Every investment bankwill try to tell you that they're unique. They'll say that they run lean deal teams, swing for large mandates, and really emphasize culture and fit. Most of the time - as you no doubt already know - this isn't really true.
Sure, Evercore is known for having a less intense culturethan Moelis. But the reality is that the differences are usually slight andcontingenton many different factors, like what MDs you end up primarily working with. So some analysts and associates will have a better experience at Moelis than Evercore and vice versa.
Among the investment banks, Centerview Partners is probably the singular one that really is quite differentiated. At the end of the day, banking is banking, but Centerview does tend togo by the beat of their own drum.
The reality is that joining Centerview - especially at the analyst level - isn't necessarily for everyone (as we'll get into in the first question). But if you're interested in restructuring, don't shy away from Centerview.
Centerview doesn't doa large number of RX deals - relative to HL, for example - but they have a knack for getting onto some of the largest and thornie*st. If you end up joining Centerview, and want to get RX exposure, you'll get more than enough. And if you ultimately want to exit to a top distressed or special situations shop, you'll absolutely get interviews.
Note:While Centerview used to offer a generalist program across M&A and RX, they've recently changed this. Now Centerview brings on a few "Restructuring Majors" each summer to work within the dedicated RX group.They'll spend the majority of their time on RX deals, but will still get some M&A exposure (depending on how heavy the RX deal flow is). So, these few people are the only ones who are true generalists across RX and M&A anymore -- the rest of the 28 or 29 in the class will just be focused on M&A (although even if you aren't a "Restructuring Major" you can probably still get staffed on an RX deal occasionally if you really want to).
Centerview Interview Questions
Below are some of the top Centerview Partners questions you should prepare for. The interview format isn't different than any other banking interview, but you will occasionally getmore abstract problems (like question six).
Question 1: Why Centerview?
Question 2: Let's say you own 80% of a company that generated $200 in net income. Given that you own 80% of it, you have consolidated financials. However,since you don't own all of it, how is this $200 reflected in the three statements?
Question 3: Walk me through the three statements when accrued expenses increase by $100? What about when these expenses are paid in cash?
Question 4: Let's say you want to buy 10% of a company for $50m. The company has $300m in debt, $100m in cash, $50m in capital leases, and $25m in operating leases. What's the enterprise value of the company?
Question 5: If you're including operating leases in your enterprise value calculation, what does that do to your EV / EBITDA multiple?
Question 6: Some think that stock buybacks should be banned? What do you think?
Question 7:Walk me through a recent deal we've done?
Why Centerview?
When I've written up the most common interview questions for other elite boutiques, I usually haven't gone over the "Why this bank?" question. This is because normally the answer is just the generic rationales that they have great deal flow, seem to have a great culture, etc.
However, with Centerview you should spend quite a bit of time thinking about why you want to join them and have a good answer prepared.
This is because, as you likely already know, Centerview has a three year analyst program and the expectation is that you'll stick around for the entire thing.Further, while you can get great exits after the analyst program, the majority stick around and become associates (which is very rare among top EBs). It doesn't hurt when they offer you $200,000 to stick around, I suppose.
While it's never a good idea to say that you have no intention of being a career banker in an interview, no one at Moelis or PJT is under the illusion that you're likely to stick around after your analyst stint. But that's just not the case at Centerview. They want people who are leaning towards being career bankers and want to grow up within the bank.
So the first part of your answer should involve making it clear that you recognize the analyst program is slightly different than at other banks and that's a positive for you (because you believe that you'd like tostay on as an associate and beyond).
Note: No one is going to hold you to the answer you give in an interview (especially if its a summer analyst interview!). But if you're looking to exit to the buy-side in 12-16 months, thenyou really should look elsewhere.
After this, you cangive any additional generic reasons you have (e.g., great culture, lean deal teams, large mandates, etc.). Those additional reasons are all valid, but you should bring up the prior two points as those arethe meaningful differentiating points.
