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Happy Saturday, future bankers!

Hope everyone is doing well! Today we’re covering LBOs on private companies, role models, and Tesla’s bad quarter.

🚀 Let’s get into it.

🔢 Technical Question

Why might it be more difficult to do an LBO on a company that is private?

A Leveraged Buyout (LBO) is a strategy where a company is acquired using a significant amount of borrowed money. The assets of the company being acquired are often used as collateral for the loans. Now, executing an LBO on a private company can be more challenging due to several reasons:

1. Lack of Information: Private companies are not required to disclose as much information as public companies. This lack of transparency can make it difficult to assess the company’s value and potential risks, which are crucial for structuring the LBO.

2. Valuation Difficulties: Without publicly available financial data, accurately valuing a private company can be complex. This could lead to disputes over the company’s worth, complicating the LBO process.

3. Financing Challenges: Lenders might be more hesitant to finance an LBO for a private company due to the lack of publicly available information and potential difficulties in assessing the risk.

4. Lack of Liquidity: Unlike public companies, private companies do not have shares that are readily tradable on a public exchange. This lack of liquidity can make it harder to exit the investment.

5. Owner Resistance: Private companies are often closely held, and owners may be resistant to change, making negotiations more difficult.

These factors contribute to the complexity and risk associated with conducting an LBO on a private company.

🗣 Behavioral Question

Who is a role model to you?

Here's a breakdown of best practices and strategies:

Why The Question Matters

Interviewers ask this for several reasons:

• Values: They aim to see what qualities you admire. Does this align with the firm's culture and expectations of an analyst?

• Ambition: Your role model might hint at your career goals and indicate how this internship fits your path.

• Communication: How you explain your choice tests your storytelling and reasoning skills.

Best Practices

1. Be Genuine: Choose someone you truly admire. Faking enthusiasm is noticeable.

2. Focus on Professionals: Family members are wonderful role models, but this context calls for a work-related figure. Ideally, someone within finance or a related field.

3. Tie to Investment Banking: Identify traits your role model has that are essential within investment banking (e.g., analytical rigor, collaborative nature, resilience).

4. Be Specific: Avoid generic answers. Share a particular situation or accomplishment that demonstrates why this person inspires you.

5. Keep it Concise: Don't ramble. A well-articulated explanation with a specific example is better than a long, vague narrative.

Types of Role Models

• A Senior Banker: If there's someone you've observed, read about, or networked with, this is a great option. Shows you're familiar with the industry

• A Professor: Demonstrates your interest in technical concepts and commitment to learning the fundamentals of finance.

• A Mentor: Highlights your openness to guidance and ability to learn from others.

🗞 Industry News

😬 Tesla Stock Takes Another Hit

Tesla had a bit of a rollercoaster week, with shares dipping 3.6% on Friday, rounding off a week that saw a nearly 6% drop in stock value. The EV giant’s woes were attributed to dwindling EV demand impacting sales and a potential shift in future products. Reuters reported that Tesla had scrapped plans for a sub-$30,000 EV, the so-called Model 2, and would instead concentrate on a self-driving robotaxi. Elon Musk, Tesla’s CEO, refuted the report on his social media platform, X, and announced that the robotaxi would be unveiled on August 8th.

The week’s events followed a first quarter that saw Tesla’s stock lose almost a third of its value, making it the S&P 500’s worst-performing stock. The quarter’s delivery numbers significantly missed expectations, with Tesla reporting 386,810 global deliveries in Q1, a nearly 10% drop from the previous year. Despite raising the price of its popular Model Y in the US and China, Tesla backtracked by offering new incentives like zero-interest loans and free trials of its self-driving software. With strong competition in the Chinese EV market and discounts on existing inventory in the US, Tesla’s start to the new quarter has been less than stellar.

Read more about this story below.

Thanks for tuning in today! Best of luck to everyone working through recruiting right now. If you sign an offer, reply to this email and let us know about it! Like seriously, do it—we’d love to hear about it!