownership unless option is exercised; Sometimes the option can be sold

Time you were faced with a challenge and how you overcame it

Football and being a younger player in a leadership role

Walk me through your resume

Hit all key points

Most important statement

IS, reveals the profitability of a company

Strengths

Leadership Critical Thinking Work Ethic and Competitive Drive

Tell me about a time you failed

Oversleeping through lifts freshman year

What is minority interest?

Ownership of less than 50% of a company's enterprise value. Generally 20-30 with little say in operationsW

Feedback from your previous internship

Patted on the back for my way to retain information at a fast pace as well as be personable and engage in conversations properly with clients

Current Statistics

SP- 4,400 Dow- 34,800 Nasdaq 100- 170 Nasdaq Composite- 13,200 Inflation- 8.5% 10Y- 2.94% (Level not seen since 2018) 2Y- 2.66% Unemployment- 3.6% Apple- 167 Interest Rates- 0.25 (expected to increase by half percentage points moving forward, expected to possibly be at 2%-2.5% at years end)

How can a company raise cash?

Sell stock, sell assets, issue debt

Synergies

The combination of two firms together increases the value than if they were to work separately. Increasing revenue while lowering cost of capital.

Equity Risk Premium

The excess return that investing in a given company provides over a risk-free rate

Time you worked with someone from a different background

Whole life with sports

Amortization

the reduction of a loan balance through payments made over a period of time

EPS equation

(net income - preferred dividends) / average common shares outstanding

What is ECM?

-Cross between IB or Corporate Finance and SandT at face value. -ECM team helps companies execute transactions in primary markets by managing their structure, syndication, marketing, and distribution

Darden Restaurants

-Economies of scale as well as scale with 1800 locations in combination with diversity within its 8 different locations -Impacted heavily in January with the Omicron variant but recovered in March. -Cheddars -Longhorn -Capital Grill -Olive Garden -Seasons 52 -Bahama Breeze -Yard House -Eddie Vs -Implemented pricing actions to combat the effects of inflation. Committed to raising prices 3% this year assuming the 6% inflation rate on the year. -Restaurant Supply is down 13% from Pre-Covid levels, consumers are looking for an affordable restaurant option, Darden provides this due to their economies of scale and pricing options -Their confidence in pricing comes from their scale combined with the ascertain that consumer wages are increasing with inflation -From a real estate perspective, many landlords want safe option from restaurant ownership due to increased interest rates and real estate costs -They currently trade at about $135 with a Trailing PE Ratio that is roughly 35% than the average of some of its competitors, Forward PE ratio that is 19% lower than the average of some of its competitors, and a EV/EBITDA multiple that is 12% lower than the average of some of its competitors (Starbucks, McDonalds, Yum!, Brinker, wanted to find companies that were relatively the same size from a market perspective) FPE- about 15.5 TPE- about 16 EV/EBITDA- 13.88 -Dividend payout of $1.10 per share, or $4.40 annually. Darden paid out 52% of its earnings in dividends last year. Company has grown at an average of 24% annually for the last 5 years

Evercore as a whole

-Evercore's business model is asset light. Growth is driven by human capital and Evercore has invested in its human capital, driving revenue growth and profitability. -The bigger Evercore gets, the easier it is to grow even bigger and more profitable. In addition, the company benefits from long-standing shifts in the industry that are driving customers to independent, focused firms -General Motors sole independent advisor on their IPO in 2010, largest IPO in history, the company raised 20 billion at $33 per share

Walk me through an NAV

-Find present value of cash flows from existing assets by assuming no exploration and deleting their reserves to zero -Add these asset Present values, this is your asset value -Subtract claims to other stakeholders and other corporate effects -Subtract net debt -Subtract the present value of decommissioning liabilities -Subtract the present value of corporate costs -Add the value of the hedge book

Evercore's ECM Team in particular

-Flexibility to work as an underwriter or an independent advisor

Recent Evercore Deal

-J.P. Morgan and Evercore, as joint bookrunners, and the other underwriters, on the offering of 2.01 million shares of Piedmont Lithium Inc.'s common stock at a price per share of US$65.00. The offering included the exercise of the underwriters' option to purchase 262,500 shares, resulting in gross proceeds of US$130.8 million. Intends the use the proceeds to fund some of their projects internationally as well as in the U.S. -Piedmont Lithium attempts to work towards the clean energy economy in America with a large amount of its current attention being paid towards supplying the fast growing E.V. Chain

Questions for the interviewers

-What are the skills I can add between now and the internship? -What have the best interns here done? -How does the implementation of digital currency effect dealflow moving forward

