How To Be An Alpha Male

How to Be an Alpha Male
Copyright: Alpha University

www.UniversityAlpha.com
HOW TO BE AN
ALPHA MALE
Michael Herlache MBA
Doctorate in Business Administration Candidate 2020
Alpha University Publishing


For my wife, Svitlana, whom is my treasure.

About the Author:

Michael is a natural when it comes to picking up women. Even at the
youngest ages, Michael was comfortable approaching and escalating with
girls and always had a girlfriend. By high school, Michael was managing
multiple relationships with women from different schools. While an
undergraduate, he found himself in a long term relationship and wanted
to learn about how to be more dominant in the relationship. Despite
having love, he found himself supplicating in the relationship. After
becoming alpha, his girl began to chase him and loved him even more for
it.
Michael is also a natural when it comes to finance. He is the co-founder of
a boutique investment bank at the age of 25 (www.AltQuest.com).
AltQuest Group focuses on M&A for middle market businesses with $2M to
$100M in enterprise value on the sell side. On the buy side deals may go
north of $1bn.
Physically, Michael has been bodybuilding for almost two decades. He
focused initially on maintaining a mectomorph body type since he could
not gain weight, but as his body changed he now maintains a mesomorph
body type and has benched 400 lbs. He believes in the importance of
increasing your strength every day.
Academically, Michael got a 3.89 in undergraduate at University of
Massachusetts Amherst and earned a scholarship to Texas A&M University
for its MBA program.
Michael is happily married to a beautiful and feminine Ukrainian girl, the
love of his life. He currently works in M&A in the middle market and is the
founder of Alpha University.
Michael spent a year being an assistant for a PUA in Chicago. He was there
in field, for bootcamps, & talks. He mastered game and found it most
rewarding to build love and game in the context of long term relationships
with women.
Michael has been accepted into a Doctoral program for business where he
will specialize in finance.
TABLE OF CONTENTS
ALPHA MALE METHODOLOGY:
Chapter 1: Alpha Male Methodology
ALPHA IN PHILOSOPHY:
Chapter
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2: High Value Models

3: What is an Archetype?
4: Gender Archetypes
5: Alpha Male vs. Beta Male
6: Beta Female vs. Alpha Female
9: Where to Find Beta Females?
10: The Love Archetype
11: Behavioral Modeling
12: The Value Spectrum
12: Alpha and Beta Model
13: The Purpose of Life
14: Principles of Alpha & Beta
15: Ego
16: Reason vs. Bias
16: The Natural Organizing of Society
17: Protecting the Natural Organizing of Society
18: The Dominant Narrative
19: The Non-Dominant Narrative
20: Dealing with Accusations from Beta Males & Alpha Females
21: Objectivism
22: Epistemology, Reason & Philosophy
23: Biased Philosophies
24: Objective Behavior vs Biased Behavior
25: The Reason Reward Cycle
26: Value & Values
27: Intellectually Dominant vs. Intellectually Submissive
28: High Value vs Low Value
29: Clarity vs Agreement
30: Reasoned/Objective Culture vs Biased Culture
31: Femininity vs Feminism
Chapter
Chapter
Chapter
Chapter
Chapter
Chapter
Chapter
Chapter
Chapter
Chapter
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Chapter
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32:
33:
34:
35:
36:
37:
38:
39:
40:
41:
42:
43:
44:
45:
46:
47:
48:
49:

Protecting Your Girl from Feminism & Moralism
Standards
Search Costs & Relationship
What Should a Male Look for in a Girl?
What Should a Girl Look for in a Male?
Bioelectricity & Evolution
Value & Pleasure
Attraction
Positive Tension Model
Game
Game in Relationship
Marriage: The Sex Perpetuity
The Horniness Principle
Assume Horniness
A Day in the Life of an Alpha Male
The Alpha Code
The Alpha & Beta Lifestyle
Winning the Game
ALPHA IN FINANCE:
PERPETUITY SCIENCE:
Part I: Perpetuity Methodology
Chapter 50: Perpetuity Methodology
Part II: Standard of Living
Chapter 51: Standard of Living: Perpetuities & Investment
Part III: Perpetuities (Value)
Chapter 52: Perpetuities: Build or Buy
Part IV: Perpetuity Science (Value Creation)
Chapter 53: Business: The Science of the Perpetuity
FOUNDATIONS OF FINANCE:
Part V: Tracking Value (Accounting)
Chapter 54: Tracking Value with Accounts
Part VI: Analyzing Value (Finance)
Chapter 55: Analyzing Value with Finance
Part VII: Modeling Value
Chapter 56: Finance with Excel
Chapter 57: Financial Statement Modeling


BUILD-SIDE:
Part VIII: Perpetuity Analysis
Chapter 58: Perpetuity Science
Chapter 59: Perpetuity Analysis
Chapter 60: Market Analysis
Chapter 61: Value Chain Analysis
Chapter 62: Gap Analysis
Chapter 63: Product/Platform Analysis
Part IX: Perpetuity Building
Chapter 64: Perpetuity Building
Part X: Perpetuity Management
Chapter 65: Perpetuity Management
Chapter 66: Valuation Methodologies
Chapter 67: Framing Valuation
Chapter 68: The Market for Perpetuities
Chapter 69: Index Building & Analysis
Chapter 70: Financial Data Sources
Part XI: How to Become a Billionaire
Chapter 71: How to Build a Unicorn
Chapter 72: The Four Habits of Billionaires
Chapter 73: Total Theme Monetization
Chapter 74: Venture Capital Valuation
SELL-SIDE:
Part XII: Perpetuity Exit
Chapter 75: Investment Banking
Part XIII: The Middle Market
Chapter 76: Middle Market Breakdown
Part XIV: M&A Multiples
Chapter 77: M&A Multiples
Part XV: M&A Origination
Chapter 78: M&A Origination Methodology
Part XVI: Mandate/Target Matching
Chapter 79: Mandate/Target Matching
Part XVII: Deal Structuring
Chapter 80: Deal Structuring
Part XVIII: M&A Process
Chapter 81: M&A Process
Part XIX: Firm Management
Chapter 82: Running the Boutique Investment Bank
Part XX: Deliverables & Coverage
Chapter 83: Investment Banking Deliverables
Chapter 84: Coverage
Chapter 85: Index Building & Analysis
Chapter
Chapter
Chapter
Chapter
86:
87:
88:
89:

