Are Financial Modeling Courses Necessary
Financial modeling is a cornerstone skillset for private equity associates. Courses are not strictly necessary but very helpful for candidates who have not gone through investment banking analyst programs. In my view, it is a skill that is mostly sharpened on the job through sheer repetition and from understanding all the moving parts of an actual deal. But with the increasing hiring of candidates from management consulting (and other non-banking) backgrounds and the recruiting cycle arms race, some self-study is warranted for aspiring private equiteers.
Financial Modeling Skill Level for Private Equity Associates
Most private equity firms run lean and require new hires to hit the ground running. At minimum, I would expect a new associate to be able to put together a simple LBO or three-statement model quickly based on a CIM. But the true value of a model is in its ability to express the attractiveness of an investment in terms of the levers of value-add (both financial and operational) that may give the PE firm an edge in an auction or negotiation. There is no substitute for real world reps for the latter, but courses are a great way to get you up to speed on the former.
Wall Street Prep Courses Review
I am aware that there are several online courses available now but Wall Street Prep reached out to me so this is my take on their offerings.
As above, this program has hours upon hours of material covering all the basic types of modeling you would expect an investment banking or private equity analyst to know. The content starts with conceptual explanations followed by hands-on exercises for each step. This would be how one would learn by doing it yourself and Googling when stuck, but in a much more condensed manner. The interface makes easy to skip through sections that you are already familiar with, so it makes for some efficient learning.
The quality of the content is solid. The authors clearly have real world experience and keep the fluff to a minimum. This is the course that many reputable investment banks (Goldman Sachs, Evercore, JP Morgan, Morgan Stanley) and mega funds (KKR, Bain Capital, Carlyle) choose to train their new hires which speaks to the quality. In my opinion, the course is great (bordering on overkill) if you are learning financial modeling from scratch but prospective private equiteers with some banking experience might be better served by the Private Equity Masterclass.
For prospective associates, this would be the course I recommend. There are 3 parts to it: a refresher on LBO modeling, a run-through on an entire deal process and case study of a lower middle-market deal. The latter two sections are what really stood out to me.
The deal process walk-through is comprehensive and representative of a typical process. They have included material on much more than just the model so you would also learn about how to review CIMs, prepare legal documents, handle due diligence work, and the basics of debt financing. This is all presented through the lens of an actual case study so it is very easy to translate your learnings to real world transactions.
The third section takes you through the assessment of a lower-middle market deal. Going from the initial introduction call from your firm’s senior private equiteer and the messy raw data from the target company (that LMM private equiteers are all too familiar with), to the deal recommendation to your investment committee. The difficulty in a lot of LMM transactions is running your analysis based on very limited or unprocessed raw information. The author clearly has had many deal reps, approaching the case with a very structured framework.
All-in-all, WSP’s Private Equity Masterclass would give you the equivalent experience of a single live deal as a newly minted associate. It is not strictly necessary but should give you a big leg-up in PE recruiting and an easier time ramping up in your new role.
These courses are definitely helpful for aspiring private equiteers or even new associates who don’t have access to structured training programs. They are not strictly needed nor are they cheap (use coupon code EQUITEER for 15% off) but certainly good value if you need an edge to get into this competitive industry.