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HOW TO DRAFT THE PERFECT RESUME AND ACE THE MOST CHALLENGING INTERVIEWS
www.ibtraining.com
BY ASHISH KOHLI Investment Banker and Professor, IBI - MBA, Kellogg Graduate School of Management; Chartered Accountant
This publication contains the opinions and ideas of its author. Neither the author nor the publisher can guarantee the accuracy of the information contained herein. The author and publisher specifically disclaim any responsibility for any liability, loss, or risk, professional or otherwise, which is incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this book.
Authors foreword Early in my career, I spent the night before an important interview nervously preparing for the following day. I ended up having a disastrous interview for a job that I really wanted due to insufficient and last minute preparation. I wished that I had known someone who could have given me not only great, but also practical advice. I decided there and then that I would speak to lots of peopleget lots of advice and never make the same mistake again This book is meant to prepare you for not only jobs in the finance industry but also for the important interviews in your life. I want to share my personal experience of an investment banker with some of the leading banks globally and actively leading the recruiting efforts for these banks at some of the most prestigious schools in U.S., Europe and Asia. I believe that this book will serve as an excellent resource for undergraduate and graduate students as well as experienced professionals looking for jobs in finance. I suspect you may be reading this book for many different purposes perhaps you are reading this because youve been scheduled to interview with a firm of your dreams. You are excited about the job and what it might mean for your career. You want to shine but you are nervous that you might mess up. You may also be reading this book if you are applying for undergraduate or graduate school and need to make a resume and have an interview scheduled with the school or alumni. This book will help you prepare for your interviewand prepare you for life. Throughout our lives we are constantly interviewing to sell ourselves and our ideas. The interview process includes applying to undergraduate school, first jobs, graduate schools and jobs thereafter. I strongly urge you to find your passion and use this book to market yourself and find the job that you will enjoy the most. In the modern world of business, it is useless to be a creative, original thinker unless you can also sell what you create - David Ogilvy, Founder of Ogilvy & Mather
TABLE OF CONTENTS
1. Creating a perfect resume.. Pg 5 Top 10 resume rulesPg 6 Detailed tips for creating your resumePg 7 Example resume formats Pg 9 IBI bullet point information.. Pg 11
2. Composing concise cover letters.. Pg 13 3. Networking for the interview... Pg 16 4. Acing the interviewPg 20 Top 10 rules for interview successPg 21 Select expected interview questions. Pg 23 5. Sending thank you letters and following up on interviewsPg 25
APPENDICES
A. What are the different jobs in Finance?......................................... Pg 28 B. Comprehensive Finance interview questions. Pg 35 C. Recommended reading material.. Pg 51 D. Resume of author.. Pg 54 E. Action words for resumes. Pg 57 F. Interesting articles.Pg 60
Sports o Competitive sports demonstrates to reader that you can handle pressure and discipline o Good conversation topic o Corporate sports including golf, lacrosse, tennis o Team sports demonstrate that you can communicate and work well with others Highlight skills o Proficient in Microsoft Word, Excel and Power point Basic skills is assumed for applicants for finance jobs Highlight distinctive skills within these software (e.g., Visual Basic) o Ability to use research databases like Bloomberg Languages o Be careful as Hindi is not generally the language of business in India o Mandarin and Cantonese are important for working in Shanghai and Hong Kong o For each language listed, state skill level Beginner, Proficient, Fluent Other interests o Including international travel, art Include publications and articles you have written Community leadership programs or volunteer work Professional Affiliations o Focus on current affiliations that are impressive and relevant
RESUME FORMAT I
XXXX St., Apt. XX New York, NY 10003 Telephone: 212.555.5555 FIRST AND LAST NAME xxx@gmail.com
EXPERIENCE Company Name Associate, Investment Banking, Communications and Electronics Group August 2003 May 2006 San Francisco, CA
Focused on sell-side mergers and acquisitions advisory for high-growth technology companies
Notable active engagements include: Company Name Analyst, Investment Banking July 2001 July 2003 New York, NY
Supported all transaction stages in various product groups including (i) financial restructuring, (ii) mergers and acquisitions and (iii) financial advisory (business valuations, fairness opinions and solvency opinions) Notable closed engagements include:
EDUCATION University Name Bachelor of Science: Finance and Information Systems May 2001 New York, NY
ADDITIONAL INFORMATION - Extensive experience in Excel, Word, PowerPoint, Bloomberg, FactSet, Capital IQ, SDC - Played squash for UK national team
RESUME FORMAT II
FIRST AND LAST NAME ADDRESS TELEPHONE EMAIL
EXPERIENCE 2007-2008 COMPANY NAME 2005-2007 New York, NY & London, UK New York, NY
COMPANY NAME
2001-2004
COMPANY NAME
New York, NY
Senior Associate, Investment Banking Generalist Group, Media and Telecom Group
EDUCATION 1997-1999 UNIVERSITY NAME Master in Business Administration, June 1999 Majors in finance and accounting. Deans List. 1992-1995 New Delhi, India Evanston, IL
1989-1992
UNIVERSITY NAME Bachelor of Commerce (Honors), May 1992 Major in accounting and finance. Languages Interest/Hobbies
OTHER DATA
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Distressed Case Study/Course Bullet Point: Pursued a case study for a leading US consumer company regarding its $600 mm recapitalization transaction, including a $106 mm new equity investment by private equity investors IBI One Day Investment Banking and Finance Boot Camp at Universities: Investment Banking Institute, [Location] [Month & Year]
Financial modeling and valuation training program Normalized" and "Spread" historical and projected financial statements, including analyses of operational and leverage ratios Overview of company valuations utilizing (i) comparable public company analysis, (ii) precedent transactions analysis and (iii) discounted cash flow (DCF) analysis and built fully-integrated financial statements projection model
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December 1, 2008 Ms. Kimberly Clark Director of Finance XYZ Company Inc. 453 Park Avenue New York, NY 10018 Dear Ms. Clark, I am writing this letter to apply for the Financial Analyst position for your New York Office. Joe Desmond, CFO of ABC Company, Inc. who I believe you know mentioned that I reach out to you regarding the particular position. I have three years experience as a financial analyst with ABC Company and was promoted to financial analyst within two years for outstanding performance, which was one year ahead of time. I am extremely excited at the opportunity to be part of your growth company and strongly believe that my prior experience and skills will enable me to be a valuable contributor to the finance team. Please consider my application for this position. I look forward to meeting with you to discuss my experience and qualification. Please contact me at 917682xxxx or through email joshharris@hotmail.com. I will also call you next week to follow up on this opportunity. Thank you for your consideration. Sincerely, Josh Harris Enclosure Resume