Financial Data Sources
Industry or Sector Newsletter
Industry or Sector Report
Rolodex Building
BUY-SIDE:
Part XXI: Buying a Perpetuity
Chapter 90: The Operating Model
Chapter 91: The Financial Buyer aka Private Equity (LBO)
Chapter 92: The Strategic Buyer aka Corporation (Merger)
PERSONAL FINANCE:
Part XXII: Cost of Living
Chapter 93: Passive Income vs. Expenses
Chapter 94: Target Countries
Part XXIII: Education
Chapter 95: Undergraduate
Chapter 96: Graduate
Chapter 97: Post-Graduate
Part XXIV: Career
Chapter 98: The Value of a Career
Chapter 99: Wall Street Career Paths
Part XXV: Portfolio Management
Chapter 100: Own Portfolio
Chapter 101: The Market Portfolio
Chapter 102: Alternative Investments
Part XXVI: GP/LP Portfolio Management
Chapter 103: Micro Venture Capital
Chapter 104: Lower Middle Market Private Equity
ALPHA IN HEALTH:
Chapter 105: Archetypal Body Types
Chapter 106: Developing an Archetypal Body Type
Chapter 107: The Alpha Diet
ALPHA IN LOVE:
Chapter
Chapter
Chapter
Chapter
108:
109:
110:
111:
Alpha and Beta in Love Methodology

Positive Tension Methodology
Network to Love Methodology
Relationship Methodology

NEXT STEPS:
Chapter
Chapter
Chapter
Chapter
111:
112:
113:
114:
How to Be an Alpha Male Course

Get Beta Girlfriend/Wife
Get Investment Banking Internship
Get Mectomorph or Mesomorph Body

PREFACE:
Seeming vs. Being Alpha
The majority of the alpha male books are concerned with how to seem
like you are alpha rather than how to actually be alpha. Thus, they speak
about social situations, body language, and framing. This text and Alpha
University are concerned primarily with how to be an actual alpha male.
Alpha University has created a methodology for doing so. This is the Alpha
Male Methodology:
Alpha in
Philosophy
Alpha in
Health
Alpha
Male
Alpha in
Love
Alpha in
Finance


From this methodology, Alpha University has built a body of knowledge
which turned into the course, How to Be an Alpha Male. The book, How to
Be an Alpha Male, is meant to accompany the course which can be taken
online, in the weekend workshop, or in the month-long training.
When asking the question, How to Be an Alpha Male?, we are really

asking four questions simultaneously:
How to use reason, remain unreactive, and confidently pursue your
intentionality in any situation?
How to select, attract, escalate, have sex with, and commit to a beautiful
feminine woman?
How to become a millionaire before 40 years old without sacrificing
quality of life by building a perpetuity?
How to build an athletic and muscular body for life?
For each question, Alpha University has developed proprietary
methodologies which are the basis for building a capability which is the
ultimate answer to the question.


When the male implements these models in their life on a regular basis
and builds the capabilities in philosophy, finance, love and health, they
may say that they have become an alpha male.
This book and the course is truly my lifes work, and I hope that you find
it as transformative as it has been for myself and countless others.
Alpha males add value. The value spectrum is the following:
reason
philosophy
commodity
logistics
network
advocacy
consulting/decision frameworks
transaction execution
engineering
manufacturing
platform
liquidity
governance
Beta males do not add value and are focused on taking others value via
political (ingroup/outgroup bullying/threats) means.
Regarding Portfolio Management:
the goal is not simply to diversify among asset classes, but concentrate
wealth in perpetuities. this is a paradigm shift between diversified
gambling on price volatility to principled investing. the principle of
investing is to invest only in perpetuities or risk free assets.

the majority of books/courses claim that man is a social being (where
decision making is towards the ends of popularity to the ingroup). thus
content is focused on social situations, framing, histrionics.
alpha university is concerned with actuality being alpha. man is a

reasoned and loving being.
The alpha male and the beta female are perpetuities that continuously
add value. The beta male and alpha female bring zero sum (politics with
defined winner and loser) to their interactions.
Reason (value):
Concentrate only on perpetuities and ignore everything else.
Philosophy: Objectivism, Alpha & Beta
Finance: Perpetuity Science
Health: Alpha workout & diet
Love: Alpha & Beta in Love
Bias (defering to ingroup authorities in exchange for 'popularity' to

ingroup):
Diversify and spread focus to things other than perpetuities.
Philosophy: Progressivism/multiculturalism
Finance: Modern Portfolio Theory
Health:
Love: Pickup as a lifestyle. 'Liking' based upon conformity to ingroup;
where human's value is based upon 'social' (i.e. utility to the ingroup)
rather than reason & love. The regressing of humanity.
having a job and adding value are two entirely different things.


Michael Herlache MBA
Doctor of Business Administration Candidate 2020
Founder of Alpha University
mike.herlache@universityalpha.com

ALPHA MALE
METHODOLOGY

Chapter 1:
Alpha Male Methodology
This text and Alpha University are concerned primarily with how to be an
actual alpha male. Alpha University has created a methodology for doing
so. This is the Alpha Male Methodology:



Alpha in
Philosophy
Alpha in
Health
Alpha
Male
Alpha in
Love
Alpha in
Finance
From this methodology, Alpha University has built a body of knowledge

which turned into the course, How to Be an Alpha Male. The book, How to
Be an Alpha Male, is meant to accompany the course which can be taken
online, in the weekend workshop, or in the month-long training.

When asking the question, How to Be an Alpha Male?, we are really

asking four questions simultaneously:
How to use reason, remain unreactive, and confidently pursue your
intentionality in any situation?
How to select, attract, escalate, have sex with, and commit to a beautiful
feminine woman?
How to become a millionaire before 40 years old without sacrificing
quality of life by building a perpetuity?
How to build an athletic and muscular body for life?
For each question, Alpha University has developed proprietary
methodologies which are the basis for building a capability which is the
ultimate answer to the question.
When the male implements these models in their life on a regular basis
and builds the capabilities in philosophy, finance, love and health, they
may say that they have become an alpha male.

