Harris Williams IB Interview Questions

Harris Williams relies most on precedent transactions. That method values a company using the prices buyers actually paid to acquire whole, comparable companies. The firm is mainly a sell-side M&A advisor: it represents owners selling their company and is paid largely on the sale price. Precedent deals already include a control premium, the extra a buyer pays above a minority-stake value to own and run the business. Those multiples are the best evidence for the top price a seller can defend.

The P/E ratio (share price divided by earnings per share) is a claim about the future. The financial statements are a record of the past. Two companies can report the same revenue, margins and net income last year and still trade at different multiples, because investors expect different growth, assign different risk, and trust the earnings to different degrees. The statements show what was earned. The multiple shows what the market will pay for what comes next.

An LBO analysis (leveraged buyout: a purchase funded mostly with borrowed money) works backward to the price a private equity buyer can pay and still earn its target return. The answer rests on three assumptions: how much debt lenders will provide, the exit multiple the buyer expects to sell at, and the IRR hurdle (the minimum annual return the buyer demands). It is usually built on a standalone basis, without the synergies (cost savings or extra revenue from combining two companies) a strategic buyer could capture. So it typically reads as a floor on value, below the full price the company could fetch.

Analyze balance sheet composition (PP&E, inventory, loans, deposits), income statement margins (gross, operating) and line items (R&D, interest income), then compute cross-statement ratios (asset turnover, inventory turnover) to match each company's financial fingerprint to an industry signature.

A big retailer is the textbook case, so Walmart or Kroger. Customers pay cash at checkout while suppliers wait 30 to 60 days for their money, so current liabilities (mostly accounts payable, the bills owed to suppliers) exceed current assets like inventory and receivables. The company sits on the supplier's money for weeks before it has to hand it over, and that is what pushes working capital below zero. For a business like this the negative number reads as strength. Nothing about it signals distress: the suppliers and the customers are financing day-to-day operations.

Use FCFE (free cash flow to equity, also called levered free cash flow: the cash left for shareholders after the company pays interest and net debt repayments) mainly for banks and insurers, where borrowing is part of the operating business rather than a financing choice. It also fits models that forecast the debt schedule (the year-by-year plan of borrowing, interest, and repayment) explicitly, with leverage roughly stable. Discount FCFE at the cost of equity (the return shareholders require) and you get equity value directly. Most other companies, even ones with debt, get valued with unlevered FCF discounted at WACC (the blended cost of debt and equity), which gives enterprise value.

I'd group my questions into four buckets. Timing: are the business, the team and the financial reporting ready to go to market now? Strategy: what do the owners want from a deal, and which buyers fit that goal? Storytelling: what drives growth, what makes the company hard to copy, and what data proves it? Those three buckets, plus a direct question about known weak spots, let the bank advise on the right process, a realistic valuation range and what to fix before launch.

Group your questions by the topics a buyer will probe: the business model and customers, the quality of the financials, growth drivers, management and operations, and what the owners want from the deal. For each topic, start from a specific claim or number in the teaser and ask three things: what supports it, how long it will last, and what could worry a buyer. A teaser is the short, usually anonymous summary a sell-side bank (the bank advising the owners on the sale) sends to potential buyers. Diligence is the detailed checking a buyer does before it commits to a price.

Year 2 has no new purchase, only $10 of depreciation. Depreciation is the yearly charge that spreads the $100 cost of the PP&E (property, plant and equipment) over its useful life. Pre-tax income falls $10, and at a 25% tax rate net income falls $7.50. On the cash flow statement, start from net income of -$7.50 and add back the $10, since depreciation uses no cash. Cash rises $2.50. That is the tax saved. On the balance sheet, cash is up $2.50 and net PP&E (cost minus all depreciation taken so far) is down $10, so assets fall $7.50. Retained earnings (the running total of profits kept in the business) drop $7.50 to match.

A DCF values a company today on the cash it is expected to produce in the future. You project unlevered free cash flow (cash left for all investors, both lenders and shareholders, after operating costs, taxes and reinvestment) for about five to ten years. Then you estimate a terminal value for every year after that and discount both back to today at the weighted average cost of capital (WACC). The total is enterprise value. Subtract net debt to get equity value, and divide that by diluted shares to get an implied value per share.

Pick a recent deal from the Harris Williams website or press releases, ideally in the industry group you want to join. Walk through it in four parts: the company, the parties, the strategic logic, and Harris Williams' role. Harris Williams is a middle-market M&A advisor. Most of its work is sell-side, which means it helps an owner sell a company. That owner is often a private equity firm or a founder. Frame the deal that way.

Identical financial statements tell you what a business earned in the past. Value depends on what it will earn and how safe those earnings are. Two companies with the same revenue, EBITDA and net income can trade at very different multiples because of industry growth, competitive moat, management quality, customer concentration, revenue mix, and items that sit off the balance sheet. Each of those moves the expected growth rate and the risk of the cash flows, and that is what a buyer pays for.