RENCAP: Rencap Investment Bank Recruiting

INVESTMENT BANKING: TECHNICAL INTERVIEW QUESTIONS

Those of 'una' without a background in finance should take these questions seriously and do further research on them. I have contacted analyst and associate who have given their opinions on the questions. Enjoy the reading...

Question 1 - A client of yours owns his own business 100% outright. It is worth £500M and he/she would like to get some liquidity out of his company, but still wants to continue working. How do you advise your client to get the maximum valuation, while still retaining some ownership?

Question 2 - A public company is currently trading at a 52-week low. The company's current quarterly reporting is on schedule with analyst's and management's predictions. The management team is looking to raise money to fund a project, which they believe will double the company's EBITDA. What options do you advise the company to pursue in order to raise the necessary capital?

Question 3 - Your client has a company, which manufactures and sells propellers and is preparing to sell the entire company. The company is comprised of three divisions: boat, air, and windmill propellers. The boat and air divisions comprise 80% of the company, while the windmill division makes up only 20%. The boat and air divisions are losing money, while the windmill division is making money, so the net effect of the company is to break even. What do you advise your client to do in order to help them sell their company at the best price (ie. best valuation)?

Analyst A's answers
Question One- This is plain simple. Tell the owner to issue and include some debt in the capital structure of the firm. Since the owner still wants to retain some form of ownership, it is advised that the debt to equity ratio (the debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets) should be more of equity than debt so that the owner can still have a say in the day to day operations of the business. There is no generally accepted range for the debt to equity ratio but since the owners want to remain at the ‘helm of affairs’ whilst having liquidity, I would suggest a maximum range of not more than of 49 to 51(i.e. 49% debt and 51% equity) This is based on your assertion that the firm is solely owned. It could be 30 to 70,40 to 60 but should not exceed the limit set above.
However, raising debt can also have it own demerits. This is because, debt holders are entitled to constant interest payments on the debt originated via semi or annual coupon payments but debt holders, to a large extent do not influence or have a say in the daily operations of the business. Also if the debt is a convertible debt(can be converted to equity) which is usually for high risk transactions or for firms facing financial distress, they could appoint a member to sit on the board of the company in question to act as a check.

Question Two-Personally, I would ask probe further in this case.
What are the management predictions/projections? Is it, likely to exceed that of the previous financial year? What kind of project do they need funding for , what is the investment horizon or time frame for the project to be completed, what are the estimated future cash flows for the project in question?

Anyway the firm needs to identify that source of funding according to the principle of least effort mentioned above. Since the company is trading at a 52 week low( a market indicator used to measure the trading patterns of publicly quoted and actively traded companies on the stock exchange for a period usually one year i.e 52 weeks).

As the stock is trading at a 52 week low, this implies that it’s market value is below its intrinsic value( i.e discounted price) and perhaps raising money from the equity market will not be the best for them at the moment. This is because they will be giving away their stock away at a low price using the existing market price as a base for setting the offer price for the proposed seasoned offering.


Question Three- There some vital points to be raised here.
Does your client intend to sell the company as a holding entity or sell in parts through asset stripping? Asset stripping is the process of buying an undervalued company with the intent to sell off its assets for a profit. The individual assets of the company, such as its equipment and property, may be more valuable than the company as a whole due to such factors as poor management or poor economic conditions.

For example, imagine that a company has three distinct businesses: A, B and C. If the value of the company is currently 100 million but another company believes that it can sell each of its three businesses to other companies for 50 million each, an asset stripping opportunity exists. The purchasing company will then purchase the three-business company for 100 million and sell each company off, potentially making 50 million.(By buying the comapny as a whole for 100 million and selling them in parts for 50 million each!)

Personally, I would sell off the boat and air division since there not turning in a profit and invest in the windmill propellers division. This will help increase the appraisal that the firm will get during the valuation process for the final sell –off and also increase profit margins at the end of the day.


Analyst B's answers
Wrong.
There's an optimum position on the U curve shaped Weighted Average Cost of Capital that defines a balanced mix of equity and debt. Read up on Modigliani-Miller Theorem.

Question 1
Private Equity is all your client needs. Think of Facebook Inc as an appropriate case study. And i think you've used the term "valuation" wrongly. Getting a valuation on your business would not make you lose ownership of your business, it simply gives you an estimate of what your business is worth today in terms of future possible cashflows.

