Immersion Learning

Training the Street

by Joshua Butler, MBA ‘15 (2/19/14)
Joshua Butler, MBA ‘15It is quite likely that you have a considerable interest in Johnson’s Investment Banking Immersion (IBI) if you are reading this article. One of the defining marks that make IBI world-renowned is not only the realistically formulated deals we dissect and restructure week in and week out but also the early exposure to the life of a banker on Wall Street. This past weekend, that reality came from an organization called Training the Street (TTS). TTS literally has taught most of the Wall Street to-be’s on how to perform as star analysts and associates and, last weekend, its attention was solely focused on Johnson’s IBI. Let me recap for you what our weekend was like with TTS…

Day 1: It was top of the morning on Saturday. As we all trickled into the basement of Sage Hall, we had no idea what to expect except that lunch was at noon and the program was over at 5 p.m. At Johnson, it is not uncommon to hear the phrase, “sometimes you feel like you are drinking from a fire house” and last weekend was just that. The upbeat and highly experienced co-instructors opened the session with introductions and learning objectives. On the first day we would cover the Mergers and Acquisitions (M&A) process. We started off by learning why companies engage in M&A and how bankers actualize the synergies of the deal through various financial techniques. TTS provided keen insights about Earning per Share (EPS) accretion/dilution considerations along with business combination accounting to produce a pro forma representation of a company post-close. By lunch, we had allocated the purchase price premiums of the acquirer to the target and by 5 p.m. we had successfully built a fully functioning M&A model.

Day 2: Sunday was dedicated to learning intricacies and mystique behind the leveraged buyout process. We kicked off the training session with a quote from Henry Kravis from KKR that read, “any fool can buy a company; you should only be congratulated when you sell.” Welcome to the world of Leveraged Buyouts (LBO’s). TTS taught us the concept of deleveraging which entails using available free cash flows to repay debt the company incurred throughout the period of ownership of the sponsors before they sell back or exit via Initial Public Offering (IPO). We modeled out the three factors to a successful LBO: purchase price, level of debt financing, and investor’s internal rate of return. Whilst a copious amount of information for one day, the main goal was accomplished when we efficaciously modeled a full scale LBO transaction in less than four hours.

The highly coveted training that TTS provided was second to none. Albeit an entire weekend of cash flow projections, transaction analysis and synergies critiquing, we all agree that we are much better prepared to succeed during our summer internships than ever before.