Internship'Report' March'

2012!

Internship!Report! KPMG!AG!Wirtschaftsprüfungsgesellschaft!
Corporate!Finance!Department!–!M&A!Advisory!
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! Frankfurt!am!Main,!Germany! 11.07.!–!09.09.2011! ! Johann!Rusche! CPR!Nr.:!310790D3819! BSc!International!Business!&!Politics! ! Academic!advisor:!Michael!Hedegaard! PreDapproved!to!be!creditDtransferred! !

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! ! ! ____________________!
Johann!Rusche! ! Copenhagen,!22.03.2012! ! !!

Tabs:!13,605!

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Table of contents
I. KPMG at a glance p. 1

II. Key learning experiences

p. 1

III. Analytical Description – Pitch Presentations

p. 3

IV. Relation to the IBP program

p. 5

V. Problems regarding the IBP curriculum

p. 5

VI. Conclusion

p. 7

Appendix IBP program structure Evaluation/ Internship Report by KPMG

Important note: This internship was pre-approved to be credit-transferred with 15 ECTS. However, I am now only aiming at 7.5 ECTS, which also reasons the length of this report.

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I.

KPMG'AG'at'a'glance' '

KPMG*AG*Wirtschaftsprüfungsgesellschaft*is*an*affiliated*company*of*KPMG*Europe*LLP* and*is*one*of*the*leading*auditing*and*advisory*firms*in*Germany.*Its*services*are*split*in* to* three* business* segments:* tax,* audit,* and* advisory* services.* KPMG* clients* include* business* corporations,* governments* and* public* sector* agencies* and* nonFprofit* organizations.* Around* 8,500* employees* work* at* 24* locations* across* Germany.* KPMG,* together* with* her* largest* competitors* Deloitte,* Pricewaterhousecoopers,* and* Ernst* &* Young*forms*the*group*of*the*so*called*“BIG*4”,*the*most*influential*service*companies*in* both*size*and*market*share.** ** “The* Corporate* Finance,* Mergers* &* Acquisitions* Department* provides* analyses* in* connection* with* valuation* of* companies,* financing* advisory* related* to* equity* or* debt* capital,*and*transaction*and*strategy*consulting.*Mergers*&*Acquisitions*as*a*part*of*the* Corporate* Finance* provides* buy* and* sell* side* advisory* services* within* the* scope* of* corporate*transactions.”1* * * II. Key'learning'experiences' ' My* personal* learning* experience* while* interning* with* KPMG* was* excellent* and* this* is* probably*the*main*reason*why*I*enjoyed*the*time*so*much.*Being*an*intern*with*KPMG* was* a* challenging* job,* because* I* was* fully* integrated* into* project* teams,* I* was* treated* like*a*normal*employee,*and*I*was*expected*to*deliver*almost*the*same*kind*of*work*as* the* Junior* Consultants.* However,* I* enjoyed* this* demand* a* lot* and* I* got* even* more* motivated*by*the*responsibility*I*faced.** * In* general,* I* gained* a* sound* insight* into* M&A* processes* as* well* as* into* different* industries* and* about* strategic* management* consulting.* I* was* mainly* involved* in* supporting* the* teams* dealing* with* Transport* &* Logistics,* Energy,* and* General* Industrials.* In* particular* I* was* familiarised* with* the* following* tasks,* as* summarised* in* my*report*by*KPMG:* ********************************************************
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• •

Work*on*the*compiling*of*pitch*presentations* Participation* in* compiling* a* corporate* rating,* in* particular* assessment* on* the* basis*of*various*multiplier*procedures* Carrying*out*market,*industrial*and*corporate*analyses*with*the*help*of*databases,* for*example*MARKUS,*LexisFNexis,*Thomson,*One*Source*and*Mergermarket* Compiling*of*corporate*profiles* Compiling*long*and*short*lists*within*the*scope*of*a*transaction*process* Support*in*compiling*a*business*plan* Compiling* an* investment* overview* and* participation* in* creating* an* information* memorandum*within*the*scope*of*a*transaction*process** Contribution*towards*the*preparation*of*a*management*presentation*