ALPHA IN PHILOSOPHY
Alpha in
Philosophy
Alpha in
Health
Alpha Male
Alpha in
Love
Alpha in
Finance

Chapter 2:
High Value Models
In order to understand how to be an alpha male, one must first
understand value as it relates to the sexes. Namely, what is high value for
the male and female and what is low value for the male and female. We
use the High Value Model as shown here:
From the High Value Model shown above, a number of key questions arise
for the male:



From the key questions and component questions regarding how to be an

alpha male, we can develop an understanding of what defines progress for
the male:

From the High Value Model, a number of key questions arise for the
female:


From the key questions and component questions regarding how to be a

beta female, we can develop an understanding of what defines progress
for the female:
After understanding what high value for the female is, the male naturally
asks, where can I find beta females?

Due to the rise of feminism in the West, we need to identify country by

country the level of femininity of the average female which we have done
in the Female Value Scale below:
As you can see, the level of feminism in the country has a negative
correlation to the level of value of the average female in the country. The
higher level of feminism means a lower level of value in the average


female due to the female adopting more masculine behavior and being
less feminine. Feminism is quite an Orwellian word!
After we determine where the beta females are located, one has to
understand what the goal with a beta female is. This means asking the
question, what is the ideal relationship?
Remember, alpha is high value for the male and beta is high value for the
female so naturally, the alpha male being with a beta female is the ideal
relationship. For alpha male and beta females, this means avoiding
relationships with beta males and alpha females:
When the alpha male and beta female are together, this yields true love:

True love is the goal of all healthy human beings and is truly the purpose
of life. By following the methodologies in this book, we are going to be
you there sooner than you think!
In order to obtain true love and the alpha & beta way of life, you are
going to need to utilize reasoning. We can apply the High Value Model to
reasoning in the following manner:


As you can see, high value behavior is consistent with reason and low
value behavior is derived from bias. From reason we can analyze the
system of reasoning known as philosophy. Applying the High Value Model
to philosophy yields the following model:
As you can see, the biased driven philosophies include:

Progressivism
Feminism
Moralism
The philosophies that are consistent with reason include:

Philosophy of Objectivism
Philosophy of Alpha & Beta
From philosophy, we can then use the High Value Model to analyze
perspectives on individual sovereignty:

As you can see high value males and females see the individual as being
sovereign unto themselves and that their own self-interest is the highest
moral purpose of their lives. The biased see the sacrificing of anothers
self-interest as a necessary component to advance their agenda.
From perspectives on individual sovereignty, we can then analyze views
on the nature of true love:

As you can see, applying reason to true love means that love is selfinterest/ego-based and is truly synergistic meaning that the two come
together to yield something more than when they were separate. The
biased see love as requiring sacrifice which is not consistent with reason
and is thus not true love.
The biased see all aspects of life as zero sum meaning that for there to be
a winner there has to be a loser. They extend this to imply that the
winner therefore is a victimizer and the loser is thus a victim. The biased
extend this flawed reasoning to male/female relations (hence feminism),
to economics (hence Marxism), and politics (hence Progressivism):


Chapter 2:
What is an Archetype?
When we discuss high value, we are ultimately learning about what is
archetypal for a particular sex. The definition for archetype is:
The original pattern or model from which all things of the same kind are copied or on which they are based; a
model or first form; prototype.
An archetype provides an ideal that evolved through time. We can apply

archetypes to male/female relationships to understand selection,
attraction, escalation, sex & commitment. Namely, there is an archetype
for the male and an archetype for the female. Archetypes explain
selection, attraction, escalation, sex & commitment.
The archetype for the male is masculinity. We call this archetype alpha.
The archetype for the female is femininity. We call this archetype beta.
The key to success for a male is to become the male gender archetype,
alpha. The key to success for a female is to become the female gender
archetype, beta.
Alpha has to do with excellence in philosophy, love, finance & health.
Beta has to do with excellence in philosophy, love & health. The rest of
this text will thus be broken down into the components of the male
archetype alpha. From there we will do a deep dive into each and how
they relate to creation of a high value male.

Chapter 3:
Gender Archetypes
Continuing to extend the concept of the archetype to the sexes, we get
gender archetypes. Unfortunately, in the Western world, we have a
relatively new phenomena in the past few decades, the fall of gender
archetypes. Gender archetypes provide the ideal for both the male and
female and provide an initial distinction that guides human behavior. The
initial distinctions that are provided by gender archetypes is represented
in the Alpha & Beta Model taught at Alpha University. The Alpha & Beta
Model states that the gender archetype for the male is alpha (i.e.
masculinity) and the gender archetype for the female is beta (i.e.
femininity):
The distinctions in the Alpha & Beta Model are foundation and provide the
core to developing philosophically.


The instruction of gender archetypes used to occur at the level of the
family, community, and institutions. This no-longer occurs in the West
and in fact, we now see the opposite of gender archetypes being
reinforced and held out as heroic by university, media, and politicians.
The main themes portrayed in the West are the female being alpha
portrayed as a hero and the male being beta portrayed as a hero. This
conflicts with the Alpha & Beta Behavioral Model taught at Alpha
University. The Alpha & Beta Behavioral Model teaches us traditional
gender archetypes (alpha for the male and beta for the female) and the
love archetype (alpha and beta in love).
Archetypes are important as they indicate a societys primary philosophy
and shapes behavior which translates into culture. As archetypes become
neglected, the social fabric of society begins to erode and biased culture
fills the void. We see this today with progressivism and feminism in the
West:

This is the leading challenge to Western civilization; the erosion and

demonization of our ideals, and it provides an opportunity for men and
women to take responsibility for change and to teach ourselves, families,
communities and country about gender archetypes. The best way to do
this is by using the Alpha & Beta Model:

Chapter 4:
What is an Alpha Male?


Alpha is the gender archetype for the male. Alpha is masculinity.

Masculinity is defined by the males focus, passion, and intensity in
philosophy, love, health, and finance. An alpha male sees his primary role
in life as love with a beta (feminine) female as well as the building of a
perpetuity.
Alpha is synonymous with high value for the male. The female is
evolutionarily programmed to select, have sex with, build love with, and
commit with an alpha male.
Philosophy:
The Alpha Code: The alpha male does not cheat on a beta female but is
free to be with other women if the female is not beta. The key is to
determine if the female is beta or not. If she is not beta, then the male
should simply enjoy sex with her and then spend his time looking for a
beta female. When he finds a beta female he should be exclusive with her
and enjoy alpha and beta in love.
Advocates and espouses gender archetypes (alpha for the male and beta
for the female) and the love archetype
See the individual as being sovereign unto themselves and that their own
self-interest is the highest moral purpose of their lives.
Love:
Alpha males look for high value girls rather than just any girl. Alpha males
have standards and hold their women to standards.