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EXPERIENCED PROFESSIONALS
Alumni o Alumni are the best source to network for the job o Education is a lifelong investment and your schools alumni network can 17
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be helpful for your entire life. Alumni tend to be receptive when approached because they have gone through similar situations before and are generally receptive to conversation since they have affinity for their alma mater Remember to be courteous and respectful to all and do not expect every alumni to reply to you Approach Alumni and request an informational interview (rather than explicitly asking for a job). Individuals tend to like to talk about their experiences, what they know about the industry, and who might be hiring Focus on bonding with the individual. The more the person likes you the more likely they are to help you with your search Always ask for referrals / other individuals to talk to. The chances are the alum will have a number of contacts in the industry Do not forget that every conversation you have is an interview. Be prepared and ask good, specific questions
Headhunters o Establish relationships with headhunters Initiating a relationship with a headhunter is best when you are not looking for a job o Make sure you know the right headhunters to approach o Know the difference between retained and non retained search firms o Some headhunters are domestically focused and other internationally focused o Headhunters specialize in particular industries, and in particular areas of finance and accounting Friends and Acquaintances o Network with friends and acquaintances you know and you might even be able to utilize their contacts Use Professional Online Social Networks o e.g., Linked In www.linkedin.com Professional Associations o Taking an active part in professional associations and it is a great way to meet people from different walks of life who could have contacts at the places you want your job Cold Call o If your alumni network is not that strong and headhunters and friends have not been able to get you the interview you want, cold calling and sending your resume to HR and people at the Company is an option Less chances of conversion but it is better to have said that I tried than to have said I did not give it my best shot in life The Companys website will usually have HR contact information or ways to apply for a position
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Practice, Practice and Practice o Just like in competitive sports, hard work and practice will make you perfect
8. Make sure you listen to the questions and answers of the interviewer carefully Confirm what you have heard if you are not sure I just want to be sure that I heard you correctly, Could you please repeat that o If you give an answer and the interviewer mentions that it is not the right answer do not mention at that point that you had not heard him/her correctly Discuss and not argue with the interviewer Do not interrupt the interviewer let the interviewer complete their thoughts while all the time really listening to what they are saying before offering your own Pause for a second before answering the question o Signals that you have listened to the other person 9. Create a list of questions for the interviewer There will likely be time at the end of the interview for your questions Be sure to have a list of questions that spark the interviewers interest and are not easily answered by going to the Company website 10. Send a thank you note within 24 hours of the interview Email is fine as some decisions are made quickly but it is usually better to follow up with note in mail Address any questions you couldnt answer during interview or any open issues
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Below is a list of questions you should expect to be asked in a finance interview. I highly recommend that you WRITE THE ANSWERS TO THESE QUESTIONS as you will be using these throughout all your life
Tell me about yourself or Walk me through your resume? o Interviewer has not had the chance to review the resume in advance of the meeting and also gives him an opportunity to hear your story o In approximately 2 minutes (keep it short and to the point) walk the interviewer through your resume starting with your education and then your work experience o Highlight key points/achievements and focus on why you made those decisions o End with why you are interested in the job you are interviewing for o Have a flow in the story - show natural progression in jobs you have had or why you made the decisions including companies you worked for and positions o First impressions are very important some people say that they have made up their mind about the candidate in the first five minutes of the interview o Focus on more recent experiences, and ones that are relevant to the position you are seeking o Two minutes is a good time for this question, but if you see that the interviewer is engaged you can spend an additional minute or so o Do not read from your resume you should have practiced this question before look at the interviewer while answering this question
Why investment banking? o Highlight how you became interested in investment banking, For example, you met investment bankers while working alongside them if you are an auditor or a lawyer and was really interested in the work they do o Like working on transactions o Show qualities important to investment banking - attention to detail, ability to work long hours/the willingness to sacrifice personal life, analytical abilities o Steep learning curve o How it is different from other areas like consulting transactions are shorter than consulting projects and you see results right away o Answers like I want to make a lot of money should be avoided Money is something which will come in the long term
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Why Goldman Sachs or Citigroup or the Company you want to work for? o Make sure you understand the differences between the various investment banks Bulge bracket, mid-market, commercial banks with investment banking divisions and boutique banks o Culture of these banks o Transactions they have done Make sure you know about the recent deals the bank has done o Type of clients they have o Core strengths of these banks in terms of products whether M&A or leveraged finance o Speak to people you know at those banks and mention that these are the things you found from those people to the interviewer o If you would like international experience or work in a particular country make sure that the bank is strong in that area
Two questions to ask the interviewer at the end of the interview? o Make sure you know the title of the interviewer different question for a managing director vs. analyst o Prepare these questions in advance o Specific questions regarding the qualities required for the ideal candidate for the position o Do not be negative about the Company in the questions you ask
In your work experience describe the 2 main projects/deals you have done? o Focus on your role in the transaction or project Interviewer wants to see what your role is even if the deal is too big or small and if it succeeded or not Make sure you prepare and write this down again, this is something you will use time after time
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John Harris
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Bulge Bracket Banks Banc of America/Merrill Lynch Barclays Citigroup Credit Suisse Deutsche Bank AG Goldman Sachs JP Morgan Lazard (Strong M&A advisor) Morgan Stanley Rothschild (Strong M&A advisor) UBS Middle Market Banks Cantor Fitzerald Cowen & Company Friedman Billings Ramsey Jefferies & Company, Inc. Piper Jaffray & Co.
