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Financial Analysis and Valuation

Private Equity and Venture Capital

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Financial Analysis and Valuation

Industry Analysis Template

A suggested structure for an industry analysis memoSector overview and key players
  1. Industry overview and key players
    1. Breakdown of key sectors within the industry (by revenues) and their associated business models (i.e. – how do they make money?)
    2. For each sub-sector:
      1. Key players
      2. Key financial statistics: market cap, total sales, operating and net profit, margins, risk (beta), recent 5-year equity returns (ROE, ROIC), as well as valuations (P/E, P/S, P/B and EV/EBITDA ratios)
      3. Sector potential short and long term consensus growth rates
  2. Industry features
  3. Sensitivity of sales to the business cycle; Industry life-cycle stage
  4. Operating leverage
  5. Financial leverage
  6. Industry structure: threat to entry, rivalry between existing competitors, pressure from substitute products, bargaining power of buyers, and bargaining power of suppliers 
  7. Operating environment: regulatory, political, social, environmental and product risk, trade issues, exchange rate sensitivity, and impact of consolidation and globalization 
  8. Industry Trends & Market Outlook for the next 12-36 months? (e.g., how would strong dollar, rising rates, rising commodity costs, or increasing legislation impact the sector?)
  9. Key Financial & Valuation Metrics—Sector specific characteristics (e.g., same store sales for retailers)
  10. Recommendations—Should SIF 2021 overweight or underweight this sector in the next 12-36 months? 
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Financial Analysis and Valuation

Useful Templates

Discounted Cash Flows (DCF) template

Leveraged By Out (LBO) template

Adjusted Present Value DCF (APV) template

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Interpersonal Influence and Power

The Hero’s Journey Framework to Arguments and Storytelling

The below is a really nice framework to use when thinking about framing an argument, telling a story, or thinking about your short and long term goals. It can help ensure that arguments are solid, backed by evidence, and are compelling. The next time you need to make an argument, or need to get more clarity around a decision that you need to make.

This framework was introduced to us by Damon D’Amore. He’s an executive mentor and advisor to C-Suite executives and select entrepreneurs and public speakers. Here’s a list of his favorite professional development books:

https://damondamore.com/five-favorite-personal-development-books-time/

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Informational Interviews

John Latreille

Corporate Strategy, SAP

Interviewed: 10/20/2020

John has been working in a corporate strategy capacity with SAP for the past 5 years now. Before that, John was a financial analyst for a company that was acquired by SAP. John was working closely on integrating businesses acquired by SAP, which helped him navigate his way into the corporate strategy team there.

Corporate Strategy at SAP

Corporate strategy at SAP oversees the corporate development team, as well as the partnerships team, and the portfolio team (that makes decisions pertaining to R&D resources allocation). The corporate strategy function at SAP sets the company targets for the next 5 years, and the break it down by portfolio. Based on the corporate strategy, they then decide (with the rest of the teams):

  • What to build: If building in house is not the best viable option, they then decide;
  • Who they can partner with: In the event that there are players out there that SAP can partner with and can get the value that they need;
  • Who they can buy: if building in house and partnerships don’t make sense, SAP will look to acquire entities

If none of the above make sense, SAP will re-evaluate their desire to ‘play’ in the space the strategy outlined.

Typical Background for Corporate Dev. at SAP

Per John, the typical Corporate Dev. manager will have either a consulting experience, engineering experience, and/or an MBA. John emphasized the necessity of background in tech. Further, John did mention that there are people on his team with product management experience as well, that transitioned into corporate development.

Key Takeaways

Similar to my interview with Seong, I’ve learnt that it is possible to make the transition from Product to corporate dev/strategy. It’ll take showing that I have experience and aligning my resume/skills with what’s required.

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Informational Interviews

Seong Kim

VP, Corporate Development and Strategy, Chegg

Interviewed: 10/20/2020

Seong has been working for Chegg in a VP capacity for about 5 years now. I initially contacted him to better understand the world of corporate strategy, with the goal of assessing whether that area is something that I would find interesting. Additionally, I wanted to understand how I could ‘break into’ corporate strategy from my current position as a Product Manager.