Know and advocate that there is no "wrong" or "sin" or victim in
male/female relations and sex is natural and healthy.
Possesses game (cocky, teasing, sexual): know and implement the positive
tension model in the pickup phase and in relationship
True love is his goal
Takes the lead in sexual encounters
Finance:
Strives for good grades and actually cares about learning the material to
then become a thought leader in his field
Pursues learning outside of the classroom, reading on his own time
Knowledgeable regarding Perpetuity Science and builds/grows/sells/buys
perpetuities
Health:
Has or is building a mectomorph or mesomorph body type
Bodybuilds: Workouts that include the major masculine muscle groups
including: bench, arms, shrugs, back/lats
Diet of no sugar, low carbs, low fat, high protein

Chapter 5:
What is a Beta Male?
A beta male is the opposite of the gender archetype for the male (i.e.
feminine). A beta male is synonymous with low value. Beta males do not
possess optionality. Beta males do not see their primary role as love with
a beta (feminine) female nor the building of a perpetuity.
Philosophy:
Primary method of influencing others is bias in the form of framing,
ingroup/outgroup bullying, censorship and histrionics
Beta males possess a biased philosophy (progressivism or moralism) and
model the opposite gender archetype (i.e. femininity)
See all aspects of life as zero sum meaning that for there to be a winner
there has to be a loser. They extend this to imply that the winner
therefore is a victimizer and the loser is thus a victim. They further


to economics (hence Marxism), and politics (hence Progressivism)
Are intellectually submissive has to do with the male or females
advocacy of the philosophy of bias including progressivism/feminism and
moralism. Philosophical submissiveness conveys low value for the male
and female.
Advocate that there is no objective reality.
Moralist (the concept of sin and non-scientific view of God)
Progressive (hostile to reason, gender archetypes and the love archetype)
See the sacrificing of anothers self-interest as a necessary component to
advance their agenda.
Love:
See love as requiring sacrifice which is not consistent with reason and is
thus not looking for true love.
Has no game and does not want to have game
Relies on the female to take the lead in sexual encounters
Pickup as a lifestyle with no standards for women
Sees impregnating a woman as a means to keeping her
Finance:
Does not care about grades or learning the material
Does not know Perpetuity Science or care to build perpetuities
Does not attempt to add value
Health:
Does not work out
Does not eat healthy
Does not attempt to dress well and does not care about appearances

Chapter 6:
What is a Beta Female?


Beta is the gender archetype for the female. Beta is femininity.

Femininity is defined by the females focus, and passion in philosophy,
love, and health. The beta (feminine) female sees her primary role in life
as love with a male.
Beta is synonymous with high value for the female. The male is
evolutionarily programmed to select, have sex with, build love with, and
commit with a beta female.
Philosophy:
Applies the philosophy of objectivism and the philosophy of alpha & beta.
Feminine women possess reason and behaviorally model their gender's
archetype, beta
Understand that womens rights and feminism are entirely different
things. Womens rights come from nature and are protected by reason.
Feminism comes from the philosophy of Marxism and views the world in
terms of victimizer/victims especially in male/female relations. To
feminists, relationships are zero sum meaning that there is a clearly
defined winner and a clearly defined loser. Thus, feminists view true love
as something that is not real and ultimately a negative thing for a woman.
Possesses reason and alpha & beta philosophy


See the individual as being sovereign unto themselves and that their own
self-interest is the highest moral purpose of their lives.
Love:
Prioritizes love over career
Love with the male is her number one priority
Passion for pleasing the male
There is no "wrong" or "sin" or victim in male/female relations and sex is
natural and healthy.
Health:
Works out by running and fitness training
Eats well by not eating sugar and eats low carbs, high protein and low fat
Feminine body type with target weight 95 lbs (for shorter girls) to 140 lbs
(for taller girls)
Enjoys wearing feminine clothing such as dresses and skirts

Chapter 7:
What is an Alpha Female?
An alpha female is the opposite of the gender archetype for the female
(i.e. masculine). An alpha female is synonymous with low value. The
alpha female does not see her main role in life as love with a male.
Philosophy:
Primary method of influencing others is bias in the form of framing,
ingroup/outgroup bullying, censorship and histrionics (i.e. victimizing
themselves to others)
Alpha females possess a biased philosophy (progressivism/feminism or
moralism) and model the opposite gender archetype (i.e. masculinity).
See all aspects of life as zero sum meaning that for there to be a winner
there has to be a loser. They extend this to imply that the winner
therefore is a victimizer and the loser is thus a victim. Furthermore, they
to economics (hence Marxism), and politics (hence Progressivism).


Feminism comes from the philosophy of Marxism and views the world in
terms of victimizer/victims especially in male/female relations. To them,
relationships are zero sum meaning that there is a clearly defined winner
and a clearly defined loser. Thus, they view true love as something that is
not real and ultimately a negative thing for a woman.
Advocate philosophy of bias including progressivism/feminism and
moralism.
Advocate that there is no objective reality.
Feminists are hostile to reason, gender archetypes and the love
archetype.
Moralist (the concept of sin and non-scientific view of God)
See the sacrificing of anothers self-interest as a necessary component to
advance their agenda.
Love:
Prioritizes career over love
Love with the male is not her number one priority
Unwilling to please the male
See love as requiring sacrifice and is thus not want or believe in true love
Health:
Does not attempt to work out or care to
Does not eat well or care to
Does not attempt to dress feminine nor care to.

