Career switch of Franco Imperial: from PwC Philippines to the largest alternative asset manager in Spain

As I wanted my next career change to be in Europe, I knew that the best way to do so given my limitation as a non-EU national was to join a top tier Master’s in Finance program. After reviewing various business school rankings, course curricula, background of professors, and penetration of alumni in the industry, IE came as the ideal option for me. Eventually, my decision turned out to be just right: after graduating from IE, Arcano Capital (the largest alternative asset manager in Spain), sponsored my work permit and hired me as a senior investment analyst, investing in private equity and infrastructure funds in the alternative energy space.

Franco Imperial, originally from Manila, the Philippines, graduated first in class from the Master in Advanced Finance at IE Business School. He has a built expertise in business valuations at PwC Manila before joining IE. Currently Franco is working at Arcano Capital (*) as an investment analyst of European & North American funds in the clean energy space.

Franco is also interested in finding market anomalies in liquid equities: he wrote the Master's thesis centered on an alternative method to simulate stock price paths by incorporating Black Swans.

We had a chat with Franco the other day about his experience at IE, and would like to share with you his experience!

IE Finance Team: What do you think differentiates the MIAF program at IE from other schools?

Franco: I think the key differentiator of the MIAF is that most of the professors are full-time practitioners. For instance, my professor in three classes – Valuations, M&A, and Investment Banking Due Diligence – was the ex-MD of Morgan Stanley. While he of course taught us the fundamentals of these subjects, what was very interesting and valuable were the case studies he provided as they were based on his first-hand experiences on large transactions (e.g. M&A and IPOs of well-known banks, Facebook’s IPO, etc.). Moreover, he patterned some of our quizzes after superdays encountered in investment banking interviews, giving us a certain advantage in terms of familiarity with structure, content, and time-pressure.

IE Admissions Team: You were living in the Philippines, what made you decide to come all the way to Spain to do the program?

Franco: My career objective was really to transfer to the buy-side either in Private Equity due to my professional experience in Valuations/M&A or in a Global Macro fund due to my interest in financial economics and quantitative models. As I wanted my next career change to be in Europe, I knew that the best way to do so given my limitation as a non-EU national was to join a top tier master’s in finance program. After reviewing various business school rankings, course curricula, background of professors, and penetration of alumni in the industry, IE came as the ideal option for me.

Eventually, my decision turned out to be just right: after graduating from IE, Arcano Capital (the largest alternative asset manager in Spain), sponsored my work permit and hired me as a senior investment analyst, investing in private equity and infrastructure funds in the alternative energy space.

IE Admissions Team: Did you choose a specialization track during the final period? If yes, why? If not, why not?

Franco: We were offered the opportunity to specialize in either Corporate Finance, Asset Management, or FinTech. As I mentioned in #4, my career objective was to enter Private Equity or a Global Macro Fund. As my objective required classes from both Corporate Finance and Asset Management, I chose to specialize in two tracks to have the benefit of both. While it was both mentally and physically demanding to major in two areas, I was able to get the best of both worlds.

IE Admissions Team: Which class(es) did you enjoy the most? Why?

Franco: Creative Accounting and Advanced Valuation was definitely my favorite and I always recommend this class to incoming MIFs and MIAFs. It is taught by Ignacio de la Torre, the Director of the Master in Finance programs and a full-time partner at Arcano.

First, I enjoyed the subject because it taught us how to be critical of annual reports which are often mistakenly perceived to be “untouchable”. Yet, the very fundamental principle of accounting is that accounting is only an opinion to which some transactions are based on very subjective matters. Hence, this class trained us to focus not only the top line figures but also to the issues buried in the obscurely worded footnotes. We were thus able to form our own judgments on whether a figure may have been a result of overoptimistic assumptions, overly aggressive revenue recognition, etc. Second, after becoming more discerning of financial accounting, we were then taught how to make the corresponding adjustments to the valuation (e.g. adjusting EBITDA, net Debt, Working Capital, etc.) that ultimately affected valuation multiples (EV/EBITDA, EV/Sales, P/E, P/B). Finally, we were taught on how to be more critical of DCF valuations which should be fundamentally linked to adjusted multiples and reasonable accounting figures (e.g. For a cyclical company, is the equity research analyst using a terminal year in which the cash flows hit the high point of the cycle? For a 0% terminal growth rate company, does the analyst forecast financials such that the return of capital is substantially greater than the cost of capital by terminal period?).