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A*very*nice*side*effect*were*the*sharp*improvements*I*made*using*MS*Office,*mainly*MS* PowerPoint* and* MS* Excel,* since* I* was* dealing* with* these* programs* on* a* daily* basis.* I* also* got* to* know* various* banking* databases* such* as* CapitalIQ,* Bloomberg,* or* Mergermarket,*which*I*can*handle*quite*well*now.** * Moreover,* it* was* interesting* to* observe* and* understand* how* management* consultants* work,* especially* in* the* very* interesting* field* of* M&A,* linking* investment* banking* with* strategic* management* consulting.* It* was* the* first* time* for* me* to* work* in* a* highly* professional*environment*for*a*longer*time*and*it*was*a*great*experience*to*be*dealing* and* working* with* people* that* all* graduated* from* leading* European* or* US* business* schools*and*universities.* * Furthermore* I* was* seriously* surprised* and* impressed* at* the* same* time,* how* much* people*in*this*industry*do*actually*work*–*including*me*for*these*ten*weeks!*I*started*to* work*around*9am,*had*a*very*quick*noon*break*just*to*eat*some*food*and*then*continued* working* until* very* late* in* the* night,* interrupted* by* a* little* snack* in* the* evening* only.* I* rarely*left*office*before*midnight*and*in*case*I*had*finished*my*work*earlier*that*evening,* it*was*an*unwritten*internFlaw*and*commonly*expected*to*check*with*other*colleagues* for*new*tasks*to*support*other*projects*team.*This*might*sound*as*if*interns*were*heavily* exploited*by*KPMG,*but*this*is*definitely*not*the*case.*Everybody*in*the*M&A*department*

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worked* that* long* and* intensively* and* as* an* intern* one* was* not* freed* from* this* work* culture*since,*but*rather*fully*integrated.*However,*I*never*complained*about*this*very* intense*workload*and*I*was*usually*in*a*good*mood*while*working*in*the*office.*This*was* mainly*due*to*one*reason:*The*very*friendly*working*atmosphere*and*the*overwhelming* kindness* of* my* colleagues.* With* these* people* it* was* simply* fun* to* work* with.* I* was* always*treated*in*a*very*fair*and*helpful*manner*and*got*help*whenever*needed.*Another* positive* aspect* is* the* fact* that* I* could* start* building* my* own* professional* network.* Whereas*I*am*still*in*a*loose*contact*with*some*former*KPMG*colleagues,*I*was*especially* delighted*when*one*partner*offered*me*his*future*support*at*the*end*of*my*internship.** * * III. ' In*this*section*I*will*elaborate*on*the*central*task*I*have*been*dealing*with*most*of*my* time* –* the* compiling* of* pitch* presentations.* Apart* from* my* contribution* towards* a* management* presentation* and* a* market* outlook* about* the* energy* industry* almost* all* the*tasks*I*have*listed*in*the*section*above*were*related*with*the*overall*work*for*several* pitch*presentations.* * Pitch* presentations* certainly* belong* to* the* most* tedious* yet* crucial* part* of* the* M&A* advisory* business.* SellFside* pitch* presentations* are* worked* out* by* all* the* major* M&A* transactions* companies* as* well* as* smaller* M&A* boutiques* as* an* application* to* be* selected*as*the*advisory*firm*of*the*certain*target*which*is*about*to*be*sold.*Thus,*a*pitch* presentation* is* the* way* to* land* a* job* for* the* M&A* advisors.* Though* the* pitch* presentations* are* submitted* free* of* charge* to* the* potential* client,* they* involve* a* great* deal* of* research* as* well* as* analytical* and* strategic* work* until* the* presentation* is* finalized.*Pitch*presentation*usually*do*not*exceed*a*length*of*25F30*pages,*excluding*a* comprehensive*appendix.*In*a*pitch*presentation,*one*will*rarely*find*anything*negative* since*the*main*purpose*is*to*sell*KPMG’s*competences*and*later*on*the*target*company* itself.*The*structure*of*a*pitch*presentation*is*usually*the*same*and*does*only*vary*to*a* minor*extend:*Pitch*presentations*contain*an*overview*about*the*target*company’s*key* strengths* and* some* general* statements* about* the* company’s* industry.* They* further* include* a* brief* future* market* outlook* as* well* as* a* suggestion* for* the* future* corporate* * 3* Analytical'Description''–*Pitch'Presentations'