Chapter 8:
Where to Find Beta Females?
As a male, you are looking for high value rather than just any female. So
the natural question becomes, where are the beta females?
Due to the rise of feminism in the West, women in the West nolonger see
their primary role in life as love with a male. Since the alpha male sees
his primary role in life as love with a beta (feminine) female, this is a
major problem. Thus, we need to identify country by country the level of
femininity of the average female which we have done in the Female Value
Scale below:

As you can see, the level of feminism in the country has a negative
correlation to the level of value of the average female in the country. The
higher level of feminism means a lower level of value in the average
female due to the female adopting more masculine behavior and being
less feminine (not seeing her primary role in life as love with a male).
Feminism, being both masculiphobic and feminiphobic, is quite an
Orwellian word!
Ultimately we find beta females in countries that have cultures that
reinforce gender archetypes (i.e. objective cultures). Some of these
countries are:
Ukraine
Russia
Poland
Czech Republic
Japan
China
India
We can see the culture based upon what the country's media, education,
and politicians portray as heroic (ideals). In the West, the female being
alpha and the male being portrayed as beta is held out as heroic. Beta
females will not be found here. Women prioritize career over love in the
West. The cultures in the West (progressivism & feminism) are in fact


hostile to gender archetypes. Just ask your average Western woman what
she thinks about gender archetypes.
So here is the main question you have to ask yourself regarding your love
life:
Would you like to spend your time picking up low value women that do
not love men (PUA in the West) or having a lifetime of true love with a
high value woman (Alpha University)?
Herein lies the difference between Alpha University and other pickup
literature (PUA). Alpha University focuses on selecting high value women
instead of low value women. Other pickup literature assumes that all
women have equal value. They do not make the distinction between alpha
and beta females. Feminism is synonymous with low value for the female
as it advocates the woman being alpha. Due to feminism in the West, low
value women even think that they are high value.
You can also observe the effects of feminism in the spike in the divorce
rate in the USA to 50% of marriages. The rise in feminism coincides with
the rise in the divorce rate. Beta females do not get divorced as love with
the male is her number one
priority. Men with beta females experience this love and stay in love. If
you are interested in staying in love and being married, selecting a beta
female is going to be key.
Having sex with low value women can be fun, but I suggest that you raise
your standards. Having sex and love with a beta female is much more
rewarding than simply pursuing endless same night lays with low value
women. I would know, I have successfully done both and I can tell you
that waking up next to your true love is priceless. I tell my wife every day
that she is my treasure and I truly feel, believe, and know it.

Chapter 9:
The Love Archetype
After we determine where the beta females are located, one has to
understand what the goal with a beta female is. This means asking the
question, what is the ideal relationship?


Chapter 10:
Behavioral Modeling
So what do with do with the High Value Model and the Alpha & Beta
Model?
We behaviorally model our own genders archetype!
In order to become successful, we model other successful people's
behavior. The best practice of behavior for a gender is called an
archetype. Gender archetypes are thus the ultimate guide for those
pursuing success. The Alpha and Beta behavioral model is a gender
archetype model allowing both the male and female to identify successful
behavior and eliminate low value behavior.
Behavioral models allow us to model successful behavior and obtain love
and significance. Modeling your gender archetype is ultimately the
decision to become successful in life. Alpha is success for the male. Beta
is success for the female.
The Alpha and Beta behavioral model also allows us to identify low value
behavior; namely the male being beta and the female being alpha. We are
to use the Alpha and Beta model and apply it to any situation. The key
question to ask is:
Am I being alpha or beta with my behavior?


Or regarding a mate:
Is she being beta or alpha with her behavior?
The male should be being alpha and the female should be being beta.

Chapter 11:
The Value Spectrum


So what do with do with the High Value Model and the Alpha & Beta
Model?

Chapter 11:
Alpha and Beta Model
The core model that we are going to refer to when behaviorally modeling
our gender archetype is the Alpha & Beta Model:
The alpha and beta behavioral model guides the male and female in
determining what behavior is ideal and what behavior is not ideal. Alpha
(i.e. masculinity) is ideal behavior for the male. Beta (i.e. femininity) is
ideal behavior for the female.
Alpha for the male (sex drive). The male should be striving towards alpha.
Alpha maximizes bioelectricity (i.e. pleasure) in the male.
Beta for the female (love drive). The female should be striving towards
beta. Beta maximizes bioelectricity (i.e. pleasure in the female.

Chapter 12:
The Purpose of Life


An alpha male and a beta female in love is the love archetype. This
archetype is what we should be striving towards. The love archetype
maximizes bioelectricity (i.e. pleasure) in both the male and female.
Alpha and beta in love will bring you more happiness than any amount of
money. It truly is the purpose of life.

Chapter 13:
Principles of Alpha & Beta
From the High Value Model and Alpha & Beta Model, certain principles
emerge. One can have principles without being a moralist/religious. The
following are the principles that form the foundation for the alpha and
beta philosophy:
The Principle of the Gender Archetype:
The male and the female should strive to be their gender archetype
The male should be alpha (i.e. masculine) and the female should be beta
(i.e. feminine)
The Principle of the Love Archetype:
Both the male and the female should strive toward the love archetype
The love archetype is monogamy between an alpha male and a beta
female
Being monogamous with a beta female is alpha
The Principle of Providing:
The male should provide for the female in finance and the female should
provide for the male in love.
The male should build a perpetuity in order to do so.
The Principle of Bioelectricity Maximization:
The male and female should strive to maximize bioelectricity rather than
money.
Bioelectricity for the male is maximized with health, love, and finance
(i.e. perpetuity + meaningful work)
The Principle of Love:

The male and female should have sex, cuddle, and commit daily.
True love is the ultimate goal of both the alpha male and the beta
female.
The Principle of Perpetuity:
The male should build or buy one perpetuity in life and use this to pay for
expenses (i.e. passive income)
The Principle of Health:
The male and female should workout daily
The male doing bodybuilding (and running when a mesomorph or
endomorph)
The female doing cardio
The male should build and maintain an alpha body type
The female should build and maintain a beta body type
The Principle of Style:
The male should wear business casual or business formal or be wearing
fitness clothing
The female should wear feminine clothing (i.e. dresses, skirts) or be
wearing fitness clothing


The Principle of Focus:
That which you focus on you invest in and receive returns from
The male should focus on philosophy, health, love, and finance
The female should focus on philosophy, health and love
The Principle of Culture:
Each person carries with them culture
Culture consistent with the High Value Model and Alpha & Beta Model is
known as an objective culture
Culture not consistent with the High Value Model and the Alpha & Beta
Model is known as a biased culture

Chapter 14:
Ego
Ego is the highest moral purpose of ones life. The larger the ego, the
more attractive the male. Alpha is the male ego. Alpha is associated with
the sex drive and value drive. Beta is the female ego. Beta is associated
with the love drive and beauty drive.

Chapter 14:
Reason vs. Bias


Chapter 15:
The Natural Organizing of
Society
From the different egos of the male (alpha) and female (beta), there
comes the natural organizing of society. The natural organizing of society
is that high value males (i.e. alphas) have sex with high value girls (i.e.
betas) and the high value males (i.e. alphas) build/buy perpetuities to
support the high value girls. This is the Alpha & Beta way of life that
emerges from the Alpha & Beta philosophy.
There is no victim in the natural organizing of society. There are those
that simply have less value and those that have high value. It is upon
those with low value to do the work (behavioral modeling) to increase
their value.