Question 2
There are several reasons why a company will trade at a 52 week low, for one, it might just be unnecessary market sentiments. That said, if the company is looking to raise capital, debt markets might be the way to go, given that all over the world, interest rates are testing the lowest levels ever seen and might remain so for a long long time to come.

Question 3
What do you mean by losing money? are they making losses or is it the case that they aren't making profits? they are both two different things. Either ways, the best valuation for you company will be worth your company is worth, no more, no less. If you are willing to dispose it, you can sell it off in bits as a poster suggested above, but you must remember that this will generate a liquidity problem and you might be forced to sell them for a very low price than selling the company as a whole.

Certain things don't sell like Akara in the market, you will have to wait for months and in some cases years before you find buyers. Who will be willing to buy an air propeller from you in the next few weeks for the amount that it is actually worth? answer? Noone!, well, of course with the exception that you are lucky enough to find people that are desperately in need for an air propeller which only ever happens one in a million cases.

So what will i do? Create a spin-off and dump the shares of both companies in the hands of existing shareholders. You can find out how spin offs and carve outs work and google.


I will post more questions and answers..I no wan hear stories after the interviews O..

Investment banking interview question overview including technical and qualitative or fit | IBankingFAQ

The above website says it all....

ighoeve...ighoeve...ighoeve....how many times did i call ur name? more power to ur elbow...more stamina to ur waist....more endurance to ur......

Quote:

---

Originally Posted by babestell

ighoeve...ighoeve...ighoeve....how many times did i call ur name? more power to ur elbow...more stamina to ur waist....more endurance to ur......

---

to ur wetin na.........@ighoeve u 2 much

Who is this unrivalled genius! Ighoeve! My God! You are the man. Am so impressed! I wish i knew you before my SRD, MY STORY WOULD HAVE BEEN DIFFERENT

Quote:

---

Originally Posted by babestell

ighoeve...ighoeve...ighoeve....how many times did i call ur name? more power to ur elbow...more stamina to ur waist....more endurance to ur......

---

@babestell,Please any recent update from them

@ighoeve, You too much. thanks a bunch

Quote:

---

Originally Posted by beelady

@babestell,Please any recent update from them

---

nope....dnt worry about the silence, they probably wont send us the formal invte to the assessment centre until early september....takia

Quote:

---

Originally Posted by babestell

ighoeve...ighoeve...ighoeve....how many times did i call ur name? more power to ur elbow...more stamina to ur waist....more endurance to ur......

---

babestell, you are spoilt o..I am just seeing this...You are talking to big boy, ehn. hahahahahahah. Don't worry, big boy has a lot of turgidity, unusual strength, stamina and plenty of endurance.

Is Bambo a year ahead of you?

Quote:

---

Originally Posted by beelady

@ighoeve, You too much. thanks a bunch

---

Yeah beelady, you're welcome. You people really did very well, I must say. Report reaching me has it that the global cut off is 80% on both tests. That is very high; even the bulge bracket banks like Goldman Sachs, Deutsche Bank, RBS, Morgan Stanley, Merry Lynch and JP Morgan don't set such a high cut off. Theirs is like 50%. I think the Renaissance cut off was set high because of all those Russians applicants. They are math geniuses. Trust me, I work with some of the m...What astonishes me is how some of them were able to score 80% on the verbal section..Their English is awful..

Quote:

---

Originally Posted by chisomaga247

to ur wetin na.........@ighoeve u 2 much

---

Thanks..I see your success come around very soon. Don't forget to invite us sha.

Quote:

---

Originally Posted by phoneline

Who is this unrivalled genius! Ighoeve! My God! You are the man. Am so impressed! I wish i knew you before my SRD, MY STORY WOULD HAVE BEEN DIFFERENT

---

Amen, mhen..Thanks.

I bet something exemplary is being kept for you and you alone. Abeg don't be deterred. Keep applying..

PS: This school trains engineers and places them in top oil and gas firms: Erreur 404 - IFP School dem shell, chevron, Saudi Aromco, total, agip dey go lobby for students there..Imagine!

@phoneline

IFP School

They also offer direct scholarships through the oil and gas companies. But you would have to work for the company wey sponsored you when you successfully complete the graduate programme.

