SAPLING FINANCIAL MODELLING COMPETITION · 2020. 2. 16. · Financial modelling opens doors to a number of satisfying and potentially lucrative careers (indicative all-in compensation

SAPLING FINANCIAL MODELLING COMPETITION

PREPARED BY ROB HONG, CFA MFIN

EVENT OVERVIEW

© 2019 SAPLING FINANCIAL CONSULTANTS | 3

OVERVIEW OF EVENT

Models must be built from scratch (no re-use of templates). The models will be evaluated by a panel of judges from Sapling and select private equity firms for:

• Transferability• Credibility

• Consistency• Robustness

• Accuracy• Auditability

• Nice Charts• Cool Features

The competition will be based around the development of a financial model covering an M&A transaction (LBO or “leveraged buyout”) over the course of 48 hours• The competition is based on an individual entry (no teams). There is no entry fee

5 finalists will be shortlisted and will present at a Judging Event• The finalists will prepare a presentation of 10 minutes, and then will have 10 minutes for questions• The presentation will include:

– Quick walkthrough of model, and discussion of assumptions– Discussion of outputs– Discussion of things you thought you could improve in retrospect

• The Judging Event will have networking before and after, and hors d'oeuvre and (Ivey permission pending) drinks To enter, send an email to [email protected] with your name and graduation year


PLANNED PARTICIPATING FIRMS

The following firms are planning to provide Analysts/Associates as Judges between Smith and Ivey


KEY DATES

Key dates include the following

Thursday March 12, 2020

Saturday/SundayMarch 14-15, 2020

Monday March 23, 2020

Thursday April 3, 2020

Registration deadline

Date of the modelling

test (48-hour window

to complete)

Notification of finalists

Judging night


PRIZES

There will be several prizes

Sapling has hired 1 Ivey grad and 1 Smith grad for start in summer/fall 2020 Additionally, there will be good exposure to the participating Private Equity firms

Top prize• $1,500 cash• First round interview with Sapling• Dinner with Sapling in Toronto• Hotel stay in Toronto at leading

hotel (Shangri La, Four Seasons, etc.)Runner up • $500 cash• Sapling

sweat pantsThree finalists

• Sapling sweat pants

FINANCIAL MODELLING


MODEL USE CASESModels can be used in a variety of situations

1 M&A• Model built to show the synergies of acquiring another firm, and to illustrate the impact on EPS, etc. based on varying

assumptions around purchase price and financing arrangement (debt vs equity, cash vs stock, etc.)• Can be built based on just the target, or layered into acquirer’s company• Key output is IRR/NPV, and if layered into acquirer’s company, dilution/accretion (impact on EPS, value per share or share price)

• Forecasts a company’s operations and finances to a high level of detail—enough that the moving parts can be well understood. Often used for annual budgeting process and variance analysis

• Key output is several (net income, cash balance, growth y/y, etc.)

2 Entire Company Models

• Focuses solely on the revenues and expenses associated with an expansion plant (a new factory, piece of equipment, store or location)

• Key output is IRR/NPV

3 Expansion Plant Models

• Model that is constructed for a single bid/deal, or to respond to a request for proposal• Key output is pricing, and secondarily IRR/NPV given a certain price

4 Specific Bid/RFP Models

• Determines the cost of providing a single additional unit of service or product• Key output is cost per unit

5 Cost Models


Investment Banking

MODELLING CAREERS

Financial modelling opens doors to a number of satisfying and potentially lucrative careers (indicative all-in compensation shown)

01

02

$110,000 - $1M+Investment bankers help their clients raisemoney in capital markets by issuing debt orselling equity in the companies. Other jobduties include assisting clients with mergersand acquisitions (M&As) and advising them onunique investment opportunities such asderivatives

Private Equity$110,000 - $1M+Private equity is like investment managementbut focuses on buying majority equity stakesin private firms. Work includes conducting duediligence, and implementing financial andoperational improvements at portfoliocompanies

Investment Management$65,000 - $1M+Investment management refers to thehandling of financial assets and otherinvestments—not only buying and sellingthem. Management includes devising a short-or long-term strategy for acquiring anddisposing of portfolio holdings.

Equity Research$80,000 - $1M+Involves performing fundamental equityresearch on a coverage universe, providinginvestment ideas for clients’ portfolios

03

04


MODELLING CAREERS CONT’D

Management Consulting

05

06

$60,000 - $750,000Lead/support strategic planning engagementswith clients, deliver reports and presentationsto executive audiences summarizingrecommended strategies

Corporate Strategy$90,000 - $1M+Facilitate the development of corporate,business unit and functional strategic plans,and collaborate with business leaders totranslate strategic plans intotargets/deliverables and business plans thatcan be executed

Financial, Planning & Analysis (FP&A)

$75,000- $400,000Provide value added reporting and analysisthat ultimately moves the business forwardstrategically and operationally

Corporate Development$120,000 - $1M+Responsible for modeling, pricing, offercreation and issuing, due diligence, preparinginvestment memorandums, presenting toinvestment committee, managing 3rd partyadvisors and closing activities