Chapter 16:
Protecting the Natural
Organizing of Society
Instead of working to raise their value, the beta males and alpha females
sought to change the definition of what is valuable by attacking gender
archetypes, reason, and attempting to change the natural organizing of
society. The beta males and alpha females even created their own
philosophies including progressivism and feminism.

Chapter 17:
The Dominant Narrative
The dominant narrative is the high value males having sex with high value
females, building perpetuities, working out, and being reasoned. This is
the Alpha & Beta way of life. This way of life is under attack from the
biased, including moralists/religious and progressives that seek to do
away with the natural organizing of society (i.e. capitalism).
There is no victim in the natural organizing of society. There are those
that simply have less value (beta males and alpha females) and those that
have high value (alpha males and beta females). It is upon those with low
value to do the work (behavioral modeling) to increase their value.
The beta males and alpha females decided that instead of becoming high
value by becoming objective, behavioral modeling and building
perpetuities, they would organize to change the natural organizing of
society to reward beta males and alpha females. This is what has
happened in the West to corporate America, education, politics.

Chapter 18:
The Non-Dominant Narrative
The non-dominant narrative claims that there is a victim in the natural
organizing of society (beta males and alpha females) and that this
justifies changing the natural organizing of society via soft and hard
coercion. The non-dominant narrative is now propagated in
progressive/feminist and moralist families, education, media, corporate
America, and politics.

Chapter 19:
Dealing with Accusations from
Beta Males & Alpha Females
Since there are so many of them, one is bound to run into low value
people (i.e. beta males and alpha females). Since they are hostile to
reason especially when applied to the sexes, these beta males and alpha
females will often make accusations against alpha males and beta
females.
Alphas know how to remain unreactive, tease the frame, and continue
with the dominant narrative.
Alpha females and beta males are merely frame trolls.

Chapter 20:
Objectivism
1.
Objective reality nature, to be commanded must be obeyed.
Wishing wont make it so.
2.
Reason objectivity rather than bias
3.
Self-interest man is an end in himself. Mans own happiness is
the highest moral pursuit.
4.
Capitalism value trading without coercion.
Philosophy and human nature:

Metaphysics nature of the universe as a whole, pertaining to existence
What is the essence of human nature?
The objective view of man is living being with an objective identity with
reason as the means of survival. Things are not given to him automatically
by reality. He can obtain value only by his own action (by production).
What is the nature of reality?
Reality exists outside of consciousness.
What is mans nature and means of human knowledge (epistemology)
To survive, man must use reason by integrating conceptual knowledge
with material from the senses.
Life requires the achievement of values which requires actions, which
requires productivity, which requires conceptual knowledge, which
requires reason.


The biased try to rewrite the nature of man to be biased (ex.
collective, altruistic). From there they created a set of values in line
with this frame.
Actions achieve value. He needs knowledge to determine which actions
yield the most value.
Reason the faculty that integrates conceptual knowledge and the
material provided by the senses.
Values flow from the nature of man.
Ethics values to guide human choices
Politics role of government
Aesthetics proper standards of art
20% production of food in society
80% other productivity towards advancement. The role of the creators and
innovators
Life expectancy is higher in countries with objective cultures and lower in
countries with biased cultures
Reason is an attribute of the individual. There is no collective mind. The
biased claim that there is collective thinking or a collective mind hence
their emphasis on consensus. Thought is not collective.
No work is done collectively. It is under the guidance of a single mans
thoughts.
Man is an entity.
The biased (ex. Collectivists) are wrong metaphysically. Collective is a
frame.
The only kind of thought which exists is individual thought. The private
process of thought.
The biased frame that there is another type of thought. A metaphysics not
consistent with reality.
Integrating sensory data to conceptual knowledge.
Man is autonomous and rational.


Mans means of knowledge. Reason is the means of mans acquisition of
knowledge.
God is a word for the infrastructure of reality (ie. Dark matter)
What is capitalism?
The social system proper for man consistent with mans nature:
Rational faculty (reason) to gain conceptual knowledge then to apply
concepts to material from the senses in real time. Reason is an individual
mind, not a collective mind/brain.
Action required to sustain human life is intellectual.
Production is the application of reason to the problem of survival.
The struggle:
Biased vs The Objective
Mans survival requires that those who think be free of the interference of
those who dont. Freedom is the fundamental requirement of mans mind.
The rational mind does not work under compulsion. It does not
subordinate its grasp of reality. It does not sacrifice its knowledge of the
truth. A mind cannot be forced. A gun is not an argument.
The social recognition of mans rational nature is the concept of
individual rights. Rights are a moral principle defining and sanctioning a
mans freedom of action in a social context.
1.
Right to life
2.
Right to property
3.
Right to be objective without fear of punishment
What is a social system?

A social system is a set of moral, political, and economic principles
embodied in a societys laws, institutions, and government which
determine the relationships, the terms of association among the men
living in a geographical area.
Key questions:
1.
Does a social system recognize individual rights?


2.
Does a social system ban physical force from human
relationships?
3.
Is man a sovereign individual or is he the property of the tribe
(state, society, collective)?
4.
Is man free?
Capitalism is the only system that answers yes.

