Harris Williams IB Interview Questions

Harris Williams would rely most on Precedent Transactions because, as a sell-side M&A advisor, they need to justify the highest defensible price, and precedent transactions inherently include control premiums that anchor valuations higher for sellers.

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.

The LBO method is highly sensitive to leverage, exit multiple, and cash flow assumptions, uses a subjective IRR target, only reflects a financial buyer's perspective (producing a valuation floor), and depends on an assumed hold period.

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.

We use FCFE primarily for financial institutions (banks, insurers) where debt is an operating product rather than financing, and secondarily for LBOs or equity-level models where the debt schedule is explicitly projected.

Ask management diligence questions organized into four buckets — Timing (when to go to market), Strategy (growth plan and competitive positioning), Storytelling (differentiated equity narrative for the CIM), and Advice (process structure, valuation expectations, and counterparty preferences).

The first diligence call must systematically cover financial quality-of-earnings detail, growth narrative, operations, legal structure, seller objectives, buyer universe preferences, and data room readiness so you can build a preliminary valuation, draft the CIM outline, and construct a tiered buyer list.

In Year 2, the income statement shows $10 of depreciation expense, which reduces pre-tax income by $10. Assuming a 25% tax rate, taxes fall by $2.50, so net income decreases by $7.50. On the balance sheet, net PP&E falls by $10 and cash rises by $2.50 from the tax shield, so total assets decline by $7.50. Retained earnings fall by $7.50, and the balance sheet balances. On the cash flow statement, net income is down $7.50, depreciation is added back by $10, and there is no capex in Year 2, so cash from operations increases by $2.50 and net cash increases by $2.50.

Project unlevered free cash flow, discount at WACC alongside a terminal value to arrive at enterprise value, then subtract net debt and divide by diluted shares to get implied share price.

Harris Williams advised a PE-backed middle-market company on a sell-side process, running a competitive auction with broad outreach, shortlisting buyers, and ultimately achieving a premium valuation through competitive tension among final bidders.

Differences in industry, competitive moat, management quality, customer concentration, revenue mix (recurring vs. one-time), growth prospects, off-balance-sheet liabilities, and strategic/acquisition value can all affect the discount rate or expected future cash flows, leading to different valuations.