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strategy* after* an* acquisition.* Pitch* presentation* finish* with* a* summary* about* KPMG’s* competences*and*M&A*advisory*successes*in*the*past,*supported*by*credentials*tailored* towards*the*industry*of*the*potential*customer.*In*the*appendix*the*reader*can*find*an* analysis* of* around* 25F30* potential* investors,* in* other* words* short* profiles* of* both* financial* (such* as* e.g.* private* equity* funds)* and* strategic* investors,* whereas* the* emphasis*is*generally*placed*on*the*latter.* * My*work*mainly*involved*the*responsibility*for*the*appendices.*Thus,*I*had*to*take*care* of* the* short* profiles* of* potential* investors,* which* I* had* to* identify* myself.* Therefore* I* analyzed*the*market*environment,*found*major*player*or*searched*industry*indexes*by* using* databases* such* as* CapitalIQ,* One* Source* or* MARKUS.* I* compiled* a* long* list* and* then*further*ranked*the*investors*I*had*identified*according*to*three*criteria:** 1) Financial*Capacity:*I*screened*financial*statements*looking*for*key*figures*such*as* EBITDA* and* annual* turnovers* to* analyze* the* financial* capacity* for* a* potential* takeover.** 2) Strategic* Fit:* I* analyzed* the* degree* of* overlapping* corporate* activities* between* the* potential* investors* I* had* identified* and* the* acquisition* target* to* assess* the* strategic*fit*for*the*investors.* 3) Recent* M&A* Activities:* M&A* databases* such* as* Mergermarket* allowed* me* to* figure*out*whether*the*potential*investors*had*accomplished*any*takeovers*in*the* recent*past*and*whether*M&A*belonged*to*the*business*practice*of*these*players.* * However,*I*also*contributed*to*the*main*part*of*several*pitch*presentations.*I*worked*on* corporate* rating* and* quite* quickly* began* to* realize* that* the* Discounted* Cash* Flow* method*is*not*really*used*for*valuation*any*longer,*but*rather*are*multiplies*such*as*P/E* ratio,*EBIT*or*EBITDA*multiple*much*more*common.*I*have*also*learnt*a*great*deal*about* different* markets* and* industries* and* got* used* to* read* corporate* annual* reports* when* filtering*for*particular*information.*All*in*all,*working*on*pitch*presentations*was*a*very* good*opportunity*to*dive*into*M&A*for*the*first*time,*mainly*because*of*the*broad*variety* of*task*that*I*was*allowed*to*deal*with.* * ' ' * 4*

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IV. '

Relation'to'the'IBP'program'

