Specialized Technical Questions #

1. “How do you evaluate SPACs and de-SPAC transactions?” #

Comprehensive Analysis:

SPAC Structure Analysis:

1. Initial SPAC IPO Key Components:

• Unit structure (shares + warrants)
• Trust account mechanics
• Sponsor promote
• Underwriting fees

Governance:

• Board composition
• Voting rights
• Redemption rights
• Time limitations

2. De-SPAC Process Transaction Elements:

• Target valuation
• PIPE financing
• Warrant dilution
• Redemption impact

Due Diligence:

• Financial projections
• Industry analysis
• Comparable companies
• Growth assumptions

3. Post-Merger Considerations Value Drivers:

• Lock-up provisions
• Earn-out structures
• Working capital
• Sponsor alignment

Risk Factors:

• Execution risk
• Market conditions
• Regulatory scrutiny
• Shareholder approval

2. “Walk me through different types of derivative valuation methods.” #

Detailed Response:

Valuation Approaches:

1. Black-Scholes Model Components:

• Spot price
• Strike price
• Time to expiration
• Volatility
• Risk-free rate

Applications:

• European options
• Warrant valuation
• Employee stock options
• Convertible securities

2. Binomial Model Features:

• Multiple time steps
• Early exercise
• Changing variables
• Path dependency

Uses:

• American options
• Real options
• Complex derivatives
• Structured products

3. Monte Carlo Simulation Applications:

• Path-dependent options
• Asian options
• Barrier options
• Complex basketsw

Methodology:

• Random path generation
• Statistical analysis
• Scenario testing
• Risk measurement

3. “How do you analyze distressed debt investments?” #

Comprehensive Framework:

Analysis Components:

1. Capital Structure Analysis Priority Review:

• Secured claims
• Unsecured claims
• Subordinated debt
• Equity claims

Covenant Analysis:

• Payment terms
• Security provisions
• Cross-defaults
• Change of control

2. Asset Valuation Methods:

• Liquidation value
• Going concern value
• Break-up analysis
• Comparable transactions

Adjustments:

• Market conditions
• Asset quality
• Environmental issues
• Legal claims

3. Recovery Analysis Scenarios:

• Best case
• Base case
• Worst case
• Liquidation

Factors:

• Industry conditions
• Operating performance
• Legal jurisdiction
• Creditor rights

4. Trading Strategy Considerations:

• Entry points
• Position sizing
• Hedging strategies
• Exit opportunities

4. “Explain project finance modeling and analysis.” #

Detailed Breakdown:

Key Components:

1. Revenue Modeling Elements:

• Volume projections
• Price assumptions
• Capacity utilization
• Operating schedule

Risk Factors:

• Market risk
• Performance risk
• Force majeure
• Regulatory changes

2. Cost Structure Operating Costs:

• Fixed costs
• Variable costs
• Maintenance
• Labor

Capital Costs:

• Construction costs
• Equipment
• Working capital
• Contingencies

3. Financing Structure Debt Components:

• Senior debt
• Subordinated debt
• Bridge facilities
• Reserve accounts

Equity Elements:

• Sponsor equity
• Development fees
• Construction equity
• Operating equity

4. Risk Analysis Categories:

• Construction risk
• Operating risk
• Market risk
• Political risk

Mitigants:

• Contractual arrangements
• Insurance
• Reserve accounts
• Security package

5. “How do you value financial institutions?” #

Comprehensive Response:

Valuation Methods:

1. Bank Valuation Key Metrics:

• P/B ratio
• P/TBV ratio
• P/E ratio
• Dividend yield

Specific Considerations:

• Loan portfolio quality
• Deposit base
• Capital adequacy
• Regulatory requirements

2. Insurance Company Metrics:

• P/BV
• P/Embedded Value
• Combined ratio
• Investment yield

Analysis Areas:

• Underwriting profit
• Investment income
• Reserve adequacy
• Capital requirements

3. Asset Management Valuation Drivers:

• AUM growth
• Fee structure
• Operating margins
• Client retention

Performance Metrics:

• Revenue yield
• Cost ratios
• Investment performance
• Distribution capability

6. “Walk through complex merger consideration structures.” #

Detailed Analysis:

Types of Consideration:

1. Mixed Consideration Components:

• Cash portion
• Stock portion
• CVR rights
• Other securities

Structuring Factors:

• Tax efficiency
• Shareholder preferences
• Balance sheet impact
• Control considerations

2. Collar Arrangements Types:

• Fixed exchange ratio
• Fixed value
• Floating with caps/floors

Analysis:

• Stock price movements
• Value protection
• Accounting treatment
• Tax implications

3. Earn-outs Structure:

• Performance metrics
• Time periods
• Payment mechanisms
• Acceleration events

Considerations:

• Achievement probability
• Control issues
• Accounting treatment
• Dispute resolution

4. Contingent Value Rights Features:

• Trigger events
• Payment terms
• Transfer rights
• Expiration

Applications:

• Regulatory approval
• Patent litigation
• Product development
• Market conditions

7. “Explain different types of fairness opinions and their analysis.” #

Comprehensive Framework:

Opinion Types:

1. Standard Fairness Opinion Analysis Required:

• Comparable companies
• Precedent transactions
• DCF analysis
• Premium analysis

Considerations:

• Market conditions
• Industry trends
• Synergies
• Control premium

2. Special Situation Opinions Scenarios:

• Going private
• Related party
• Hostile defense
• Restructuring

Additional Analysis:

• Conflicts of interest
• Fiduciary duties
• Alternative scenarios
• Stakeholder impacts

3. Methodological Considerations Valuation Methods:

• Trading multiples
• Transaction multiples
• DCF scenarios
• Asset valuation

Documentation:

• Board presentation
• Fairness analysis
• Process review
• Alternative scenarios