Algorithmic Trading was another favorite of mine. It was taught by Bernd Hanke who runs his own quantitative fund in London after heading Goldman Sachs’ Quantitative Equity Group in New York. I particularly enjoyed this class as I was able to further practice my skills in VBA and MATLAB by replicating and back testing a risk-managed momentum factor model. This class proved to be very helpful in my Master’s Thesis where I needed to use similar techniques.

Private Equity & Corporate Analytics is another that is worth mentioning. The class was taught by Simon Hirst, a University of Oxford/Wharton MBA graduate and former MD of Tri-Artisan Partners. Basically, this class was an LBO modelling class in which our final case was to perform an LBO model of Marks & Spencer in which different financing structures were analyzed and modelled (from amortizing debt, to PIK, to convertible bond structures, etc.).

IE Finance Admissions Team: What are some of the challenges you encountered during the program?

Franco: I think the biggest challenge for a number of us was to avoid the temptation of getting some ca?as or dobles from the terrazzas surrounding our campus. From 9am to 3pm every day, we were immersed in classes in which we had to do heavy financial modelling, analyze various financing structures, engage in mental acrobatics for case studies, and read dense paragraphs of financial regulation. At 3pm in Madrid, the sun is out and the terazzitas are filled with life. Hence, the walk from our classroom towards the library or home to continue studying was excruciating.

In other words, the program was really demanding as an hour of ca?as/dobles is an hour lost in reviewing for an exam. To give an idea of finals week, we sat through two three-hour exams each day from Monday to Friday where our classes ranged from derivatives, to advanced corporate, to fixed income, to macroeconomics. As you can imagine, our ability to shift from one mindset to another was important and our ability to strategize in terms of preparation was crucial.

Ultimately, the intensity and breadth of the program paid off as the skills that are vital in the industry – grit, equanimity, and ability to multitask – were stretched to their limits. This made the ca?as/dobles post-finals worth it.

IE Finance Team: How do you feel the MIAF prepared you for a career in finance?

Franco: There are 3 major ways the MIAF prepared me: (1) I learned the required hygiene technical skills in both IB/PE roles and AM/HF roles, (2) I was immersed in the greyest areas in finance, and (3) I learned the “best practices” from professors who are full-time practitioners.

I’ll try to expound a bit more on these three points.

Hygiene Skills

The basics were of course learning how to model various types of valuation models (e.g. APV, LBO, and merger models), becoming skilled in both IFRS and US GAAP, creating efficient frontiers and statistical models (more importantly detecting and avoiding statistical flaws), knowing how to sector allocate or even factor allocate (value, momentum, etc.) in various phases of an economic cycle.

Yet what I appreciated more was that professors deliberately trained us to develop the intuition and the ability to do back-of-the-envelope calculations, skills often overlooked but demanded in actual practice. For instance, in an M&A scenario, we were trained how to quickly come up with an estimated purchase price adjusted for synergies, restructuring costs, and other adjustments without an excel sheet at hand. Another example: we were trained how to assess the probability of an acquisition pushing through by considering the long and short positions of M&A arbitrageurs. For me, this was a new and an ingenious way of evaluating an acquisition as I had been previously used to evaluating only the traditional deal dynamics (e.g. purchase price vs. estimated synergies, antitrust issues, etc.)

