The reason internships exist.
Office tour.
Introductions.
Usernames and passowrds.
Typing.
Awkward conversations.
Retyping… several times.
Printing.
Figuring out the optimal print margins.
Reprinting…
If you’re lucky, said internship may even lead to a full time offer. Congratulations!
All of these happen over the course of an internship, sometimes every day, but none of them are really the point of doing an internship. By the end, these will probably be the things I forget about my internship. I’ll probably remember the final reports and cool models and stuff. But the reality is the internship is more than just accomplishing stuff that you put on your resume. It’s also learning to fight and survive a million tiny battles along the way.
Like that time where I accidentally printed the entire 80 pages of a 10-K, when I only wanted two of them.
Or when I brought a list of comps (comparable companies) to my boss time after time, only to be told the results weren’t satisfactory each time.
When we look at internships from 10,000 feet in October or January or April, we only see the collection of mountain tops that makes up the surface – the cool things that we will talk about in interviews in 6 months. We never see the gritty, sometimes mind-numbing, and more often frustrating valleys that make up the space between those peaks. We build our expectations based upon our view of the peak, and we take our first step only to find that our foot falls further than we expected. Inertia takes over. Pretty soon it’s all we can do to keep putting one foot in front of the other, and we find ourselves running down the mountainside into the valley.
In the valley, the shadow of the mountains broods and seems to provoke us: “Why aren’t you at the peak? You should be there by now. After all, didn’t you go to school for this?”
But the trek up to the next peak can be overwhelming. Pretty soon we forget about the peak, because all we want to do is make it through the next hour of climbing. Just a few more steps…
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Last Tuesday, I began working on a valuation case. Pang (the other analyst) and I would build the model, though he had actually built most of it before I began at CRA. Since this was an oil and gas company, the cash flows would be based on the firm’s assets – its reserves. A lot of the inputs were easy to find because we had what’s called a reserve report – a detailed “inventory” of the firm’s reserves and the level of assurance associated with each reserve. Other inputs would require a certain level of assumptions, so obviously it’s really important to maximize the level of certainty regarding those assumptions. This meant finding comps, or comparable companies, that were as similar as possible to the subject company, which was a private firm.
I was made responsible for identifying the comps. I used Capital IQ to screen for public companies that met various requirements, such as total asset size, revenue, etc. I brought my list of comps to my boss, thinking it wasn’t perfect but it was probably at least close. Nope. What I didn’t know was that most of the subject’s assets were in a specific, now highly valued oil play – the Bakken shale play. It was back to the drawing board, but this time I had to figure out how to find companies with mostly Bakken assets – which isn’t really screen-able or easily identified in Cap IQ.
This process and the conversation with my boss repeated itself multiple times per day for over a week. Each time, I felt that I was pretty close to the true comp set, only to be asked to consider additional factors. Each night, I came home and my brain hurt from scanning probably a hundred websites, PowerPoints, and 10-K’s trying to determine the percentage of Bakken assets for each comp. It was frustrating, and at times it seemed thankless. Other times, it felt like I was being told to chase down a rabbit trail. But suddenly, I was given a deadline of Friday afternoon, when we would have conference call with the New York office. Things would have to come together quickly.
Friday morning, I met with my other boss – the VP of the Houston office – and it was a tough conversation. I had come up with 8 comps that were sufficient for my first boss, but the VP was not happy with the way we had chosen them. The process was too subjective – the result of many conversations asking me to look into this company or that one. We had a good list, but without an objective series of criteria, it would look like we hand-picked them to influence the eventual valuation. In the span of just a few hours, I would have to reverse-engineer a screen that would allow us to identify the same eight companies, but in a more objective manner. Then, I would have to design an acceptable format for presenting them so we could share them with the New York office during the call.
Enter the million tiny battles with Excel, printers, and my old graphing calculator that has several pixels missing so a 7 sometimes looks like a 1.
I skipped lunch and at 2:01pm I walked into the conference room with a stack of papers…
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Internships are full of situations and times for which school either cannot or does not prepare you. Realizing that you could recreate the result of a week of iterations in several hours is one of those times. Sure, knowing the companies that would make up the final comp set helped me re-do a week’s worth of work in half a day. But it was having the conceptual understanding of how to arrive at the end goal that made it go faster. I was now aware of which factors were most important, so I could quickly prioritize and align my screens. But what am I supposed to think about the week I spent working and re-working the list of comps?
Was it a waste of time? I mean, I guess I learned. But would I have learned the same thing by asking more questions up front, making fewer mistakes, and arriving at the comp set sooner?
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Midway through the conference call, the VP put me on the spot to discuss the comps. Nobody else on the call had seen the new list but me. I wasn’t expecting to do this. On all the other calls, I had only really been invited to listen. I tried my best to keep calm and walk through the list, knowing that one curveball question could totally expose me. The curveball never came, and I made it through relatively painlessly. This was likely the biggest success of my time at CRA so far. In fact, the VP said she was really happy with the comp list.
I don’t think finding a list of comps is a mountaintop achievement. Valuing a $50 million+ company will be. But an internship is as much about surviving the unknown as it is about milestone achievements. In other words, it’s been two weeks well spent. Here’s to the next 8!