The modeling test

Modelling tests range from a one-hour paper LBO, to a two-to-three-hour on-site Excel model from a short prompt, to a multi-day take-home case with a presentation. Know which you face before you start practising.

Read the full prompt first and sketch the structure before typing. Build assumptions, then sources and uses, then the operating model, debt schedule, returns and sensitivity. Prioritise a complete, balancing model over a beautiful partial one.

Model each tranche separately with interest rates, mandatory amortisation and a cash sweep that uses excess cash to repay senior debt first. Use average balances for interest if allowed, with a circularity switch. Check that cash never goes negative.

Present IRR and MOIC with sensitivity tables to entry multiple, exit multiple and EBITDA growth. Add a credit summary showing leverage and coverage each year. The reader should see at a glance whether the deal works and what it depends on.

For take-home cases, write a short recommendation: invest or not, at what price, with key reasons, risks and diligence questions. Clear thinking in the memo often matters more than modelling flourishes.