Commercial Banks with Investment Banking BNP Paribas Dresdner Kleinwort HSBC Macquarie Group Mitsubishi UFJ Financial Group RBC Capital Markets Royal Bank of Scotland Scotia Waterous Societe Generale TD Securities Inc. Boutique Banks Alvarez and Marsal Duff & Phelps GMP Securities Rodman and Renshaw Saegent Advisors
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Bulge Bracket Investment Banks generally have industry and product groups. o Industry groups represent almost all industries including consumer products, healthcare, financial institutions, technology, media and telecom, energy group o Product groups include mergers and acquisitions, restructuring, leveraged finance, debt capital markets and equity capital markets The typical structure of investment bank is: o Analyst Typically join after undergraduate and some outstanding analysts are promoted to associated in approximately three years o Associate Join after MBA or other graduate programs or are analysts which are promoted to associates. Sometimes, banks hire associates with industry experience o Vice Presidents Associates are promoted to Vice President in three to four years o Senior Vice President or Directors Vice Presidents are promoted to Senior Vice Presidents in two to four years o Managing Directors Directors are promoted to Managing Director within two to four years
2. Venture Capital Venture Capitalist typically raise money from institutional investors to form a fund for a period of time generally 10 years, using it to invest in start up high-growth potential private companies. They hope to generate a return or profit later when the start-ups go public via IPOs or are sold Venture capital firms include: - 3i Group - Benchmark Capital - Draper Fisher Jurvetson - Kleiner Perkins, Caufield and Byers - New Enterprise Associates - Sequoia Capital 3. Private Equity - Leveraged Buyouts Leveraged Buyouts involve making equity investments as part of a transaction in which a company, business unit or business assets is acquired from the current shareholders typically with the use of financial leverage Companies selected for these transactions are typically more mature than those invested by venture capital funds and tend to generate predictable operating cash flows to service the debt loads Blackstone Group Kohlberg, Kravis Roberts Bain Capital Carlyle Group Apollo Group Apax Partners Candover 30
4. Sales and Trading Sales and Trading could involve working in Equity, Debt, Commodities, Emerging Markets or Currencies product group Sales and Trading is offered by almost all the investment banks who receive commissions and fees for performing those services o In Sales, you help maintain relationships with institutional investors, and match the banks services and products to their needs o You work with the Trading and Research teams to provide comprehensive client coverage, including fulfilling client requests for market updates, executing client orders and providing institutional clients with information about specific securities You may also provide marketing ideas and help initiate transactions o In Trading, you help senior traders cover institutional accounts and make markets in your group's particular range of products. You will assist the senior traders in managing risk, liquidity and exposure and you may support all aspects of the trading desk: pre-trade analysis, research on index constituent changes, inbound and outbound trade processing and the design of optimal strategies for large trades o Proprietary Sales and Trading is when the bank uses its own balance sheet to trade. Goldman Sachs made an enormous amount of its profits through proprietary sales and trading
5. Equity and Fixed Income Research Sell Side Equity analysts research stocks and write reports on public companies with their views on the particular companys stock price generally buy, sell or hold o Securities analysts are usually further subdivided by industry specialization or sectors o Among the industries with the most analyst coverage are biotechnology, financial services, energy, and computer hardware, software and services Fixed income analysts research bond issuers. Fixed income analysts are also often subdivided by asset class. Among the fixed income asset classes with the most analyst coverage are convertible bonds, high yield bonds and distressed bonds
6. Hedge Funds A hedge fund is a private investment fund open to a limited range of investors that is permitted by regulators to undertake a wider range of activities than other investment funds and also pays a performance fee to its investment manager A hedge fund is a fund that can take both long and short positions, use arbitrage, buy and sell undervalued securities, trade options or bonds, and invest in almost any opportunity in any market where it foresees impressive gains at reduced risk The primary aim of most hedge funds is to reduce volatility and risk while attempting to preserve capital and deliver positive returns under all market conditions 31
Some of the leading hedge funds are: SAC Capital Atticus European Fund RAB Capital. London Appaloosa Management Citadel
7. Accounting Firms Accounting Firms have corporate finance groups which perform mergers and acquisitions and private capital raising work and also transaction advisory groups which specialize in financial and other due diligence work Accounting firms also have audit and tax groups which would also allow you to obtain your chartered accountancy or CPA professional certification. Some of the leading accounting firms are: PricewaterhouseCoopers LLP Deloitte & Touche LLP Ernest & Young LLP KPMG LLP Grant Thornton LLP BDO Seidman LLP McGladrey & Pullen LLP
8. Investment Management Investment management is the professional management of various securities (shares, bonds etc.) and assets (e.g., real estate), to meet specified investment goals for the benefit of the investors Investors may be institutions (insurance companies, pension funds, corporations etc.) or private investors (both directly via investment contracts and more commonly via collective investment schemes e.g. mutual funds) The term asset management is often used to refer to the investment management of collective investments, whilst the more generic fund management may refer to all forms of institutional investment as well as investment management for private investors The provision of 'investment management services' includes elements of financial analysis, asset selection, stock selection, plan implementation and ongoing monitoring of investments. Some of the leading investment management firms include BlackRock PIMCO D.E. Shaw & Co. Wellington Capital Management JP Morgan Asset Management 32
9. Commercial or Corporate Banking A corporate or commercial bank is a division of a bank that mostly deals with deposits and loans from corporations or large businesses, as opposed to normal individual members of the public. Commercial banking is also known as business banking They also provide other services including providing documentary and standby letter of credit, guarantees, performance bonds, securities underwriting commitments and other forms of off balance sheet exposures and currency exchanges Some of the leading commercial banks are: HSBC Bank of America JP Morgan Wells Fargo Barclays
10. Private Wealth Management Private Wealth Management is the term generally used to describe highly customized and sophisticated investment management and financial planning services delivered to high net worth investors Generally, this includes advice on the use of trusts and other estate planning vehicles, business succession or stock option planning, and the use of hedging derivatives for large blocks of stock Some of the leading firms include: Morgan Stanley Private Wealth Management Bank of America Raymond James Piper Jaffray Goldman Sachs UBS Credit Suisse
11. Corporate Finance Jobs at Companies All leading corporations have corporate finance and mergers and acquisitions groups which work with investment bankers to identify and execute transactions Further, these companies often offer analyst and associate positions which include intensive financial modeling. Some of the leading firms include: 33
12. Management and Strategy Consulting Management and Strategy consulting jobs involve working to improve the performance of companies by evaluating all aspects including Strategy, Finance, Operations and Marketing and Sales. Managing and Strategy consulting jobs value financial modeling experience Some of the leading firms include: McKinsey & Company The Boston Consulting Group Bain & Company Monitor Group
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What is EBITDA? EBITDA or Earnings before Interest, Taxes, Depreciation, and Amortization is an indicator of a company's financial performance and cash flow, which is calculated as follows: o EBITDA = Revenue - Expenses (excluding tax, interest, depreciation, and amortization) or EBIT which is operating income plus depreciation and amortization
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EBITDA can be used to analyze and compare profitability between companies and industries because it eliminates the effects of financing decisions EBITDA is widely used as a measure of cash flow for a company and as a popular leverage covenant Total Debt to EBITDA and EBITDA to Interest Expense It is a non-GAAP measure o You will not see EBITDA on the Companys income statement but will have to calculate it Though EBITDA is widely used by the investment community, it has several drawbacks o EBITDA leaves out the cash required to replace old equipment, which can be significant Assumes that fixed assets dont require capital replenishment, which may be challenging for fast growing firms Not a good tool for companies whose assets have shorter lives o EBITDA ignores a companys tax obligation, which is a cash-absorbing expense o Some companies may reclassify operating expenses as extraordinary charges to enhance EBITDA o It overlooks the working capital requirements for more investing and accounts receivable to support growing sales