Grey areas

Besides preparing us for these hygiene skills, the professors frequently immersed us in the greyer areas of finance – those that cannot be resolved by simple yes’ and noes, nor by na?ve reliance on a financial model’s output. For instance, one professor brought us back to the fall of 2008 during the Lehman’s Collapse. Of course, the first challenge was hurdling the technical requisites such as knowing how to structure and value MBS, CDS, CDOs and diving deep into VaR calculations, a metric that is often misunderstood as much as it is misused. Then, after overcoming the technical aspects, the more challenging questions were raised: Was the collapse of Lehman a Black Swan or a Predictable Surprise? How does one act when quantitative models are saying something that does not jive with one’s intuition? As you can see, while technical know-how can be very important to a certain extent, the ability to navigate multi-dimensional issues, the intuition to make grey-area calls, and the conviction to stand one’s ground amid the fallacy of groupthink are what set everyday professionals from the exceptional. While this feat may take years of successes and failures, the MIAF handed us the guiding principles in the pursuit of achieving it.

Best Practices

Finally, the fact that professors were mostly full-time practitioners were key to coming as close to praxis as possible. While we were of course taught the" “by-the-book” methods, we were also taught the “best practices” in the industry. For instance, textbooks would simply tell you to go to the company’s balance sheet, calculate the net debt, and then deduct the net debt from the company’s enterprise value to arrive at the implied equity value. Yet, our professors taught us how to dig deep in the footnotes of the annual report to meticulously determine what should be the real debt and cash levels that should be used: Are there underfunded pension liabilities? Are there in-the-money convertible bonds? Does the company guarantee the debt of related parties? Is part of the company’s cash operating or restricted?  

IE Finance Team: What tips do you have for newcomers – whether preparing for the MIAF, careers and job application, student clubs, etc.?

Franco: To fully benefit from the MIAF program’s curriculum, I found it helpful to always devote time to deliberately find the underlying link among classes instead of studying them in silos. This technique helped me understand a particular class at a deeper level and see the interconnectedness of the financial industry.

For instance, you may be interested in moving to private equity and find that your derivatives classes may never be relevant to your industry. However, I think that you can still form connections and relevance between the two. As a trivial example, private equity deals can be structured with call and put options, the former to provide the PE investor a means of increasing its stake whereas the latter to provide a means of exit. A more technical example lies in a PE firm’s carried interest structure in which its payoff structure mimics that of a call option. Hence, one can actually value the carried interest using methods learned in derivatives and evaluate whether the fee structure is appropriate.

Career

In terms of job applications, my advice is to leverage on IE’s resources and network: (1) alumni, (2) professors, and (3) career team. Actively contacting them will be way more effective than passively applying for jobs online.

First, a quick search in LinkedIn will already show you that MIF and MIAFs are literally all over Europe working in various industries in finance from boutiques to bulge-bracket banks (BofA, JPM, Goldman, Lazard, UBS, etc…). In fact, I was able to get a 3-month M&A internship over the summer at PwC Madrid by contacting the head of M&A who was also an IE graduate.

Second, seek advice from your professors as most are part-time professors but full-time professionals. For instance, Ignacio de la Torre – my professor in Creative Accounting & Advanced Valuations and also the Financial Director of the MIF/MIAF – is a partner at the Arcano Group. After seeking advice, he recruited me to his macro & investment banking team at Arcano as a summer intern. After my internship with his team, he eventually landed me a spot in the buy-side where I now work as an investment analyst of private equity & infrastructure funds in the alternative energy industry.

Finally, actively consult with IE’s career team, especially with Irina Zilbergleyt. Working in investment banking for Merrill Lynch and eventually in private equity for Allied Capital and Ares Management in New York, she is very well-connected in the industry and she knows the ins and outs of the recruitment process.

IE Finance Team: Thank you very much Franco, we wish you all the best with your future endeavours!

(*) Arcano Partners, founded in 2003, is an independent financial advisory and asset management company, with three major business areas: investment banking, wealth management and alternative asset management.

Arcano has a workforce of over 155 people, with offices in Madrid, Barcelona and New York. Since its creation, it has positioned itself as one of the leading independent firms in the European financial market.