07

08


FEATURES OF GOOD MODELS

Below is a selection of features that distinguish good models

ABCDEFGHI

Consistent colour coding (e.g., inputs as blue)

Ability to fill right

No spacer columns

No columns with quarters/years – all monthly

Inputs all on one sheet

Formatted numbers

Summary of everything

P’s and Q’s rather than straight $ plus a growth factor

No overly complex formulas (“show your math”)

ABOUT SAPLING


Mid-Tier Mining Take Out & Merger

Plant Expansion Model

Cryptocurrency Mining Model

Analyzing Business Drivers

INDICATIVE CASES

Previous work done by Sapling

CASE STUDIES


INDICATIVE CASES (1) - MID-TIER MINING TAKE OUT & MERGERCASE STUDIES

We built a best-in-class financial model, layeredon top of the life of mine models developed bythe two entities. The model was designed tocalculate pro forma metrics, through the threefinancial statements, for both entities combined

Much of our work focused on modelling outdetailed term sheets provided by two bulgebracket investment banks and a mining financehouse. We managed the model for bothinvestment banking teams with one-dayturnaround

The many scenarios we ran involved changes tocapital structure as well as different operatingassumptions (high/low grade, high/low tonnage,etc.)

A private equity group was looking to purchase a mid-tier mining company financed with a combination of debt, equity and a streamingfacility, and then merge it with another company in an all-stock deal to create a diversified producer. The total deal approached $1B

CLIENT: PRIVATE EQUITY GROUP

3 KEY INSIGHTS Equity Investor Return Matrix

Base Case

Eq

uit

y (C

A$

M)

Minimum Cash Balance (CA$ M)

– $25 $50 $75

$100 4.52x 4.32x 4.12x 3.92x

$125 3.82x 3.66x 3.50x 3.34x

$150 3.35x 3.22x 3.08x 2.95x

$175 3.02x 2.90x 2.79x 2.67x

$200 2.77x 2.67x 2.57x 2.47x


INDICATIVE CASES (2) - PLANT EXPANSION MODELCASE STUDIES

We developed a detailed financial modelshowing the relative benefits, includingpayback period, of insourcing relative tooutsourcing

We noticed a Capex of approximately $4million would generate substantial cost savings,resulting in a 1.5 year payback period

The company chose the insourcing model,obtained bank funding, and they have recentlystarted production

An Ontario manufacturer (with ˜$25 million of annual revenues) hired Sapling to determine whether to insource manufacturing, instead of using several third-party vendors around the world

CLIENT: ONTARIO MANUFACTURER DECIDING ON WHETHER TO INSOURCE MANUFACTURING

1 5 9

13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 93 97

101

105

109

113

117

Cu

mu

lati

ve D

isco

un

ted

Cas

h F

low

Month Number

Outsourcing Cum Disc CFs Insourcing Cum Disc CFs

3 KEY INSIGHTSDISCOUNTED PAYBACK PERIOD OF INSOURCING VS OUTSOURCING SCENARIOS


INDICATIVE CASES (3) - CRYPTOCURRENCY MINING MODELCASE STUDIES

We developed a comprehensive financial model showing a number of different opportunities, ranging from owning and running ASICs and GPUs, to more “exotic” business opportunities such as starting a pool, investing in masternodes, and leasing out power to third parties

Key findings from the model include the return on investment that investors can expect, the relative profitability of the different business opportunities, and how changes in power price negotiations can drastically affect profitability

The company is already generating revenue and is working on both development of the new facility as well as raising many millions of equity capital

A group of private investors exploring the possibility of moving their existing, small mining operations from a third-party hosting facility to a purpose-built facility approached us to assist with financial modelling and due diligence

CLIENT: GROUP OF PRIVATE INVESTORS

2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20

Tota

l Po

ol R

even

ues

Tota

l Po

ol S

ize

Total Pool Revenues (R) sha256 scryptequihash neoscrypt qubitlyra2z quark m7m

3 KEY INSIGHTS POOL SIZE & POOL REVENUES BY QUARTER


INDICATIVE CASES (4) - ANALYZING BUSINESS DRIVERSCASE STUDIES

We examined massive amounts of data acrossseveral systems (HR, Finance, Operations). We thengenerated a Cost Analysis Tool with a Dashboardcontaining dozens of heat maps, which providemetrics such as Wages/Revenue, Wages/Locationand Maintenance/Client across Service Type andRegion

These heatmaps highlight underperformingRegions for a given Service that provide significantcost savings opportunities

The Tool can instantly run the heat maps across anytime period desired (months, quarters, years) and iseasily updated

A Canadian midmarket private equity firm had acquired several US entities and merged them. The PE firm, in collaboration with the CEO of the new entity, engaged Sapling to assist with understanding the drivers of the business and the opportunities for cost savings