What is working capital? Working Capital can be used as a measure of both a company's efficiency and its short-term financial health Working capital is calculated as: o Working Capital = Current Assets - Current Liabilities Positive working capital means that the company is able to fund its short-term liabilities with its short term assets. Negative working capital means that a company currently is unable to meet its short-term liabilities with its current assets including accounts receivable and inventory If a company's current assets do not exceed its current liabilities, then it may run into trouble paying back creditors in the short term
ADVANCED QUESTIONS If you add $100 of depreciation expense in the income statement with a 40% tax rate, how does that affect the income statement and how does the balance sheet balance? This is an excellent and one of my favorite interview question which shows how the three financial statements income statement, balance sheet and cash flow statements are related to each other Income Statement o Depreciation is an expense so operating income or EBIT declines by $100. Assuming a tax rate of 40%, net income declines by $60 Cash flow statement o Net income decreased by $60 so cash flow which starts with Net Income will decrease by $60 o Depreciation increased by $100 as it is added back in the cash flow statement so cash flow from operations increased by $40 38
o The ending cash balance increases by $40 as a result of cash flow from operations increasing by $40 which goes to the balance sheet Balance Sheet o The $60 reduction of net income causes retained earnings to decrease by $60 o Cumulative depreciation increases by $100 so Net PP&E decreases by $100 o PPE will decrease by $100 and cash goes up by $40. $40 cash change shows how the 3 statements are linked to each other
A company buys a car for $1,000 dollars on Jan 1, 2008. How will the income statement, cash flow and balance sheet be affected for the period Jan 1, 2008 to December 31, 2008? Let us assume that the depreciation method used for the car is straight-line method over 5 years and a 40% tax rate is assumed o Income Statement The depreciation expense for the period Jan 1, 2008 to December 31, 2008 will be $1,000/5 which is $200 Net Income will be reduced by $120 as you would get tax benefit of $80 o Cash Flow Statement $1,000 was spent to buy the car so Capex will increase by $1,000 so there will be a $1,000 use of cash in cash flow from investing activities so a use of cash of $1,000 Cash flow statement starts with net income which comes down by $120 in the cash flow statement Depreciation expense is added back in cash flow statement so $200 is added back So net change in cash is -1000-120+200= -$920 o Balance Sheet Cash is down by $920 from the cash flow statement Gross PP&E goes up by $1,000 Accumulated depreciation increases by $200 Net PP&E goes up by $800 ($1,000-$200) Net Income reduced by $120 which makes shareholders equity reduce by $120 Therefore, assets came down by $120 (-$920+$800) and shareholders equity came down by $120 so assets = liabilities + shareholders equity and the balance sheet balances
What is goodwill and how is it calculated? Goodwill is calculated by: o Equity purchase price paid for the Company - Targets fair market value of equity Book value of equity is book value of assets book value of liabilities = shareholders equity on the balance sheet (Assets Liabilities = Equity) o Financial statements are historical 39
Numbers on the balance sheet in the annual reports or 10-Ks and 10-Qs are also book assets and book liabilities What is Fair Market Value of Equity = Fair Market Value of Equity is book value of assets and liabilities revalued to fair market value for example land which is generally shown on books at cost and is not depreciated may have a significant adjustment Market Value of Equity paid is the fully diluted shares outstanding * share price (including premium if any) for a public company Accounting rules state that goodwill no longer should be amortized each period, but must be tested once per year for impairment o Absent impairment, goodwill can remain on a companys balance sheet indefinitely
Valuation Questions BASIC QUESTIONS What are the common valuation methodologies used to determine the value of the Company? Total Enterprise Value or Public Market Valuation Comparable Company Analysis Comparable Transaction Analysis Discounted Cash Flow Analysis Leveraged Buyout Analysis Other methods could include: o Sum of the Parts Analysis o Liquidation Analysis which is generally used in bankruptcy and not part of the standard investment banking methods
What is Enterprise Value and how is it difference from Equity Value? Total Enterprise Value is Equity Value + Debt + Preferred Stock + Minority Interest Cash o Enterprise Value represents the value of the operations of a company attributable to all providers of capital equity, debt and preferred o Enterprise Value means the value of the company as it is trading in the market today Equity Value or Market Capitalization is Fully Diluted Shares outstanding multiplied by price per share
What are the common valuation metrics? Enterprise Value (EV) / EBITDA, EV/Revenues, EV/EBIT, Price Earnings Ratio are the most commonly used valuation metrics o LTM data and one or two year forward data is generally analyzed o Some industries have different metrics for examples Financial institutions use Price/Book ratio 40
ADVANCED QUESTIONS Explain fully diluted market capitalization? A companys fully diluted market capitalization equals its share price multiplied by the number of fully diluted shares outstanding Basic shares represent the number of common shares that are outstanding today or as of the reporting date of the company o Basic shares outstanding should be found in the front page of the Companys most recent 10K or 10Q or annual report for UK companies Fully diluted shares equals basic shares plus the potentially dilutive effect from any outstanding stock options, warrants, convertible preferred stock or convertible debt To calculate the dilutive effect of stock options we typically use the Treasury Stock Method. The options information can be found in the companys latest 10K or annual reports for UK companies o Options information is not broken out in the 10Q or other filings of the Company If the company has other potentially dilutive securities e.g. convertible preferred stock or convertible debt we may need to account for those as well in our fully diluted share count o We need to make sure that we either account for convertible debt as debt or as equity else we will be counting it twice o Generally, if the security is in the money we should treat it as equity
Explain a Discounted Cash Flow (DCF) analysis? To properly value a business, you should ideally take all the flows of money that will be distributed between now and judgment day and discount them at the appropriate discount rate. Thats what valuing businesses is all about. Part of the equation is how confident you can be about these cash flows occurring. Some businesses are easier to predict than others. We try to look at businesses that are predictable -Warren Buffet I look for businesses in which I can predict what theyre going to look like in ten to fifteen years time. Take Wrigleys chewing gum, I dont think the Internet is going to change how people chew gum -Warren Buffet The Discounted Cash Flow (DCF) analysis values a company or business based on the Net Present Value (NPV) of the companys future cash flows In order to do a DCF analysis, the following steps need to be completed o Project free cash flow for a period of time Generally 5 years or 10 years Depends on how much of the cash flows you can predict For growth companies it might be better to stretch the cash flow for 10 years 41
Free cash flow equals o EBIT less taxes plus D&A less capital expenditures less the change in working capital We start from EBIT and not Net Income because we want the unlevered free cash flow Does not include interest expense and so is independent of debt and capital structure The value we will get will be the Enterprise Value of the company as the numerator is the unlevered free cash flow of the company and the denominator is the weighted average cost of capital Next step is to calculate Terminal Value o Terminal Value is the value of the Company from year 6 or 11 to infinity depending upon if we projected our cash flows for 5 or 10 years at the end of year 5 or year 10 Next step is to present value the projected free cash flows and terminal value, at the appropriate discount rate, also known as weighted average cost of capital (WACC) Adding the present value of the projected cash flows and the present value of the terminal value gives us the DCF value of the Company
How do you calculate Terminal Value of the company? There are two methods for calculating terminal value o Gordon Growth method or o Terminal Multiple method To use the Gordon Growth method, we choose an appropriate rate by which the company can grow forever after we have projected the companys cash flow for 5 or 10 years o Growth rate should be modest, for example, average long-term expected GDP growth or inflation Try growing a company which has $100 mm of cash flow at 20% for 300 years let alone infinity Difficult to see what number it is as it is a huge number companies cannot grow forever at 20% rate or even 15% rate o To calculate terminal value we multiply the last years free cash flow, year 5 or year 10 by 1 plus the chosen growth rate, and then divide by the discount rate less growth rate o Terminal Value = (Ending Cashflow x (1 + Growth Rate)) / (Discount Rate - Growth Rate) The second method, the Terminal Multiple method, is the one that is more often used in investment banking o We need to take an operating metric for the last projected period which could be year 5 or year 10 and multiply it by an appropriate valuation multiple Most common metric to use is EBITDA We typically select the appropriate EBITDA multiple by taking what we concluded for our comparable company analysis on a last twelve months (LTM) basis o Big assumption made is that the EBITDA multiple 42
