Do we work efficiently?

Hello from Spain! After a year working as M&A Analyst one of my thoughts are: Do we work efficiently?

In this post I will talk about M&A, but I am pretty sure that this could be useful for all sectors!

For the people who is not quite familiar with this sector, the main work of an Analyst is building strong Excel models and doing cool presentations.

Knowing that, you could think, Excel and Power Point? Long hours and High pressure just to build models from scratch and Power Points? And the answer is: Normally yes, but It depends on the team and the way they work.

Let’s start from Excel models. In M&A it is said that everybody has to build their own model because it is not possible working in the same Excel sheet more than one person.

In this case, I agree up to a point. If you work with complex models you better do your own Excel model, but if you are just doing some screening you could use shared spreadsheets, yes! Shared spreadsheets exist!

Normally, when you have your model done you have to build a cool presentation to support your investment thesis. In this case, you can do your own presentation or you can work in team in a presentation.

The point here is, Does it make sense working in the presentation and the Excel model at the same time? From my point of view, no, it doesn’t.

Why? Let’s see an example.

This is the case where two Analysts work at the same time in an Excel model and a presentation.

The first column represents the people, the second column represents the total product created, the third column is the Average Product (Total Product/Labor) and the fourth column is the Marginal Product (the output that you get adding a unit of labor)

As we can see, with 1 unit of labor we have a total product equals to 1 (1 worker = 1 Excel Model). If we add a second Analyst to do the presentation at the same time (1 worker = 1 Presentation). In the end, we will have 2 products, but as you can see the Average Product decreases, and the Marginal product is equals to 0. That means that in a Project with two Analyst working at the same time you don’t create an output adding one worker!

Now, let’s see the case where a second Analyst starts doing the presentation when the first Analyst has finished the Excel Model.

 

In this case, we can see how adding a new Analyst, our Average Product is equals to 1 with one worker and two workers. But if we focus on the Marginal Product, it make sense that if we add a new Analyst we will increase our output in one product (the Presentation).

In the end, we will have an output equals to 2 (Excel + PowerPoint) in both cases, but as I see it, it make sense not working at the Excel and the Power Point at the same time.

Furthermore, in this job the assumptions chage a lot, and the Analyst who builds the presentations could be stucked changing only the numbers of the presentation for weeks!! Can you imagine changing numbers of a presentation for weeks? I am pretty sure that M&A Analyst can!

Hope you enjoy it!

See you soon

Simón

 

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