My 10 weeks at Exit Plan Capital

My name is Orgil and I am a freshly minted graduate of Columbia Business School’s MBA program. During my last semester in the moody spring of New York, I had a great fortune to work alongside Mike McGlade and the Exit Plan Capital team of interns for 10 weeks in Mike’s search of purchasing a company. During this time, I have learned, applied and improved upon many skills and attributes that are essential for my professional career going forward. Here are some examples below categorized as quantitative and qualitative.

Quantitative

Financial Statement Analysis: Responsible for covering small and medium businesses with operations in New York state, Mike and I saw tremendous amount of deal flow on a daily basis. From an emergency medical device repair company with just couple millions in revenue to a civil engineering firm with a $30 million plus in revenue, we saw a wide spectrum of businesses across numerous industries. It was fascinating for me to learn and break down the macroeconomic forces that drive particular industries (such as Affordable Healthcare Act, monetary policy, defense spending expectations by the new administration etc.) and also the microeconomic factors (growth, profitability, competitiveness, customer acquisition etc.) that drive bottom line profitability for a specific business. Specifically, I applied many of the concepts taught in Corporate Finance and Accounting classes when demystifying companies’ balance sheet and income statement evolution over time.

For example, since most of the companies we analyzed were private companies, I would search for a set of comparable public companies and spread their key financial statistics such as revenue growth, gross margin, and EBITDA and EBIT margins. This gave me a benchmark and measuring stick for how the target company stands in terms of competitiveness and general industry trends. When there is a general trend of declining cost of goods sold (COGS) for the set of public comparable companies while the COGS is going up for the target company over the same period of time, it was important for me to understand whether economies of scale is squeezing the smaller players in terms of cost/value capture or the third-generation family business owners are losing focus and determination. This helped Mike and I to evaluate whether the target company profitability margins can be maintained/expanded under a new business savvy and well-connected owner with feasible growth plans like Mike. I had a chance to practice and improve upon this skill on a daily basis at Exit Plan Capital.

Financial Modeling:  Once Mike and I agree on a company that we should analyze further, I practiced my financial modeling skills building comparable companies spread (least applicable due to scale and private nature of all target companies), discounted cash flow analysis (DCF) and leveraged buy-out analysis (LBO, most relevant due to our IRR hurdles for shareholders).

Since most companies were private, I worked with a lot of unaudited financial statements where there had to be multiple EBITDA adjustments to derive normalized figures. Going meticulously through the confidential information memorandum (CIM) and speaking with owners and brokers to peel the layers, Mike and I analyzed each line item on the financial statements carefully to derive an EBITDA/EBIT numbers we believed most fairly represented current state of the business. This was a great learning experience with regards to what to watch out for in non-standard accounting practices and how to normalize the financial statements to arrive at an apples-to-apples comparison.

Once financial statements were normalized, the next step was to build different financial models and building them from scratch helped to accommodate unique traits of each businesses we analyzed. Having Mike accessible almost anytime to consult on matters I have not seen/experienced before helped me a great deal. Most importantly, I truly enjoyed building a hypothesis about the business and its future prospects, testing it thoroughly with Mike and seeing final outcomes such as IRR, reproduction value of assets or intrinsic value indicated by a DCF analysis.  

Qualitative

Industry Analysis:  Parallel and simultaneous with the quantitative skills, I learned so much about industries I would have never investigated on my own while at Exit Plan Capital. I was exposed to many deals that were across multiple industries and I enjoyed every aspect of it. It helped me to understand what is different or similar across industries and how that affects the current competitive landscape. I think the biggest key takeaway for me was to develop my own framework of learning about an industry. For example in week 9, when looking at the digital imaging space, I knew exactly where to begin such as, “What is the market size? Who are the current major players? What are the key external drivers? What drives demand and supply forces?”, to name a few.

Sales, Sourcing and Lead Generation: I have not been exposed to sourcing and lead generation efforts in my professional career prior to Exit Plan Capital. This was definitely a new area for me as I compiled a list of brokers to reach out for business opportunities and blind called a few to speak about our mission. This helped me practice my communication skills, liaising with multiple parties simultaneously, and building a relationship out of thin air. Sitting in the same room with Mike and eavesdrop on him speak to business owners and brokers helped me tremendously on how to communicate effectively on the phone, starting with the small talk to the real business very clearly. I always thought this was an area of weakness for me but these 10 weeks, especially the second half, I was on the phone practicing at least an hour each week.

Mentorship: Last but truly not least, I have made a great mentor, friend, and advisor in Mike. Walking to coffee shops or hot lunch spots nearby, we discussed anything ranging from Philadelphia sports, Mongolian culture, career prospects, couple of CIMs, and business school experience to weight lifting best practices! This helped me stay motivated, engaged and excited for what is ahead of me in the future. I hope I get to help Mike and reciprocate in some way when our professional paths cross in this vast but yet surprisingly close-knit business world.

On the other side, with few years of professional experience and almost completed MBA degree in my belt, I enjoyed mentoring and helping other interns who were in undergraduate programs. I distinctly remember myself not knowing what to do in life and trying to make something of myself in the world while I was an undergraduate student at Indiana. I could not have made it to Wall Street in the financial center of the globe without mentorship and sacrifices of many that I am so grateful for. It was truly nice being reminded of how important it is to give back and help without expecting anything in return.

In summary, at Exit Plan Capital, you will have an incredible learning experience if you trust the process Mike has set-up and come in with an open mindset to learn and advance. I hope you do come on-board for this great experience and if you are on the fences, always feel free to consult with me on an individual basis at OSedvanchig17@gsb.columbia.edu about the opportunity.

            - Orgil Sedvanchig