Capitalism is a social system based on the recognition of individual rights
including property rights, in which all property is privately owned.
In a capitalist society; no man or group may initiate physical force or the
threat of force against others. Political correctness is the threat of force
against the objective.
The only function of government is to protect mans rights; protecting
him from physical force.
Government is the means of placing the retaliatory use of force under
objective control.
In a capitalist society, all human relationships are voluntary. Men deal
with one another only by reason, discussion, persuasion, and contractual
agreement.
Private property protects and implements the right to disagree.
Capitalism keeps the road open to the creative mind.
Moral justification of capitalism:
Only system consistent with mans rational nature, its ruling principle is
justice, protects mans survival.
common good and public interest are frames that has served as the
foundation for all tyrannies.
There is no such entity as the tribe or the public; they are only a
number of individual men.
Good and value pertain only to an individual living organism.
Schools of thought on the nature of the Good:
1.
Moralist good inherent regardless of context or consequence


2.
Subjective/relative good bears no relation to facts of reality.
Good is created by mans consciousness
3.
Objective good is an evaluation of the facts of reality by mans
consciousness according to a rational standard of value. Good is an aspect
of reality in relation to man.
The moralist and subjective/relative theories make it possible for man to
believe that the good is independent of mans mind and can only be
achieved by physical force. The moralist and subjective/relative theories
have created Stalin, Hitler, and Lenin.
When Good is arbitrary/subjective. Force becomes the only way of
dealing with one another.
Reason: the only means of communication. Objective reality; the only
common reference.
Objective theory of values incompatible with rule by force.
Capitalism is only system based implicitly on objective theory of values.
The Good is objective; attempt to achieve the good by force is a
contradiction. The good is in objective reality and to be discovered by
mans mind.
Mans capacity to value. To recognize the good.
Values cannot exist (be valued) outside of the full context of a mans life,
needs, goals, and knowledge.
The recognition of individual rights implies the good is not an abstraction
or a supernatural dimension.
The good is a value pertaining to reality, to the earth, to the lives of
individual human beings.
Men are not interchangeable.
Values are not determined by fiat or majority rule.
You have no social duty. Your own life is your own responsibility.
The only thing that a capitalist system requires is that which nature
requires; rationality.

Chapter 21:
Epistemology, Reason &
Philosophy
Objectivism is the philosophy consistent with metaphysics. What then is
mans nature and means of human knowledge (epistemology)?
Mans epistemology is rooted in his ability to reason. Reason is his sole
means of forming concepts and interpreting the material from his senses.
Reason applies to all and everything. Nothing supersedes reason including
God, the state, or victims. No-one/nothing is exempt from reason.

Chapter 22:
Biased Philosophies
Philosophies not consistent with reason and metaphysics are known as
biased. The leading biased philosophies in the West are:
Progressivism
Feminism
Moralism
It is important for the male to develop philosophy consistent with reason
and metaphysics.
Biased Philosophies:
Progressivism/Feminism:
Progressivism advocates behavior (i.e. advocates the girl becoming more
alpha and the male becoming more beta). Progressives portray the female
being alpha as heroic and the male being beta as heroic. You can look at
how media, universities, and politicians portray beta males as heroic. A
cultures heroes convey its ideals. The progressive schema is also hostile
to the value schema and sees a system designed around value (i.e. the
maximization of pleasure) as unfair.
Moralism:
Moralism is another biased philosophy as it is not consistent with the
reason and metaphysics in that the moralist advocates sin and a
personal God that enforces morality. As we know, there is no sin in
nature. We also know from science that God is the infrastructure that
allows the multiverse to exist (dark matter).

Chapter 23:
Reasoned Behavior vs. Biased
Behavior
There is such a thing as objective behavior and biased behavior. Objective
behavior is consistent with reason, the philosophy of objectivism, and the
philosophy of alpha & beta. Biased behavior is not.
A male should be a heterosexual that is an engineer in some capacity
building perpetuities, being reasoned, having sex with a beta female, and
working out. Objective behavior for the male is called alpha.
A female should be a heterosexual female that is feminine and loving,
reasoned, pleasing her man, and working out. Objective behavior for the
female is called beta.
Biased behavior for the male is called beta. Biased behavior for the
female is called alpha.

Chapter 24:
The Reason Reward Cycle
The reality (i.e. the metaphysics of the universe) rewards reason and
reasoned behavior. The philosophy consistent with metaphysics is known
as objectivism. Philosophy of objectivism and behavior consistent with
this is known as objective behavior. Objective behavior receives
objectively positive outcomes. Objectively positive outcomes create
objective happiness.
Reasoned
Rewards
Reason
Reasoned
Communication
& Behavior
Reasoned
Philosophy
Reason is consistent with metaphysics. Behavior consistent with reason is

objective behavior.
Objectivism provides us the standard.

Chapter 25:
Value & Values
Values are objective and are consistent with reason.
Using reason, we identify which phenomena has high value and that which
has low value. Related to the sexes, that which has value in the first
place are individuals aligned with their genders archetype. Other
phenomena that has value includes the love archetype, perpetuities, and
the natural organizing of society/objective culture.

Chapter 26:
Intellectually Dominant vs
Intellectually Submissive
In addition to being dominant in finance, love, and health, an alpha male
is dominant philosophically (i.e. objective). That is what we cover in the
Alpha Philosophy portion of this text and the How to Be an Alpha Male
course.
Dominant philosophically has to do with the male or females knowledge
and application of the philosophy of objectivism and the philosophy of
alpha & beta. Girls can be knowledgeable philosophically and still be
beta. Alpha males teach their girls to be knowledgeable philosophically in
order to protect them from progressivism/feminism and moralism.
Being intellectually submissive has to do with the male or females
advocacy of the philosophy of bias including progressivism/feminism and
moralism. Philosophical submissiveness conveys low value for the male
and female. These individuals would include the beta male and the alpha
female. Another tell regarding those that are non-dominant
intellectually/philosophically are those that advocate that there is no
objective reality.

Chapter 27:
High Value vs Low Value
The objective truth is that some people have higher value and some
people have lower value. Those with higher value are reasoned and model
their genders archetype. Those with lower value are biased and do not.
Those with the lowest value model the opposite sex's gender archetype.
A female does not get more value by being alpha, she gets more value by
being beta. A male does not get more value by being beta, he gets more
value by being alpha.
Society naturally organizes around high value. Progressives/feminists and
moralists call this unfair. High value males (alpha) get sex from high value
females (beta). High value males build perpetuities (career is a
perpetuity) and use them to support high value females. This social
system is called Capitalism. There is nothing unfair about this. It is only
low value males (beta) and low value females (alpha) that are unwilling to
be reasoned and model their gender's archetype that complain about this.
Alphas do not associate with low value people.

Chapter 28:
Clarity vs Agreement
Remember that alphas do not display certainty seeking behavior and are
comfortable operating in a context of tension. A wise Jewish man once
said, seek clarity rather than agreement. Alphas seek clarity rather
than agreement with people. So when you disagree with someone, that is
ok. You would rather be clear than to try to supplicate to agreement with
them. They will respect you more and you will respect yourself more for
clarity than simply agreeing with them trying to seek certainty.
When someone does not agree with you regarding the Alpha & Beta
model, you do not have to convince them. Simply explain that, A wise
man once said seek clarity rather than agreement. It is better to clearly
understand each others position. Most times, those that disagree with
gender archetypes and the Alpha & Beta model are those that have their
identities tied to a purely subjective view of the world. They do not want
to live in a world with an objective reality and actually assess their own
level of value, let alone do the work to become high value. This purely
subjective view of the world can be viewed as a rationalization as a result
of cognitive dissonance driven by ones realization that they are low
value.