used in year 5 or 10 is the LTM multiple or that the multiple does not change in 5 years o This is the reason why we do a sensitivity analysis for the EBITDA multiple Explain Weighted Average Cost of Capital (WAAC)? Weighted Average Cost of Capital or WAAC is a weighted average of the required rates of return for each of the different sources of capital equity, preferred and debt WAAC is the discount rate used in a DCF analysis to present value projected free cash flows and terminal value WACC reflects the cost of each type of capital Debt, Equity and Preferred weighted by the respective percentage of each type of capital assumed for the companys optimal capital structure WACC = [Ke x (E/(E+D+P)] + [Kp x (P/(E+D+P)] + [(Kd x (D/(E+D)) x (1-T)] o Ke = cost of equity o Kd = cost of debt o Kp = cost of preferred o E = MVE of subject company o D = FMV of debt (same as face value unless distressed) of subject company o P = Value of Preferred of company o T = tax rate See (1-T) for Debt in the WAAC formula reason is interest expense is tax deductible hence the effective cost of debt is Kd(1-t) To estimate the cost of equity, we will typically use the Capital Asset Pricing Model (CAPM) To estimate the cost of debt, we can analyze the interest rates or yields on debt issued by similar companies To estimate the cost of preferred we can analyze the dividend yields on preferred stock issued by similar companies
How do you calculate the cost of equity? The cost of equity is calculated using the capital asset pricing model (CAPM) CAPM = Rf + Beta x (RM Rf) Rf = risk-free rate RM = market rate (Expected return on the market portfolio) RM Rf = market risk premium (return above the risk-free rate) o Calculated by taking an average of data points over many years in order to incorporate a large sample of events o Amount the stocks, generally the S&P 500 for U.S. companies, have outperformed the risk free rate over a long period of time o Most banks get this rate from data providers like Ibbotson Associates Generally 5-6% recently The risk free rate for a U.S. company is generally considered to be the yield on a 10 or 20 year U.S. Treasury Bond 43
When using the CAPM for purposes of calculating WACC, why do you have to unlever and then relever Beta? Beta is the measure of volatility, or systematic risk, of a security compared to the market as a whole Beta of 1 signals that 1% rise in the market translates into 1% rise in the stock Beta of -1 signals that 1% rise in the market translates into 1% decline in the stock Betas outside of a range of 0.5 to 2.5 should be reviewed for reasonableness In order to use the CAPM to calculate our cost of equity for a private company, we need to estimate the Beta Beta is a function of risk affected by leverage In order to make an apples to apples comparison among company returns, leverage needs to be removed from beta We typically get the Beta from comparable companies, often the mean or median Beta However before we can use the comparable company Beta we must first unlever the Beta of each of our comps o Sources like Bloomberg will be a levered Beta so we need to unlever it After un-levering the Betas, we can now use the appropriate comparable company Beta i.e the mean of the comparable company unlevered Betas and relever it for the appropriate capital structure of the company being valued which could be the target capital structure of the company we are valuing. After relevering, we can use the levered Beta in the CAPM formula to calculate cost of equity. BL = Bu x [1 + D/E x (1-T)] Bu = BL / [1 + D/E x (1-T)] o BL = Levered Beta o Bu = Unlevered Beta o T = Tax Rate o D = Market Value of Debt o E = Market Value of Equity
MERGERS AND ACQUISITIONS BASIC QUESTIONS Why do companies do mergers and acquisitions? Companies merge with other companies to gain access into new product markets or broaden the spectrum of their product line Companies merge to enter new geographical markets Enhance brand recognition Consolidate operations to lower costs by achieving the economies of scale. They also consolidate to gain market share Defensive merger: Buy their way in to prevent competition from entering the industry Buy technology or research and development capabilities Acquirer views the Target as undervalued Acquirers own organic growth is slow and it needs to grow via acquisitions 44
ADVANCED QUESTIONS What is an accretion/dilution analysis and why is it important? A EPS Accretion / (Dilution) analysis is primarily used by public companies to analyze the impact on the acquirers earnings per share (EPS) of the acquisition of another company o If the acquirers EPS increases after the acquisition compared to the EPS before the acquisition, it is considered accretive o If the acquirers EPS decreases after the acquisition compared to the EPS before the acquisition, it is considered dilutive Companies are concerned with accretion dilution before making their acquisition decision as it affects the acquirers stock price o Generally companies will like to make accretive acquisitions as accretive transactions assume that the companys stock price should increase As many public companies trade on P/E multiples, any dilution to EPS could result in a subsequent drop in the stock price and vice versa o Example: Let us assume the current share price of the acquirer is $10 and EPS of $1 therefore its P/E ratio is 10.0x or the company trades at 10x earnings o If a 20% EPS accretion occurs (EPS increases to $1.20, the market assumes that the P/E ratio of the acquirer remains the same as before if the acquisition is of a company related to the acquirer o Therefore if the P/E ratio remains at 10.0x, the stock price would increase to $12 In reality the stock price does not go up always because market may not like the acquisition for a number of reasons One of the reasons could be that the market does not believe that the combined company will be able to achieve the synergies highlighted by the acquisition
How do you do an accretion/dilution analysis? For accretion/dilution analysis, we need to project the combined companys net income or proforma net income and the combined companys new shares outstanding Proforma net income will be the sum of the buyers and targets projected net income plus/minus certain transaction adjustments which are on a post-tax basis since we are adjusting net income o First adjustment is that we include synergies both cost and revenue synergies o Second adjustment is the additional interest expense which comprises of two parts Increased interest expense if debt is used to finance the purchase and adding Decreased interest income as a result of using the available cash on the balance sheet if cash is used to finance the purchase o Third adjustment is any new intangible asset amortization resulting from the transaction. Proforma shares outstanding reflects the acquirers share outstanding before the 45
acquisition plus the number of shares issued by the acquirer to finance the purchase of the target in a stock deal o Proforma EPS is calculated by dividing proforma net income by proforma shares outstanding o We compare Proforma EPS to the EPS of the acquirer before the acquisition to ascertain if the acquisition is accretive or dilutive What causes dilution in the acquirers stock price? If the target has a higher P/E multiple than the acquirer, dilution will occur assuming the acquirer issues mostly new stock for the acquisition, as opposed to using cash If the acquirer borrows the cash to fund a cash purchase of the stock, the increase in interest expense from the new debt may cause dilution If there is a large amount of new amortizable intangibles that arise from the transaction, the increase in amortization expense on the income statement can cause dilution Low or negative synergies as a result of the acquisition If the acquirer overpays for the target company Target company has negative net income
Will the deal be accretive if a company with a high P/E firm buys a company with a low P?E in an all stock transaction? Generally, if the Price to Earnings ratio (P/E) of the acquiring company is lower than the P/E of the target, then the deal will be accretive to the acquirers Earnings Per Share (EPS) o The acquirer has to pay less for each dollar of earnings than the market is valuing its own earnings o Acquirer will have to issue proportionally less shares in the transaction o Proforma earnings, which equals the acquirers earnings plus the targets earnings (the numerator in EPS) will increase more than the proforma share outstanding (the denominator), causing EPS to increase
What is synergy in an M&A transaction? Synergies means when the sum of the value of the Acquirer and the Target as a combined company is greater than the two companies valued apart Most mergers and large acquisitions are justified by the amount of projected synergies There are two types of synergies o Cost synergies - Ability to cut costs of the combined companies due to the consolidation of operations including closing one corporate headquarters, closing stores that overlap, reducing back office and information technology expenses, economies of scale in terms of buying products, laying off people in the management team and reducing advertising expenses of the combined company o Revenue synergies - Ability to sell more products and/or services or raise prices due to the acquisition or merger. For example, increasing sales due to cross-marketing of products or expanding in a new area where only one 46