Let's say you own 80% of a company that generated $200 in net income. Given that you own 80% of it, you have consolidated financials. However,since you don't own all of it, how is this $200 reflected in the three statements?
This is really more of a reclassification exercise. On the income statement you need to demonstrate that you own only 80% of the company somehow, so you add a line item "Net Income Attributable to Noncontrolling Interests" prior to "Net Income" and subtract $40 (20% of the $200 in net income of the company that you have an 80% stake in).
On the CFS, you add back $40 to the $160 in net income the flowed to the top, because you own the majority of the company and have consolidated financials.
Moving to the BS, wehave $200 that flows to the top and will just doa little reclassifying within SE. Obviously we have $160 in net income that flowed to retained earnings. Within SE we'll create a line item "Noncontrolling Interests" and place $40 there (thus creating balance).
Walk me through the three statements when accrued expenses increase by $100? What about when these expenses are paid in cash?
Here's another accounting question (which are always popular). Remember that accrued expenses have been accrued, but not yet paid.
So assuming a 20% tax rate, we'll have our pre-tax income of $100 go down to being $80 of net income. Moving over to CFO, it'll start down by $80, but then we'll add back the $100 since it's a non-cash expense. Therefore, we'll have CFO being up by $20 and there are no other changes on the cash flow statement.
On the balance sheet, cash is up by $20, liabilities are up by $100 (since accrued expenses are, obviously, liabilities), and retained earnings are down by $80 (flowing from the net income on the income statement). Therefore, we have balance.
When these expenses are ultimately paid in cash, nothing happens on the income statement (as these expenses didn't occur in the period cash is paid out, but in the prior period when they were recognized). So cash is down on the CFS by $100, which flows to the asset-side of the balance sheet being down by $100. On the liabilities-side of the balance sheet, liabilities (the accrued expenses themselves) are down by $100.
Let's say you want to buy 10% of a company for $50m. The company has $300m in debt, $100m in cash, $50m in capital leases, and $25m in operating leases. What's the enterprise value of the company?
This is a relatively straight forward EV question, but with a bit of a trick thrown in.
First, we can find the equity value by taking $50m / 0.1, whichgives us $500m. Then we can add back the debt and subtract the cash to get $700m. After this, we just need to deal with our capital leases and operating leases.
In the pastoperating leaseswere considered off-balance sheet items, but capital leases were considered in the EV calculation due to their debt-like characteristics (chances are you read about this distinction in the traditional IB guides).Therefore, we would just say that our final EV is $750m after including the capital leases.
However, with the introduction of IFRS 16 almost all operating leases are now considered debt-like for accounting purposes. This would mean the EV in our example here would be $775m after rolling in the operating leases (instead of just ignoring them for EV calculation purposes as you would before).
Practically, in most situations folks like to calculate EV as it was done previously (without operating leases). However,if you're just drawing an enterprise value figure out of somewhere like CapIQ they'll bundle operating leases into the EV calculation now (so you need to back out operating leases, which is annoying).
If you're including operating leases in your enterprise value calculation, what does that do to your EV / EBITDA multiple?
As mentioned, in practice you'll likely strip your EV of operating leases. However, if you do include operating leases in your EV calculation then your EBITDA is no longer apples-to-apples and you'll have an artificially inflated multiple (as the numerator will now be larger than the denominator).
Instead, you'll need to adjust EBITDA for lease expense (creating EBITDAR) if you're going to keep operating leases in your numerator.
Note: If for some reason you can't find the operating leases contained on the balance sheet anywhere, you can multiply the annual lease expense by Moody's industry multiple grid. However, if operating leases aren't to be found on the balance sheet it's probably because they're incredibly small.
This is all a bit in the weeds for interview purposes. But EV calculations crop up in every interview in some form or another and it's great to have this in your back pocket.
Some think that stock buybacks should be banned? What do you think?
It's not uncommon for Centerview to ask some questions that are a bit more abstract than what you would get in a traditional IB interview. For example, sometimes you'll be told about a CEO making a certain decision and whether or not you agree with it. When you get these kinds of questions, don't worry aboutthe interviewer looking for a singular answer as they understand you may not have much background knowledge on the subject.