Walk me through a DCF

1. Project the companies free cash flows for about 5 years. Free cash flow is EBIT times 1 minus the tax rate plus depreciation and amortization, minus capital expenditures, minus the change in networking capital. 2. Predict free cash flows beyond 5 years using either a terminal value multiple or the perpetuity method. 3. To calculate perpetuity method, establish a terminal growth rate, usually about the rate of inflation or GDP growth, a low single digit percentage. 4. Now multiply the year 5 cash flow by 1 plus the growth rate and divide that by your discount rate minus the growth rate. 5. Discount rate is the WACC, use that rate to discount all your cash flows back to year zero. The same of the present values of all those cash flows is the estimated enterprise value of the firm according to the DCF.

How far back would you go for precedent transactions

2-3 years to reflect market sentiment

News

5 mins of News Review

Beta

A company's correlation to fluctuation in the market

Deferred value

A liability created when a business collects cash from customers in advance of completing a service or delivering a product

Follow-on

A subsequent investment

Time you were driven

Actually I resort back to my daily basis and goal setting and timing by the hour on my phone

Accounts Payable

Amounts to be paid in the future for goods or services already acquired

Accounts Receivable

Amounts to be received in the future due to the sale of goods or services

Job roles in ECM?

As an analyst you work much more with the modeling and presentation side of dealflow. As an associate and VP a little bit higher up in the hierarchy, you begin to work a little bit more on the communications side of deals as well as take on a leadership role in some cases within some of the bookrunning that the firm does

If you were to pick two statements what would you pick?

Balance Sheet and Income Statement because you can make a CFS from this

Are you a leader or a follower?

Being a leader my whole life, and knowing when to lead and when to follow in a team setting

Why ECM?

Combines two of of strengths and field of interest. Communication and relationships with interest in the market and macroeconomic themes. The IPO process is in almost all cases the most significant event in a company's lifespan so being a part of that is something special from my perspective. You look at the IPO of General Motors in 2010 ($33 a share worth $20 Billion total) that was the biggest IPO ever in the U.S. and Evercore gives you a chance to be a part of that.

Difference between Equity Capital and Debt Capital?

Companies seek to raise capital in order to finance their operations and grow. Equity funding involves exchanging shares of a company's residual ownership in return for capital. Debt funding instead relies on borrowing, where lenders are repaid principal and interest without receiving any ownership claim. In general, equity capital is more expensive and has fewer tax benefits than debt capital, but also comes with a great deal of operational freedom and less liability in the case that business fails.

What motivates you?

Competitive drive, refusing to be less or viewed as less, sometimes this can result in me beating myself up, but always desiring to take the extra step to make myself better

C.V.S. Finance

Confirm relevant partners, verify key metrics, select proper method of valuation

CAPM

Cost of Equity Equation- (Risk Free Rate+Beta)(Equity Risk Premium)

How would you calculate a company"s beta?

Covariance of return on the company times Covariance of return on the market divided by variance of return on the market

Unlevered FCF

EV

EqV Equation

EV - Net Debt/ Diluted Shares Outstanding

Levered FCF

EqV

secondary equity

Equity raised from common investors such as shareholders

Primary equity

Equity raised from private investors

Time when something did not go as planned

Football this year, frustration, keeping people's mind on the objective, long break with Covid able to rebuild

Walk through the 3 financial statements

IS -Revenues -Cogs -SGandA -D and A -Net interest expenses -Tax Expenses -Net Income BS Assets= Liabilities + Shareholders Equity Assets- Long term and short term Liabilities- Same Shareholders Equity CFS CFO- Net income + D and A - Changes in networking Cap CFI- Long term assets and Cap Ex CFF- Repayments of Debt or Dividends

How do the statements connect?

IS Depreciation- Long term assets on Balance Sheet Amortization- Long term assets on Balance Sheet BS Cash- ending cash on CFS flows into cash on balance sheet Shareholders Equity- Net income on income Statement CFS Beginning Cash- Previous periods ending cash on BS Net Income- IS Depreciation- IS Depreciation- IS Cap Ex- BS Repayments of Debt- BS Ending Periods Cash Balance- BS

Why Finance?

Interested in Investing from a younger age in HS. Wanted to feel as though I was more directly involved and truly felt as though using my ability to communicate and be personable with people could correlate very well with the knowledge of the macroeconomic outlook of the current world and the way market conditions may be during that given time.

Time you encountered an ethical dilemma

Kobe and getting him back into the school

How would a $10 increase in depreciation expense affect the three financial statements?