company existed prior to the acquisition Generally, cost synergies are easier to predict than revenue synergies Many mergers and acquisitions do not work and a big part of the failure is not able to realize the synergies the acquiring company had predicted it would be able to achieve prior to the acquisition
LEVERAGED BUYOUT ANALYSIS BASIC QUESTIONS What is a leveraged buyout? A LBO or leveraged buyout is the acquisition of another company, private or public using a significant amount of borrowed capital to meet the cost of the acquisition The acquired company is taken private and the typical exit strategy in a leveraged buyout is for the private equity firm to sell the company or take it public again in 3-5 years Often, the assets of the company being acquired are used as collateral for the loans in addition to the assets of the acquiring company In an LBO, there is usually a ratio of 80% debt to 20% equity o Ratio is dependent on the companys cash flow and the industry the company is in and the debt markets o Because of this high debt/equity ratio, private equity companies need to issue bonds which usually are not investment grade and are referred to as junk bonds in order to meet their required IRRs
ADVANCED QUESTIONS What are the uses of an LBO model? While the private equity firms IRR is usually the most important piece of information that comes out of an LBO analysis, the analysis also has other uses. A Leveraged Buy-Out analysis is used by private equity firms / financial sponsors to evaluate a potential acquisition o By assuming the PE firms required IRR amongst other things, we can back into a purchase price for the company, thus using the analysis for valuation purposes The goal of an LBO is to acquire a company by financing the purchase with as much debt as the cash flows of the business and the debt markets will support The more debt a financial sponsor is able to obtain to finance an acquisition, the less of an equity investment the financial sponsor has to make The higher the leverage levels, the higher the expected Internal Rate of Return (IRR) is for the financial sponsor / private equity firm The goal of an LBO model is to establish expected internal rates of return (IRR) for the acquisition using a financial model that reflects the following o Assumptions and the necessary cash needed to finance the acquisition (uses of cash) o Capitalization assumptions: leverage (amount of debt), different debt 47
tranches, equity investment amounts (sources of cash) o Base case financial projections for the income statement, balance sheet and cash flow based upon the purchase price and capitalization assumptions The LBO model should be built with the ability to run sensitivities for a range of purchase prices, capitalization structures and operating assumptions In addition, we can utilize the LBO model to analyze the trend of credit statistics such as the leverage ratio and interest coverage ratio which is especially important from a lenders perspective Finally, the leverage buyout analysis is an important valuation methodology which tells us how much the private equity firm will be able to pay to acquire the Company and at the same time generate the IRR it requires. In 2006 and first half of 2007, because debt was cheap and readily available private equity firms were able to win against the strategic acquirers whereas things are quite different in 2008 where most of the major M&A transactions have involved strategic acquirers.
Explain the steps involved in an LBO analysis? Step 1 is to determine what the purchase price will be o The determination of the purchase price is complicated and typically involves a full-scale valuation (DCF, public company multiples and transaction multiples) as well as extensive due diligence including on Companys operations, financial condition, management team, customers, suppliers and assets o If the Company has publicly traded equity, then typically a purchase price would be calculated much as TEV is calculated (Offer price per share * fully diluted shares) + debt + minority interest + preferred interest cash o If we assume that we are buying the Company as a multiple of EBITDA we can calculate the TEV required to purchase the Company Step 2 is how will the deal be financed and for that we create a Sources and Uses table where Sources equals Uses of funds o Uses reflect the amount of money required to complete the transaction Usually equals the purchase price plus transaction fees and any other cash payment required as part of the transaction o Sources part of the table highlights where the money is coming from, including the new different types of debt, any existing cash that will be used, as well as the equity contributed by the private equity firm o Amount of debt is assumed based on the state of the debt capital markets and the cash flows and the industry where the company is in and the amount of equity required by the private equity firm is the difference between the Uses (total funding required) and all of the other sources of funding Private equity firms would like to put minimum amount of equity so that they can maximize their IRRs Step 3 is to create a proforma balance sheet of the company as of the transaction date by changing the existing balance sheet of the company to reflect the 48
transaction and the new capital structure o Intangible assets such as goodwill and capitalized financing fees will likely be created Step 4 is to create an integrated cashflow model for the company o This requires projecting the companys income statement, balance sheet and cashflow statement for a period of time which could be 5 or 10 years Step 5 is to make assumptions about the private equity firms exit from its investment o Typical assumption is that the company is sold or taken public in 3-5 years o An important assumption made is that the company is sold at the same multiple it was bought for example if the company was bought at 8x LTM EBITDA, the assumption is that the company will be sold for 8x EBITDA in 5 years Enables private equity firm to see the IRRs as a result of capital structure changes without multiple being increased or cost cutting and other operational initiatives Step 6 is to calculate the IRRs for the private equity firms o Projecting a sale value for the company allows us to also calculate the value of the private equity firms equity stake which we can then use to analyze its internal rate of return (IRR) Step 7 is to look at the credit ratios of the company for the next 5 years and see if the company can support the debt used to finance the transaction o Debt/EBITDA and EBITDA/Interest Expense are two important ratios analyzed besides the other ratios we look at
What are some characteristics of a company that is a good LBO candidate? Characteristics of a good LBO target include o Steady cashflows which are important to pay interest and principal payments on debt o Limited need for ongoing capital expenditure or working capital investment o Opportunity for cost reductions o A high asset base to use as collateral for debt
OTHER QUESTIONS Why might a company choose to issue debt vs. equity? Why Equity o Does not require interest payments o If the company has weak or cyclical cash flow to make interest and principal payments o Currency for acquisitions Why not Equity o Dilution 49
o More expensive than debt Interest on debt is tax deductible When a company has sufficient earning to utilize the tax shield over the life of the debt, the company will typically choose to issue debt When a company's debt level is still relatively low, they will issue more debt to increase the ratio of debt/equity. Companies have to be careful as the amount of debt increase because a higher debt level also increases the probability of bankruptcy. This threat will eventually out weigh the tax advantage if they cross their debt/equity threshold and the company's value will fall with the increase in debt Companies with predominantly tangible assets are more likely to issue more debt than companies with predominantly intangible assets because of the lower bankruptcy cost Earning per share (EPS) is a good measure when choosing between debt and equity financing. Although debt financing saves money from taxes, this newly created interest expense also reduces net income. For equity financing there is no interest expense, but there is a possible dividend expense. More importantly, due to the increase in total number of shares outstanding, equity financing has a dilution effect on earnings Debt is less expensive for two main reasons. First, interest on debt is tax deductible (i.e. the tax shield). Second, debt is senior to equity in a firms capital structure. That is, in a liquidation or bankruptcy, the debt holders get paid first before the equity holders receive anything. Note, debt being less expensive capital is the equivalent to saying the cost of debt is lower than the cost of equity
What could a company do with excess cash on the balance sheet? Invest in capital expenditures and/or research and development Invest in the stock and bond market or keep in money market and other interest bearing accounts Identify acquisition targets Share repurchases Dividends
What is LIBOR? London Interbank Offered Rate is an interest rate at which banks can borrow funds, in marketable size, from other banks in the London interbank market LIBOR is fixed on a daily basis by the British Bankers' Association LIBOR is the world's most widely used benchmark for short-term interest rates. It's important because it is the rate at which the world's most preferred borrowers are able to borrow money It is also the rate upon which rates for less preferred borrowers are based. For example, a multinational corporation with a very good credit rating may be able to borrow money for one year at LIBOR plus a few points Countries that rely on the LIBOR for a reference rate include the US, Canada, Switzerland, and the U.K.