As*stated*earlier,*the*internship*with*KPMG’s*Corporate*Finance*department*was*a*great* chance*for*me*to*learn*about*M&A*and*a*variety*of*other*topics*as*well*as*to*deepen*my* economic* understanding* in* general.* However,* at* this* stage* of* my* study* (2nd* year)* it* is* rather* hard* to* relate* my* work* to* theories,* issue,* or* problems* from* the* part* of* the* IBP* curriculum*I*have*been*studying*so*far.*Since*the*M&A*advisory*business*is*a*subFsector* of* Investment* Banking* in* the* financial* industry,* the* theories* and* concepts* from* the* political* courses* may* not* be* used.* However,* my* so* far* acquired* knowledge* from* the* economic/* business* courses* is* far* too* basic* and* theoretically* to* be* related* to* the* very* specific* work* I* did* with* KPMG.* However,* I* expect* my* internship* with* KPMG* as* an* optimal* preparation* for* the* course* “Corporate* Finance”,* which* is* scheduled* in* the* 6th* term,*and*I*am*very*much*looking*forward*to*be*provided*with*the*academic*view*on*the* M&A*business.* * Due*to*this*issue,*I*chose*to*focus*my*analysis*on*the*IBP*curriculum*itself*with*relation* to*the*challenges*I*was*facing*both*when*preparing*for*my*interview*and*when*I*started* my*actual*work*in*the*office.* ' ' V. ' When*planning*and*eventually*conducting*my*summer*internship*I*had*to*face*serious* problems* of* “academic* lacks”* due* to* the* structure* of* the* BSc* program* “International* Business*and*Politics”.*Since*I*applied*for*a*position*with*KPMG*AG*–*a*rather*technically* operating*firm*–*it*was*clear*from*the*beginning*that*the*politically*orientated*courses* would*be*less*useful*for*both*the*application*process*as*well*as*the*actual*work.*When*I* started* my* application* process* in* January* 2011,* I* had* merely* finished* three* courses* –* Micro* Economics,* Managerial* Economics* 1,* and* Political* Science.* Thus,* my* academic* economic* understanding* was* on* a* really* low* level.* In* fact,* my* “practical/applied”* economic* knowledge* was* actually* nonFexistent,* since* both* Microeconomics* and* ME1* mainly*deal*with*basic*economic*theories*and*general*concepts.*Although*the*latter*tries* to*approach*real*cases*and*further*more*practical*knowledge,*fist*year*students*are*still* * 5* Problems'regarding'the'IBP'curriculum'

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far* away* from* gaining* business* relevant* skills* that* can* be* used* in* the* real* world.* To* extend*the*perspective*on*the*economic*courses*of*the*2nd*term*–*Macro*Economics*and* Managerial* Economics* 2* –* it* turns* out* that* this* imbalance* of* economic* theory* and* businessFrelated*taught*skills*is*not*getting*any*better.* * Thus,*the*main*question*to*face*regarding*the*program*structure*is*probably:*How*less* academically* should* students* be* taught* be* in* favour* of* a* more* applied* and* businessF related*approach,*acknowledging*that*the*respective*skills*are*probably*more*trivial*and* less* scientific* than* purely* economic* theories?* I* am* aware* of* the* fact* that* this* issue* is* part*of*an*ongoing*debate*regarding*the*design*of*study*programs*in*general.*However,* from* my* point* of* view* –* admitting* that* I* can* enter* the* discussion* from* a* second* year* university* student* perspective* only* –* the* business* and* management* related* focus* should* be* emphasized* in* the* IBP* program* structure* more* strongly.* In* the* following,* I* will*specify*my*reasoning.* * First*of*all,*CBS*as*the*institution*behind*the*IBP*program*is*a*business*school*–*which* should*be*different*from*a*regular*university.*Whereas*regular*universities*tend*to*have* a*rather*holistic*approach*to*academic*education*in*general,*business*schools*are*–*also* historically* –* usually* operating* towards* a* more* practical* educational* concept,* closely* connected*to*actual*needs*from*the*business*world.*Therefore*it*is*not*surprising,*that* one*of*CBS’*slogans*that*can*be*found*on*one*of*the*banners*in*the*main*entrance*hall*in* Solbjerg*Place*stating:*“Where*University*means*Business”.*This*statement*reflects*well* what*I*tried*to*explain*above.*Therefore*I*face*problems*understanding*the*correlation* between*the*general*approach*of*Copenhagen*Business*School*and*the*nature*of*the*IBP* program.* * One*of*the*reasons*why*I*am*studying*at*CBS*is*the*fact*that*I*like*to*get*prepared*and* qualified*for*my*further*professional*career*in*the*business*world.*No*doubt*that*the*IBP* program* is* challenging* and* demanding* quite* a* lot* of* work* from* students.* However,* I* unfortunately*do*not*enjoy*the*feeling*that*I*am*achieving*actually*valuable*knowledge* that*helps*me*applying*for*certain*jobs*in*the*future*–*at*least*this*is*my*impression*after* the*first*half*of*the*program.*In*my*opinion,*IBP*students*should*not*be*studying*merely* to* achieve* certain* educational* goals* by* passing* courses.* They* should* rather* be* * 6*