Let's start with the income statement. The $10 increase in depreciation will be an expense, and will therefore reduce net income by $10 times (1-T). Assuming a 40% tax rate, this will mean a reduction in net income of $6. This will flow to cash from operations where net income will be reduced by $6, but depreciation increases by $10, resulting in an increase of ending cash by $4. Cash then flows onto the balance sheet. Where cash increases by $4, PP&E decreases by $10, and retained earnings decreases by $6, causing everything to balance.

Tell me about a time you led a group of people and accomplished something

Many of them are sports examples which I know are pretty generic but what I have found is that people will work their absolute hardest for someone that they know cares about them, not just the product. I know that doesn't always apply to the working world but I think in many ways it does, a group of people that know you will give them everything you have both in the office and out of the office or on the court and off, those groups will accomplish the most because there is a genuine desire to perform for others not just oneself

How to calculate EV

Market Cap + Preferred stock + Debt + Minority Interest - cash and cash equivalents

How would you decide on a company's capital structure?

Maximumizing market value while minimizing WACC

Last Book you read

Money by Tony Robbins or my Dad's book

Equity Markets Right now

Most of the current dealflow is follow-up investments by certain investors with the security against certain uncertainties that come with increased inflation moving forward.

What is the biggest risk you have ever taken?

Moving myself outside of my comfort zone both at La Salle and at Bowdoin, two environments where not everyone was going to see eye to eye with me or felt the same way I felt about things but being able to have success and work with them through that

How would you calculate shareholders equity?

Net difference between total assets and total liabilities

Weaknesses

Perfectionism Impatience Tendency to take on too much

Current Event Highlights

Political uncertainty in Europe and economic risks stemming from China's shutdowns were adding to investor nerves after a bumpy start to 2022 for stocks. Bond yields have surged on the prospect of tighter monetary policy set by the Fed. The war in Ukraine, which is entering a new phase in the east of the country, has boosted commodity prices, adding to inflationary pressures. I was reading T Rowe Price last week and they talked about how Earnings season has posed mixed emotions for investors in the economy. Many investors are observing how companies are able to successfully pass off inflation costs to consumers. Bond prices continue to slip as yields increase, causing investors to weight the advantages of investing in bonds as opposed to stocks.

What are the three most important things when deciding to invest in a company?

Present stability, growth trajectory, past performance

Time you approached something logically

Presentation with Janney

Book Building

Process in which an underwriter estimates the value of an IPO

Three Methods of Valuation

Public Comps (3) Precedent Transactions (Most important for PE) DCF (2) Sometimes LBO

Rev Multiple vs. EBITDA

Rev- used for companies with negative profits EBITDA- Used for more mature companies

Different types of Debt and Equity

Senior/Bank Debt High Yield/Subordinate Debt Quasi Equity Common Equity

Tell me something that is not in your resume

Service trip to Medellin Colombia with my friends

Time you worked with a group mate who was not cooperative

Setting up work to help them because it was affecting the entire group

Another M&A Deal?

Spotify Rival, Deezer, the French music streaming service is merging with a Paris listed SPAC to go public with a valuation of 1.13 billion. Makes up 2% of the global streaming market. Popular in France and Brazil. France with a 29% market share and Brazil with a 17% market share. Could possibly give Deezer a more competitive market position.

Biggest accomplishment

Success at Bowdoin and Golden Dozen

Why Evercore

Talking to Sam Richardson, Kierdan McDonald, Mobeen Malik, and Adam Kalinsky about being able to feel as though you are part of the transactions and dealflow at a very early stage in your career Talked to Kieran this week about being able to take different opportunities within specified fields of interest

Premium

The rate something is paid for above its value

private placement

The sale of a portion of a company directly to a private investor as opposed to being publicly traded

Why is minority interest used in EV equation?

To cause 100% accurate comparison in between different companies wit complete ownership

What is equity?

What is left after debt and other obligations are subtracted from total value

Can a company have negative EV?

Yes, high cash balance or low market cap

At-the-market program

a plan that integrates the marketing mix to provide a good, service, or idea to prospective buyers

Share Repurchase

a transaction in which a firm uses cash to buy back its own stock

derivatives

any financial asset whose value is derived from the value of some other "underlying" asset (i.e. stocks, bonds, commodities, rates)

Convertibles

bonds or preferred stocks that can be exchanged for common stock at the option of the holder

Preferred Equity

equity that pays a fixed income, like a bond

WACC

weighted average cost of capital. Cost of raising capital at a given company. (Cost of equity)(Percentage of Equity) + (Cost of Debt)(Percentage of Debt)(1-tax rate) + (Shareholders Equity)(Percentage of Shareholders Equity)