CLIENT: CANADIAN MIDMARKET HEALTHCARE SERVICES FIRM

Service 1 Service 2 Service 3 Service 4 Service 5 Service 6 Service 7 Average

Region 1 24,1% 24,1%

Region 2 40,9% 1,3% 16,8% 49,6% 27,1%

Region 3 44,3% 1,0% 22,7%

Region 4 24,5% 29,3% 34,9% 113,1% 50,4%

Region 5 26,4% 7,8% 33,1% 22,4%

Region 6

Region 7 37,0% 4,7% 41,3% 89,0% 43,0%

Region 8 46,7% 9,5% 28,1%

Region 9 29,2% 0,6% 42,7% 3,1% 18,9%

Region 10 38,8% 30,3% 34,6%

Region 11 36,0% 6,4% 4,7% 397,8% 111,2%

Region 12 33,8% 64,0% 145,7% 81,2%

Region 13 29,8% 2,1% 29,3% 69,2% 42,8%

Region 14 31,8% 32,2% 210,5% 69,1%

Region 15 30,1% 49,0% 33,0% 182,4% 73,6%

Region 16 40,1% 30,3% 35,2%

Region 17 91,0% 100,9% 96,0%

Region 18 35,9% 7,4% 40,3% 59,5% 122,4% 53,1%

Region 19 75,0% 75,0%

Average 36,9% 30,3% 3,9% 35,8% 48,7% 159,0% 6,3% 52,1%

3 KEY INSIGHTS WAGES/REVENUE


Analyst• Collaborate with our co-founders and consultants to deliver comprehensive financial models, conduct industry

research, build presentation decks, and conduct in-depth analyses into management using financial data.

Compensation at Analyst level is > Big Four and competitive with McKinsey / Bain / BCG / Accenture, etc.

Benefits of working at Sapling:• Young team: we don’t discriminate on age, and move people up as quickly as they grow• Direct client interaction almost from day one• Interesting, challenging work• Mentorship by “practitioners” rather than people who are “high level”• Opportunity to shape a growing firm – “in on the ground floor”

Career progression

CAREER OPPORTUNITIESSapling hires from undergrad at Ivey and Smith at the Analyst level

Analyst Consultant

Manager

Partner


CO-FOUNDERSSAPLING TEAM BIOS

Rob Hong is a Chartered Financial Analyst(CFA) charter holder, finance and consultingprofessional with a specialization infinancial and economic analysis andfinancial modeling.

With more than 9 years of professionalexperience, Rob has assisted not-for-profit andfor-profit organizations gain a deepunderstanding of the impacts of the variousoptions available at key decision-makingjunctures through cutting edge financialanalysis.

Before co-funding Sapling, Rob worked as aSenior Manager in Customer Deals at BellCanada. Here, he assessed the financialimpacts of a complex telecom deal with amultinational provider worth $300M. He alsoworked as a Senior Consultant at KPMG, wherehe assisted a provincial government withfinding multiple ways of saving $180M ofannual costs in a $1.6B health benefits budget.

Additionally, he worked as an AssociatePortfolio Manager at Artemis InvestmentManagement, where he managed and advisedapproximately $200M of client assets.

ANDREEA LUPASCU, PHD

Co-Founder & Partner Sapling Financial Consultants Inc.416 371 [email protected]

Andreea Lupascu, PhD is a businessstrategy and financial analysisprofessional with a specialization indata analytics.

Andreea co-founded Sapling and is aPartner in the firm. Andreea was a leadresearcher at University of Toronto andled numerous experiments conductedat cutting-edge synchrotrons in the USand Canada. She holds a PhD inCondensed Matter Physics, and hasextensive expertise in running dataanalysis models in Matlab, Python, andC++.

At Sapling, Andreea uses her dataanalytics skills to help small andmedium-sized businesses andgovernment organizations, using toolssuch as regression and fundamentalanalysis, and identifying trends andpatterns in financial and operational datausing data analytics. She is dedicated tofocusing her development in thefinancial modelling sector of Sapling.

ROB HONG, CFA MFIN

Co-Founder & CEOSapling Financial Consultants416 625 [email protected]


ADVISOR BOARDSAPLING TEAM BIOS

Gordon Bogden is an experienced senior miningexecutive, corporate director, investor, mininginvestment banker, geoscientist, and a formerdirector of over a dozen public mining companies.He has had wide-ranging international workexperience as a senior executive havingdeveloped an extensive network of contacts andrelationships with mining companies andfinancial institutions.

Gordon J. Bogden

AdvisorSapling Financial Consultants Inc.

Dean is a member of Sapling’s Advisory Council,and a financial adviser to entrepreneurs andsignificant investors. Formerly, he was a SeniorTax Partner at PricewaterhouseCoopers.

Richard Lee

AdvisorSapling Financial Consultants Inc.

Richard Lee is a recognized coach and advisorwithin the technology sector and has a wealth ofconsulting experience. He career began withDeloitte, where he spent the next 29 yearsworking at various levels and sectors of thebusiness including technology, media andtelecom sectors. He then moved into the HumanCapital practice focusing on talent strategies andchange management.

Dean R. Levitt

Senior AdvisorSapling Financial Consultants Inc.

Sapling Financial Consultants Inc.4773 Yonge Street, Suite 5AToronto, ON M2N 0G2(416) [email protected]

CONTACT

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SAPLING FINANCIAL MODELLING COMPETITION · 2020. 2. 16. · Financial modelling opens doors to a number of satisfying and potentially lucrative careers (indicative all-in compensation