Day in the life of
Portfolio Valuation Associate – Andrew Holliday
My name is Andrew Holliday, and I worked as an Associate in the Portfolio Valuation (“PV”) practice at Houlihan Lokey (“HL”).
As an Associate, my responsibilities were focused on leading client calls to receive valuation updates, then directing and reviewing the valuations performed by Analysts. This meant checking that the models were appropriately updated and linked, and ensuring that our client deliverables (generally PDF presentations) accurately reflected the latest valuation and information. Day to day, most of the work was focused on valuations, spending time in Excel and Powerpoint to ensure that the product my Analysts would send to VPs and further up the chain was up to standard.
Work desk
My typical work day
A typical workday actually started at a reasonable hour in my department. As a member of the junior staff (analysts and associates), as long as I arrived by around 10am I wasn’t questioned. I always had the impression that the days were allowed to start late because we were expected to work late as well. During non-busy periods, I could expect to be free of expectations by about 7pm, but those periods were few and far between.
Busy periods, which constituted 9-10 months of the year, meant frequent late nights. I rarely left before 9pm, and often stayed until the small hours of the morning getting through work. The Company did pay for dinner and a cab/Uber home when you were working late. In PV, the volume of work was such that I wasn’t necessarily waiting around to receive feedback, rather just had a huge amount of spreadsheet valuation modeling to carry out.
Thankfully, we had reasonable visibility into when things would be needed. As such, assuming I was getting my work done, the Company was happy to allow me the flexibility to leave the office to work out or play soccer, then either come back or log on from home to finish whatever I needed to that day. This made working late nights and some weekends a little more palatable.
Building valuation models
Working in PV
The focus of the work in PV is performing valuations of debt and equity investments. At a high level, debt investments, which make up the majority of the work, are focused on calibrating to an Original Issue Discount (“OID”) at issuance, and accruing the value of the debt to par over the life of the loan. These tend to be straightforward, and generally only require extra thought if there is some sort of problem with the borrower. It then gets more interesting, as you start to dig into the cash flows underlying the debt repayment, and adjusting the discount rate used to value the loan accordingly.
On the equity side, things are generally much more interesting. We value privately held (often very well known) companies for the large asset managers who had invested in them. The three well known valuation approaches for equity are DCF, Guideline Public Company (“GPC”) multiples and Guideline Transaction (“GT”) multiples, all three of which we would use on a regular basis. DCFs are more useful for more mature companies with good visibility into future cash flows, while GPC and GT are widely applicable, but require significant thought to be put into what comparables are being used. The other approach we frequently used is the Equity Allocation Model (based on the Black-Scholes Option Pricing Model), which takes into account liquidation preferences for different classes of shares. This is most relevant for earlier stage companies, where the path to exit could still be an acquisition at a value similar to or below a recent round of financing.
DCF analysis
Pros
- Compensation: Although on an hourly basis I wasn’t necessarily all that well paid, I did make a nominally large amount of money, which ultimately allowed me to save to travel for an extended period of time after leaving, and co-found Ostrich.
- Education: I did my MBA at the University of Rochester before joining HL, and although I learned a lot from that degree, I felt like the training and thought processes that I learned on the job were invaluable.
- Future career opportunities: There were multiple avenues for an exit into a different finance role from my department. Many would leave to go work for one of HL’s clients (usually large asset managers), but some of the junior staff were also able to make the jump to investment banking (still the holy grail to a few).
- Community: Being stuck in the late night foxhole that the office becomes after 10pm definitely creates a tough experience that you share with others in your position. I found that I made several good friends at the Company.
Cons
- Lifestyle: The long hours for most of the year do take a toll. Although HL has an unlimited PTO policy, I found that it could be difficult to take time off during certain periods, and missed out on trips, dinners, and more because I had to work late or during weekends.
- Long-term viability of the job: This one is somewhat specific to portfolio valuation, but even during my time there, we were implementing a basic automation tool to perform some of the more straightforward valuations. As advances are made in the space, I would expect more and more of the work to become automated.