Below are some of the key highlights from our conversation:

Per Seong, corporate strategy is defined different in every company. So do the responsibilities of the corporate strategy function in the organization

Corporate Strategy at Chegg

The corporate strategy function in Chegg sets the vision for the company for the next 5 years. Then, the corporate strategy team ensures alignment across the company of that vision (working closely with leadership and other functions), as well as map the path to accomplish that vision, essentially setting the growth strategy

Corporate Development at Chegg

The corporate development side of the house works on executing the growth strategy set by the corporate strategy team. The corporate development team is responsible for M&A negotiations and the integration of acquired companies with the mothership (Chegg).

Takeaways

After sharing with Seong what I would want to do moving forward as the next step in my career (focusing more on strategic vision rather than on tactical execution), he suggested I focused my attention on corporate strategy (as opposed to development). Seong suggested that M&A procedures get really tactical really fast, and that might not yield the fulfillment I am looking for out of my next role.

Additionally, Seong suggested I try to find spots to shine a brighter light on my strategic accomplishments as a Product Manager (i.e. to prove that I can do the job). He also mentioned the fact that I may be a good addition to a strategy team, as what happens often is that if in the process of an M&A or other activity some product input is necessary, the strategy team has to either rely on other teams (which delays operations), or hire external consultants. Seong believes that might be a good avenue for me to pursue.

The Ride of a Lifetime

Lessons to Lead By – Robert Iger

To tell great stories, you need great talent Now more than ever: innovate or die. There can be no innovation if you operate out of fear of the new I talk a lot about “the relenless pursuit of perfection.” In practice, this can mean a lot of things, and it’s hard to define. I’ts a mindset, more than a specific set of rules. it’s not about perfectionism, at all costs. It’s about creating an environment in which people refuse to accept mediocrity. It’s about pushing back against the urge to say that “good enough” is good enough Take responsibility when you screw up. In work, in life, you’ll be more respected and trusted by the people around you if you own up to your mistakes. It’s impossible to avoid them; but it is possible to acknowledge them, learn from them, and set an example that it’s okay to get things wrong sometimes be decent to people. treat everyone with fairness and empathy. This doesn’t mean that you lower your expectations or convey the message that mistakes don’t matter. It means that you create an environment where people know you’ll hear them out, that you’re emotionally consistent and fair-minded, and that they’ll be given second chances for honest mistakes Excellence and fairness don’t have to be mutually exclusive. Strive for perfection but always be aware of the pitfalls of caring only about the product and never the people True integrity – a sense of knowing who you are and being guided by your own clear sense of right and wrong – is a kind of secret leadership weapon. If you trust your own instincts and treat people with respect, the company will come to represent the values you live by value ability more than experience, and put people in roles that require more of them than they know they have in them ask the questions you need to ask, admit without apology what you don’t understand, and do the work to learn what you need to learn as quickly as you can Managing creativity is an art, not a science. When giving notes, be mindful of how much of themselves the person you’re speaking to has poured into the project and how much is at stake for them Don’t start negatively, and don’t start small. People will often focus on little details as a way of masking a lack of any clear, coherent, big thoughts. If you start petty – you seem petty if you want innovation, you need to grant permission to fail don’t be in the business of playing it safe. Be in the business of creating possibilities for greatness Don’t let ambition get ahead of opportunity. By fixating on a future job or project, you become impatient with where you are. You don’t tend enough to the responsibilities you do have, and so ambition can become counterproductive. It’s important to know how to find the balance – do the job you have well; be patient; look for opportunities to pitch in and expand and grow; and make yourself one of the people, through attitude and energy and focus, whom your bosses feel they have to turn to when opportunity arises Don’t invest in small projects that would sap your and the company’s resources and not give much back When people at the top of a company have a dysfunctional relationship, there’s no way that the rest of the company can be functional as a leader, if you don’t do the work, the people around you are going to know, and you’ll lose their respect fast. you have to be attentive. You often have to sit through meetings that, if given the choice, you might choose not to sit through. You have to listen to other people’s problems and help fund solutions. It’s all part of the job
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Corporate Strategy

Global Strategies

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A quick reminder.. When identifying a problem, we should ask ourselves: what’s going on here…what’s important… what’s less important.. what’s not really important?





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The first question strategists should ask is what is the firm trying to do? What do they want to do? From there, it’s important to identify the key sources of success (BTW – A lower price is not a sustainable competitive advantage.

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Corporate Strategy

Scope of the Firm: Vertical Integration & Geo/Global Expansion

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Corporate Strategy

Corporate Growth and Diversification

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