Perella Weinberg Partners IB Interview Questions

WACC is the weighted average cost of capital: the blended annual return a company has to earn to satisfy everyone who funds it. It is the rate you discount unlevered free cash flow at in a DCF. You build it by weighting the cost of equity and the after-tax cost of debt by each one's share of total capital, measured at market value: WACC = E/(D+E) x cost of equity + D/(D+E) x cost of debt x (1 - t). Cost of equity comes out of CAPM. Cost of debt is the yield the company pays on its debt today, and it gets tax-affected because interest is deductible. The equity term does not.

A valuation deck typically includes an executive summary with a football field chart, company overview, comparable companies analysis, precedent transactions analysis, DCF analysis, LBO analysis if applicable, sum-of-the-parts if relevant, a valuation summary, and appendices.

The Income Statement, Balance Sheet, and Cash Flow Statement link as follows: Net Income flows into the CFS as its starting line and into Retained Earnings on the BS, while the CFS's ending cash feeds into BS assets.

Yes — even with no change in enterprise value or multiple, the PE firm can achieve a return through debt paydown during the holding period, which increases the equity value at exit relative to the initial equity invested.

Three additional valuation methods are Leveraged Buyout (LBO) Analysis, which backs into a PE sponsor's maximum purchase price for a target IRR; Sum-of-the-Parts, which values each business segment separately; and the Dividend Discount Model, which discounts projected dividends at cost of equity.

Five SaaS companies are Microsoft 365, Salesforce, ServiceNow, Veeva Systems, and Atlassian. They qualify as SaaS because the software is hosted by the vendor, sold on a recurring subscription basis, and updated centrally rather than installed and maintained by the customer. Among that group, Atlassian likely has the highest gross margin, at roughly the low-80% range, helped by its low-touch, self-serve model.

The three main valuation methods are comparable companies, precedent transactions, and a discounted cash flow (DCF) analysis. Comparable companies values a business at the multiples similar public companies trade at today, such as enterprise value (the value of the whole business to lenders and shareholders) divided by EBITDA (a rough measure of operating cash profit). Precedent transactions uses the multiples buyers paid in past acquisitions of similar companies. Those multiples include a control premium, the extra a buyer pays to take control. The DCF values the company on its own cash flows instead of market prices. It projects unlevered free cash flow (the cash available to all investors before any payments to lenders) and discounts it to today at WACC (weighted average cost of capital, the blended return lenders and shareholders require) to get enterprise value.

Yes — beta can be negative if a stock's returns are inversely correlated with the market. In practice, true negative-beta companies are very rare. The best company-related examples are businesses with strongly counter-cyclical or safe-haven exposure, sometimes including certain gold-related companies, though even they do not consistently have negative beta.

Advertising and marketing. SG&A stands for selling, general and administrative expense, the operating costs outside the direct cost of making the product. The pieces that move with volume are the selling costs: advertising, promotions, sales commissions, payment processing fees. Fivefold revenue growth in a year is normally demand you paid for. The fixed pieces, rent and insurance and salaried admin, barely move.

Interest expense reduces pre-tax income on the Income Statement, lowers taxes because it is tax-deductible, and therefore reduces net income by the after-tax amount. On the Cash Flow Statement, under US GAAP, the cash interest payment is reflected in CFO through lower net income, so cash falls by the after-tax amount assuming no timing differences in taxes or interest accruals. On the Balance Sheet, cash falls and retained earnings fall by the same after-tax amount. Principal repayment does not affect the Income Statement; it appears as a financing outflow on the Cash Flow Statement and reduces both cash and debt on the Balance Sheet.

One notable Perella Weinberg Partners deal to discuss is its advisory work on complex, high-stakes strategic and restructuring situations. If you want to reference the Barclays-Lehman transaction from 2008, I would be careful and say it is often cited as a landmark financial-crisis deal involving the sale of Lehman assets through bankruptcy, rather than confidently stating PWP advised Barclays unless you have verified that mandate from a reliable source.

No impact—EBITDA adds back depreciation by definition, so a $10 increase in depreciation reduces EBIT by $10 but is exactly offset by the $10 higher add-back, netting to zero.