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Happy Friday, future bankers!

Hope everyone is doing well! Today we’re covering the difference between enterprise value and equity value, a topic you could teach a class about, and Zillow’s wild ride.

🚀 Let’s get into it.

🔢 Technical Question

Suppose you are looking to acquire a company. Do you care more about a company’s enterprise value or equity value?

When considering an acquisition, the Enterprise Value (EV) is more important than the Equity Value. Here’s why:

The Enterprise Value is a measure of a company’s total value, including not only its equity but also other ownership interests and claims by both debt holders and preferred equity holders. This means it accounts for the entire market value of a company and the cost to take it over completely.

When you acquire a company, you’re not just buying the equity (i.e., the shares of stock in the open market). You’re also taking on its obligations, which includes its debt. Therefore, the Enterprise Value gives a much more accurate picture of the total cost of acquisition, as it includes both the cost of buying all the equity and the cost of paying off the debt.

On the other hand, the Equity Value only represents the value of the shareholders’ interest in the company. It does not account for debt, and therefore, it does not reflect the total cost of acquiring the company.

So, in the context of acquisitions, the Enterprise Value is a more comprehensive and crucial metric than the Equity Value. It provides a more accurate representation of the total cost and the true value of the company.

🗣 Behavioral Question

If you were to teach a class on any topic, what would it be and why?

When responding to the question “If you were to teach a class on any topic, what would it be and why?” in an investment banking internship interview, consider the following best practices:

1. Choose a Topic You’re Passionate About: This doesn’t have to be finance-related. It could be anything from history to cooking. The key is to choose something you genuinely enjoy and can speak about with enthusiasm.

2. Explain Why You Chose the Topic: Discuss why the topic interests you and how you became passionate about it. This gives the interviewer insight into your personality and values.

3. Discuss What You Would Teach: Outline the key lessons or skills you would want your students to learn from your class. This demonstrates your ability to think strategically and plan effectively.

4. Relate It Back to the Role: Even if the class isn’t finance-related, try to draw connections between the skills or lessons from your class and the skills required for the investment banking role. This could be problem-solving, strategic thinking, or communication skills.

For example, if you chose to teach a class on chess, you could discuss how you would teach strategic thinking and anticipation of opponent’s moves, skills that are highly relevant in investment banking.

Remember, this question is a chance for you to showcase your passion, creativity, and ability to inspire others, all of which are valuable traits in any role.

🗞 Industry News

🏡 Zillow’s Wild Ride

Well, it seems like the real estate world is in for a bit of a shake-up! The National Association of Realtors (NAR) has reached a settlement that could lead to homebuyers and sellers paying lower commissions. This news sent shares of Zillow and other real estate companies on a bit of a rollercoaster ride, with Zillow’s shares dropping as much as 15%. The NAR is set to pay a whopping $418 million over the next four years to put an end to the litigation.

As part of the settlement, the NAR is introducing a new rule that ends the requirement for sellers to compensate a buyer’s agent. This change is expected to cause quite a stir in the industry, with one Wall Street analyst predicting that commissions could fall by 25% to 50%. This could be great news for existing homeowners who are looking to sell, as they’ll be shelling out less in fees. However, first-time and less-wealthy buyers might find it a bit tougher, as smaller commissions could mean less motivation for agents to work with these clients.

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!