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stimulated*by*their*study*to*develop*themselves*achieving*higher*educational*levels*by* acquiring* a* rational* “mix”* of* theoretic* economic* concepts* joined* with* businessFrelated* skills.*As*already*mentioned*earlier,*I*consider*this*“mix”*in*the*IBP*Bachelor*program*to* be*in*an*unsatisfactory,*imbalanced*stage*today.* * Concretely,* I* consider* the* first* term* to* be* structured* to* loose.* Although* it* allows* students* a* smooth* entry* into* university* life* providing* them* with* enough* time* to* integrate*into*their*new*environment,*I*believe*that*time*can*be*used*more*efficiently.*In* the*first*term,*students*face*three*courses*only,*whereas*the*Political*Science*course*is* weighted*more*heavily*due*to*its*15*ECTS*valuation.*In*fact,*the*workload*for*this*course* is* just* slightly* heavier* than* for* ME1* or* Microeconomics.* Thus,* it* would* be* possible* to* integrate* a* fourth* course* into* the* first* term.* This* would* be* chance* to* integrate* a* real* businessFrelated*course*into*the*curriculum*such*as*“Financial*Accounting”.*This*course* does* definitely* belong* to* a* sound* education* for* every* economics* or* business* reading* student.*However,*when*looking*at*the*structure*of*the*IBP*program*it*appears*that*this* essential*course*is*not*an*integral*part*of*the*IBP*curriculum*at*all2.*I*believe*this*to*be*a* pitfall*and*one*of*the*major*disadvantages*of*the*program.*I*think*it*is*misconception,*if* students* eventually* hold* a* Bachelor’s* degree* in* business* without* knowing* anything* about*accounting*and*financial*statements.* * * VI. Conclusion' ' The*time*working*with*KPMG*in*Frankfurt*last*summer*was*a*valuable*experience*I*do* not* want* to* miss.* I* learnt* a* lot* about* Corporate* Finance* and* M&A,* a* field* I* am* very* interested*in.*Furthermore,*my*motivation*to*perform*well*at*CBS*has*been*encouraged* since*I*learnt*to*know*about*the*high*requirements*within*the*topFtier*firms.*Moreover,*I* gained* a* good* insight* into* the* financial* industry.* But* I* could* not* only* develop* myself* professionally,*but*also*personally.*For*instance*I*have*noticed*that*the*way*I*deal*with* time*has*changed.*I*think*I*have*become*more*efficient*in*the*work*I*do*today*in*order*to* enjoy* my* free* time* since* this* was* heavily* cut* and* scarce* when* interning* with* KPMG.* Regarding* “time”* I* also* came* to* another* conclusion:* I* found* the* way* people* in* the* ********************************************************
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*See*IBP*program*structure*attached.*

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financial* industry* tend* to* deal* with* this* value* rather* unappealing* and* dissuasive.* I* do* not* necessarily* mind* to* work* intensively,* but* a* healthy* workFlifeFbalance* and* free* personal* time* on* the* weekends* is* really* important* to* me.* Regarding* this* issue* I* can* highly*encourage*to*read*the*article*“Tribal*Workers”*published*in*the*Financial*Times*in* 2002.3*Concluding* my* experiences,* I* very* much* recommend* summer* internships* to* fellow*students*to*broaden*ones*knowledge*and*horizon.*

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*http://msittig.freeshell.org/articles/FinT_TribalWorkers.html*

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