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RECOMMENDED READING
Accounting and Financial Statement Analysis Warren Buffet and the Interpretation of Financial Statements Mary Buffet & David Clark Financial Statement Analysis and Security Valuation Stephen H. Penman Business Analysis and Valuation Using Financial Statements Krishna Palepu, Paul Healy, and Vic Bernard Financial Reporting and Analysis Lawrence Revsine, Daniel Collins, and W. Bruce Johnson Valuation and Corporate Finance The Practitioners Guide to Investment Banking, Mergers & Acquisitions, Corporate Finance Jerilyn J. Castillo, Peter J. McAniff Valuation: Measuring and Managing the Value of Companies (Fourth Edition) McKinsey & Company Inc., Tim Koller, Marc Goedhart, David Wessels Valuation for Mergers, Buyouts and Restructuring Enrique Arzac Principles of Corporate Finance Richard Brealey, Stewart Myers, and Franklin Allen
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Interesting Books on Wall Street The Accidental Investment Banker: Inside the Decade that Transformed Wall Street Jonathan A. Knee Barbarians at the Gate: The Fall of RJR Nabisco Bryan Burrough and John Helyar Liar's Poker: Rising Through the Wreckage on Wall Street Michael Lewis Monkey Business: Swinging Through the Wall Street Jungle John Rolfe and Peter Troob Den of Thieves James B. Stewart The Bonfire of the Vanities Tom Wolfe The Predators' Ball: The Inside Story of Drexel Burnham and the Rise of the Junkbond Raiders Connie Bruck
Movies Wall Street Date of Movie: 1987 Director: Oliver Stone Cast: Michael Douglas, Charlie Sheen Boiler Room Date of Movie: 2000 Director: Ben Younger Cast: Giovanni Ribisi
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AUTHORS BIO
Ashish Kohli is a seasoned investment banker and private equity professional with over 15 years of transaction experience across product groups of investment banking and private equity including mergers and acquisitions, leveraged buyouts, private placements, IPOs and secondary offerings, high yield debt and restructuring. Ashish has extensive teaching experience and has led training seminars globally in North America, Europe, Middle East and Asia. He also led Investment Banking Training programs in the firms where he worked including leading the global analyst and associate training program at HSBC in NY and London. In the second half of 2008, Ashish conducted over 100 days of training across U.S., Europe and Asia including training programs at Cambridge University and London School of Economics in the U.K. in December 2008. Ashish started his investment banking career as an Associate in the Investment Banking Division of Credit Suisse/Donaldson, Lufkin & Jenrette in NY where he worked in the M&A, Generalist and Technology Industry Groups (the largest technology investment banking franchise on Wall Street), advising and raising capital for companies across a number of different sectors. He also worked with DLJ's private equity group, one of the leading private equity groups on Wall Street. After Credit Suisse, Ashish worked for the Investment Banking Division of Jefferies & Company Inc. in NY as a Generalist and in the Technology and Media Group where he focused on restructuring and recapitalizations, M&A advisory and capital raisings. He advised Samsonite Corporation on its recapitalization and the deal was awarded the 2003 U.S. Middle Market Deal of the Year by Mergers and Acquisitions Advisor. After Jefferies, Ashish joined the Investment Banking Execution Group (M&A and capital raising) for HSBC Securities (USA) Inc. in NY and London where he executed M&A and capital raising transactions in industries such as consumer & retail, real estate, technology and oil and gas. Ashish then joined ThinkPanmure in NY and UK as a Principal/Director for the Investment Banking and Private Equity Division leading transactions across all industries including Alternative Energy. Ashish is currently a Partner and Senior Banker for the Investment Banking Institute based in New York, a global financial training firm with training facilities in New York, 55
Atlanta, Boston, Chicago, Washington DC, Dallas, Houston, Denver, San Francisco, Los Angeles, Toronto, London, and Dubai, providing instructor-led training and elearning services to people from leading financial institutions, Fortune 100 companies and academic institutions. Prior to business school, Ashish worked for Arthur Andersen in their business advisory, audit and tax groups. Ashish earned an MBA from the Kellogg Graduate School of Management (Deans List) and a Bachelor of Commerce (Honors) from University of Delhi. He is also a Chartered Accountant. Select Transaction Experience
Advised Samsonite Corporation on its $600 million recapitalization transaction including $106 million new equity investment by Bain Capital, Ontario Teachers Pension Fund, and Ares Capital. Deal was awarded the 2003 U.S. Middle Market Deal of the Year by Mergers and Acquisitions Advisor Managed a $2.1 billion IPO for Genuity Managed a $1.2 billion high yield financing for PSINet Managed a $825 million convertible stock offering for PSINet Managed the $750 million AIM listing of Hirco real estate fund in the UK (Hirco is one of Indias leading real estate development companies) Advised William Grant & Sons on its potential $400 million acquisition of Svedka vodka in the U.S. Represented the ad hoc committee of $380.5 million 13% Senior Notes of Mpower Holding Corporation in its successful restructuring Managed a $200 million AIM listing of a close-ended fund focused on renewable energy and environmental services in Asia Advised PSINet on its $720 mm acquisition of Transaction Network Services Advised PSINet on its $1.9 billion acquisition of Metamor Worldwide Managed a $160 million SPAC offering for a company focused on acquisition of consumer and business service companies in the U.S. Advised PlayCore on its $200 million sale to Chartwell Investments Managed a $160 million high yield offering for IMAX Corp Managed a $132.5 million IPO and a $110.7 million secondary offering for ManTech International Corporation Managed a $97.8 million IPO for MTC Technologies Managed a $223.0 million secondary offering for Anteon International Corp. Managed a $232.5 million secondary offering for Endo Pharmaceutical Ltd. Managed a $61.7 mm secondary offering for Modem Media Advised GE on its entry strategy to India including advisor on the joint venture between GE Plastics and IPCL in India, the largest joint venture with a public sector company at that time