Quote:

---

Originally Posted by ighoeve

Yeah beelady, you're welcome. You people really did very well, I must say. Report reaching me has it that the global cut off is 80% on both tests. That is very high; even the bulge bracket banks like Goldman Sachs, Deutsche Bank, RBS, Morgan Stanley, Merry Lynch and JP Morgan don't set such a high cut off. Theirs is like 50%. I think the Renaissance cut off was set high because of all those Russians applicants. They are math geniuses. Trust me, I work with some of the m...What astonishes me is how some of them were able to score 80% on the verbal section..Their English is awful..

---

when i said this guy is a CIA spy...some thot i was joking...okay how did he get this highly classified information and others he has been posting here...ighoeve post ur pix, birth certificate and ATM password here let us identify u properly as a matter of job security.

Quote:

---

Originally Posted by babestell

when i said this guy is a CIA spy...some thot i was joking...okay how did he get this highly classified information and others he has been posting here...ighoeve post ur pix, birth certificate and ATM password here let us identify u properly as a matter of job security.

---

Okay, please give me a second to dig up my best pics and my fattest bank account ATM password.

Thanks.

Nice one bros.....

@ighoeve, u are original CIA spy. Oya abeg give us the hints of what to expect at the assessment center.

Quote:

---

Originally Posted by beelady

@ighoeve, u are original CIA spy. Oya abeg give us the hints of what to expect at the assessment center.

---

You meant espo?

Hey people, I am not from NIGERIA but Kenya, just bumped into this thread. They cancelled our trip to Lagos...bummer. The Assessment center will now be in Nairobi for us.
Anyone here with an inside scoop on the recruitment at rencap? i have a few questions

Quote:

---

Originally Posted by bluepoet

Hey people, I am not from NIGERIA but Kenya, just bumped into this thread. They cancelled our trip to Lagos...bummer. The Assessment center will now be in Nairobi for us.
Anyone here with an inside scoop on the recruitment at rencap? i have a few questions

---

yeah! See me dey cry i no go SA, others dey cry say dey no come lasgidi, irony of life. Welcum to NJH bro, read this thread 4rm begining to end, what to expect at the assesment has been exhaustively covered by our inhouse expert Ighoeve. Goodluck.
I just hope they hope they feed us well there cos am always hungry

Quote:

---

Originally Posted by babestell

yeah! See me dey cry i no go SA, others dey cry say dey no come lasgidi, irony of life. Welcum to NJH bro, read this thread 4rm begining to end, what to expect at the assesment has been exhaustively covered by our inhouse expert Ighoeve. Goodluck.
I just hope they hope they feed us well there cos am always hungry

---

@babestell, LMAO, its a day affair now. so do u want them to feed you for 2days?????????????

[QUOTE=beelady;510111]@babestell, LMAO, its a day affair now. so do u want them to feed you for 2days?????????????[/QUOTE
beelady and babestell, rub minds together. You may be on the same AC teammmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm. The team's name is Naijahotjobssssssss

Quote:

---

Originally Posted by babestell

yeah! See me dey cry i no go SA, others dey cry say dey no come lasgidi, irony of life. Welcum to NJH bro, read this thread 4rm begining to end, what to expect at the assesment has been exhaustively covered by our inhouse expert Ighoeve. Goodluck.
I just hope they hope they feed us well there cos am always hungry

---

@babestell, lets rub mind together

Quote:

---

Originally Posted by beelady

@babestell, lets rub mind together

---

babe dnt worry....just do ur best...as a naija person person when u ave done ur best start rapping...the more they look the less they see..lol
besides its ighoeve chest sorry head we should be rubbing...I suspect he knows more than our mindsrubbed together times 2..abi

What is new?

oya o! what happened yesterday, how did it go? please share your experience so that future RenCap hotjobbers can better prepare. I unfortunately could not make it.

Quote:

---

Originally Posted by babestell

oya o! what happened yesterday, how did it go? please share your experience so that future RenCap hotjobbers can better prepare. I unfortunately could not make it.

---

You fortunately could not make it..And hope you also sent them the rejection letter.

have you guys had your assesment centre? ours will be on Monday...
give me info people..INFO

How did your assessment centres go? Who and who got offers?