The interviewer really just wants to see if you can answer in an intelligent and thoughtful manner, without being flustered by being asked an open-ended question you've never seen before.
Stock buybacks have become (bizarrely, in my view) a hot topic among some lawmakers and economists. This has been spurred by William Lazonick's 2014 article Profits Without Prosperity and brought to the public via articles like this from the New Yorker.
During 2020, buybacks once again enter into the fold after airlines received government assistance after spending billions on buybacks over the prior decade. The underlying theory of critics is that the airlines should have created a rainy day fundinstead of buying back stock. Of course, the rainy day funds necessary to withstand the pandemic would have had to have been orders of magnitude larger than the buybacks done by the airlines, but whatever.
There are a number of ways you could frame answering this question either way (although I would side onstock buybacks not being banned). My shortened answer wouldbe that buybacks - like dividends - reward existing shareholders and promotethe efficient usage of the company's capital.
Investors have generally no issue with companies that invest heavily in themselves at the expense of profits (e.g., Amazon) if they are convinced that management is doing things that will result in enhanced long-term cash flows. However, if management can not convince shareholders that capex or acquisitions represent an efficient use of capital, then they should put pressure on the company to either disburse some excess cash back to investors via dividends or buy back stock.
If either of these were banned - since they're similar in effect - this would result in profitable companies hoarding cash that they would likely disburse in undisciplined ways (e.g., doing acquisitions for the sake of acquisitions,raising cash management compensation, etc.).
Ultimately, I view buybacks (like dividends) as being one way in which shareholders can put pressure on management to be disciplined; forcingmanagement to either make a compelling case for investment that will boost returnsor buying back stock to do so.
Of course, from an M&A perspective maybe it'd be best if stock buybacks (and dividends) were banned. Then M&A activity would explode as companies flush with cash ran around trying to buy whatever looks remotely accretive.
Walk me through a recent deal we've done?
Fortunately, Centerview lists all of their completed transactions online here. In the world of restructuring, Centerview had an extremely busy 2020 (although a quieter 2021 thus far, as is to be expected given the environment).
Notably, Centerview advised an ad hoc group of 1L and 2L lenders in the Serta Simmons restructuring. I actually wrote a whole guide on this transaction, because it was the most notable (and controversial!) of 2020. You can find that in the members area of the course if you're interested.
Anothernotable restructuring deal that would be relatively easy to talk about in an interview would be the Ultra Petroleum pre-pack Chapter 11.
On the M&A side, deal flow has been incredibly strong at Centerview thus far in 2021. You can see the list of all their M&A deals for 2021, but certainly Canadian National Railway merging with Kansas City Southern is intriguing (although it's not yet closed as of this writing).
I've written quite a bit before on how to talk about deals (including exactly what I'd say about the Serta deal in an interview) so I won't belabor the point here. As always, talk about deals you feel comfortable with even if they aren't overly large or complex. Far better to be able to confidently answer any follow ups then to regurgitate something you aren't entirely sure on.
Closing Thoughts
As I said at the outset, Centerview is quite unique.They bring in more revenue per partner than any other bank most years and generally provide higher all-in compensation than other elite boutiques. But, at the same time, they put an emphasis on retaining people within the bank, which is quite rare for top shops.
Needless to say, cultural fit is important at Centerview. This is partly why Centerview doesn't generally adhere to the recruiting schedule all the other banks follow (they're much later!). They want people to select for Centerview, not the other way around.
If you thinkbeing a career banker could be right for you, then there are few if any better places to be than Centerview.
If you're looking to join Centerview as a "Restructuring Major", then I've put together a long list of restructuring interview questions here. Of course, if you're looking for even more there's also the Restructuring Interviews course, which includes real-world examples, case studies, and hundreds of additional interview questions. Keep in mind that if you're interviewing for one of the generalist M&A summer analyst positions, you aren't likely to get any direct RX questions.
As always, best of luck!