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A accelerated, accomplished, achieved, acquired, addressed, adapted, adopted, advanced, advised, advocated, affected, allocated, altered, amended, analyzed, appraised, approached, approved, arranged, ascertained, assigned, assumed, assisted, attracted, audited, augmented, authored, awarded B balanced, bargained, bought, budgeted, built C calculated, capitalized, captured, challenged, chaired, changed, channeled, chose, classified, cleared, closed, co-authored, cold called, collaborated, collected, combined, commissioned, committed, communicated, compared, compiled, complied, completed, computed, conceived, conceptualized, concluded, condensed, conducted, consolidated, constructed, consulted, contracted, contrasted, contributed, controlled, converted, convinced, coordinated, corrected, corresponded, counseled, created, critiqued, cultivated D decentralized, decreased, deferred, defined, delegated, delivered, demonstrated, described, designated, designed, determined, developed, devised, devoted, directed, disclosed, discovered, dispatched, displayed, dissembled, distinguished, distributed, diversified, divested, documented, doubled, drafted E earned, eased, edited, effected, elected, eliminated, employed, enabled, encouraged, endorsed, enforced, engaged, engineered, enhanced, enlarged, enriched, entered, entertained, established, estimated, evaluated, examined, exceeded, exchanged, executed, exempted, exercised, expanded, expedited, explained, exposed, extended, extracted, extrapolated F facilitated, familiarized, fashioned, fielded, figured, financed, fit, focused, forecasted, formalized, formed, formulated, fortified, found, founded, framed, fulfilled, functioned, furnished G gained, gathered, gauged, gave, generated, governed, graded, granted, greeted, grouped, guided H handled, headed, hired, hosted I identified, illustrated, illuminated, implemented, improved, improvised, inaugurated, indoctrinated, increased, incurred, induced, influenced, informed, initiated, innovated, inquired, inspected, inspired, installed, instigated, instilled, instituted, instructed, insured, interfaced, interpreted, interviewed, introduced, invented, inventoried, invested, investigated, invited, involved, isolated, issued J joined, judged L launched, lectured, led, lightened, liquidated, litigated, lobbied, localized, located M maintained, managed, mapped, marketed, maximized, measured, mediated, merchandised, merged, met, minimized, modeled, moderated, modernized, modified, monitored, motivated, moved, multiplied
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N named, narrated, negotiated, noticed, nurtured O observed, obtained, offered, offset, opened, operated, orchestrated, ordered, organized, oriented, originated, overhauled, oversaw P paid, participated, passed, patterned, penalized, perceived, performed, permitted, persuaded, phased, out, pinpointed, pioneered, placed, planned, polled, prepared, presented, preserved, presided, prevented, priced, printed, prioritized, probed, processed, procured, produced, profiled, programmed, projected, promoted, prompted, proposed, proved, provided, publicized, published, purchased, pursued Q quantified, quoted R raised, ranked, rated, reacted, read, received, recommended, reconciled, recorded, recovered, recruited, rectified, redesigned, reduced, referred, refined, regained, regulated, rehabilitated, reinforced, reinstated, rejected, related, remedied, remodeled, renegotiated, reorganized, replaced, repaired, reported, represented, requested, researched, resolved, responded, restored, restructured, resulted, retained, retrieved, revamped, revealed, reversed, reviewed, revised, revitalized, rewarded, routed S safeguarded, salvaged, saved, scheduled, screened, secured, segmented, selected, sent, separated, served, serviced, settled, shaped, shortened, showed, shrank, signed, simplified, sold, solved, spearheaded, specified, speculated, spoke, spread, stabilized, staffed, staged, standardized, steered, stimulated, strategized, streamlined, strengthened, stressed, structured, studied, submitted, substantiated, substituted, suggested, summarized, superseded, supervised, supplied, supported, surpassed, surveyed, synchronized, synthesized, systematized T tabulated, tailored, targeted, taught, terminated, tested, testified, tightened, traced, traded, trained, transacted, transferred, transformed, translated, transported, traveled, treated U uncovered, undertook, unified, united, updated, upgraded, used, utilized V validated, valued, verified, viewed, visited W weighed, welcomed, witnessed, won, worked, wrote
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"I am deeply sorry for this and for disappointing so many in the M.I.T. community and beyond who supported me, believed in me and who have given me extraordinary opportunities. Ms. Jones on various occasions had represented herself as having degrees from Albany Medical College, Union College and Rensselaer Polytechnic Institute, but she had no degrees from any of those places, said Phillip L. Clay, the chancellor of M.I.T. RadioShack Chief Resigns After Lying February 21, 2006, New York Times David J. Edmondson resigned as the chief executive of RadioShack yesterday, only days after he told investors that he intended to stay on despite the revelation that he had lied to the company about his education by claiming two college degrees when he had none. David Edmondson joined RadioShack in 1994 as a vice president. Leonard H. Roberts, the executive chairman of the company, who had chosen Mr. Edmondson to be his successor as chief executive, announced the departure, which he said was a mutual decision between the board and Mr. Edmondson. Mr. Edmondson, 46, had apologized to the company and investors on Friday both for "the embarrassment" that had been caused by the revelation that he had lied about his past, and for the company's poor financial results, which were announced that day. He announced a turnaround plan and said he looked forward to carrying it out over the next 18 to 36 months. Mr. Edmondson, in an interview with The Star-Telegram on Feb. 10, had conceded he did not have two degrees, and that the degree he said he did have was not a bachelor's degree, as he had claimed in the rsum he gave RadioShack when he was hired in 1994. But he insisted he had one degree, a Th.G., a theology degree that the college, now known as the Heartland Baptist Bible College, awards after three years of study. The newspaper said the college said its records showed he had attended for two semesters, but did not graduate. But last Wednesday, the company issued a statement from Mr. Edmondson admitting, "I clearly misstated my academic record and the responsibility for these misstatements is mine alone." The board then announced an investigation, which was canceled yesterday after he resigned. Last week, the stock fell 12 percent, to $19.08, trading at a three-year low, in reaction to the poor performance and the disclosures regarding Mr. Edmondson.
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The Author would like to thank the following individuals who have made contributions to this book.
Name of Individual USA Indranil Ghosh Brian Linn Grace Wang Payal Gandhi
School Attended
Work Experience
Phd. MIT BA, Cambridge University BA, St. Olaf College BA, Carnegie Mellon University MBA, Wharton Business School BA, Northwestern University
CANADA Jeffrey Coles MBA, Rotman School of Management BSc, University of Waterloo Manulife Financial
UK Robert Storm MBA, Harvard Business School BA, Cambridge University BP Plc
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