Chapter 29:
Reasoned Culture vs Biased
Culture
Objective cultures both advocate and espouse reason, the gender
archetypes and the love archetype. Objective cultures exist in the East
(ex. Eastern Europe, South Asia, East Asia). Biased cultures are hostile to
reason, gender archetypes and the love archetype. Biased cultures exist is
the West (ex. USA and Western Europe). Biased cultures portray the
woman being alpha as heroic (i.e. high value) and the male being beta as
heroic (i.e. high value).
As you will observe in the Culture Model on the following page, philosophy
drives behavior which in turn drives culture. When you put in bias as an
input you get biased behavior (process) and ultimately a biased culture
(output). Biased culture is characterized by zero sum meaning that life is
seen as transactional with winners and losers in every transaction and
thus a victimizer and victim in every interaction including male/female
relationships. As such, true love is not seen as the goal and is even viewed
as not existing. This sort of culture is not conducive to value creation and
actually will destroy value.
A reasoned/objective culture is characterized as being synergistic where
relationships translate into additional value being created which are more
than the sum of the parts including male/female relations. True love is
seen as the goal and is strived for by all. This culture is conducive to
value creation.


Chapter 30:
Femininity vs Feminism
Girls need to understand that womens rights and feminism are entirely
different things. Womens rights come from nature and are protected by
reason. Feminism comes from the philosophy of Marxism and views the
world in terms of victimizer/victims especially in male/female relations.
To them, relationships are zero sum meaning that there is a clearly
defined winner and a clearly defined loser. Thus, they view true love as
something that is not real and ultimately a negative thing for a woman.
Feminine women possess reason and behaviorally model their gender's

archetype, beta (in line with the Alpha and Beta behavioral model).
Feminists are biased and behaviorally model the opposite sex's gender
archetype (the opposite of the Alpha and Beta behavioral model).


Girls that behaviorally model the opposite sex are unattractive to males
(especially alpha males).
Feminists are hostile to reason, gender archetypes and the love
archetype. It is important to qualify the female to determine if she is a
feminist (i.e. alpha female). You can simply ask her, Does she consider
herself a feminist? or Does she consider herself a feminine woman?.
After these questions you can even explain to her the Alpha and Beta
model and then see her reaction. If she gets offended, then you are
dealing with an alpha female (i.e. low value). If she does not get offended
and says that this makes sense, then there is a higher chance that she is a
beta female (i.e. high value). With these questions, you are trying to find
out whether she is a beta female or an alpha female. Once again, beta
females are high value and alpha females are low value.
Alpha males look for high value girls rather than just any girl. Alpha males
have standards and hold their women to standards.

Chapter 31:
Protecting Your Girl from
Feminism & Moralism
It is important for males to educate their women philosophically to avoid
bias. The bias that the male should warn his woman about is known as
progressivism, feminism and moralism. Teach your woman reasoning
skills and help her identify what bias looks like (help her to make the
distinction). There is no "wrong" or "sin" or victim in male/female
relations and sex is natural and healthy. Women love sex and want sex all
the time, just like men.

Chapter 32:
Standards
Pickup either assumes that all girls are equally valuable and has no
standards or claims that their value is entirely determined by their looks.
PUAs typically refer to attractive females as HB and a number as if her
looks entirely determine her value. This is simply not the truth. Girls that
are beta (i.e. feminine) have high value. Girls that are alpha (i.e.
masculine) have low value despite how physically attractive they are. If
you find yourself settling for sex with low value women (i.e. alpha
females), I suggest that you raise your standards.
Before you get in field, it is crucial to get your intentions and standards
defined.
Males should look for high value (i.e. beta) females and stay away from
low value (i.e. alpha) females.
In the USA and Western Europe (i.e. the West), we have a biased culture
that is hostile to reason, gender archetypes and the love archetype.
Biased cultures portray women being alpha as heroic (i.e. high value) and
men being beta as heroic (i.e. high value).
So what do we do as a male in the West?
Make the effort to find high value women globally in the East. In the East,
reason, gender archetypes and the love archetype are alive and well. We
must utilize the internet and social networks to connect with these beta
females and build a real relationship. It will be lasting.
You do not have to settle for low value women.

Chapter 33:
Relationship & Search Costs
When you are in a relationship or married to a beta female, you have
more time to build perpetuities and to work out which would otherwise
be spent trying to find sex (relationship eliminates search costs) if you
were simply pursuing pickup. Marriage to a beta female entirely
eliminates search costs.
The benefits of variety that come with pickup do not outweigh the costs
associated with search costs, especially for those living in a country with
a biased (feminist) culture. When you live in a country with a feminist
culture, search costs almost become infinite within the geography of the
country. One must search in different countries in order to find a beta
female.
For men living in countries with objective cultures, search costs are
extremely low and pickup becomes more viable. However, relationship
with a beta female is the preferred route as there are benefits that are
not available to those just pursuing pickup such as being in love, cuddling,
working out together, enjoying meals together, listening to music
together.

Chapter 34:
What Should a Male Look for in
a Girl?
Beta (i.e. femininity)!
Possesses reason and alpha & beta philosophy:
Avoid those with bias including those with a:
Moralist/religious (the concept of sin and non-scientific view of God)
Progressive schema (hostile to reason, gender archetypes and the love
archetype)
Prioritizes love (i.e. a relationship with a male) over career. Love with
the male is her primary focus.
Feminine body type with height 50 to 59 and weight 95 lbs to 130 lbs.
Enjoys wearing feminine clothing such as dresses and skirts.

Chapter 35:
What Should a Girl Look for in a
Male?
Alpha (i.e. masculinity)
Possesses reason and alpha & beta philosophy:
Avoid those with bias including those with a:
Moralist/religious (the concept of sin and non-scientific view of God,
hostile to reason)
Corporate finance/investment banking/investment management. Either
studying finance or working in finance
Game (cocky, teasing, sexual). Guys that know and implement the
positive tension model in the pickup phase and in relationship.
Male should have a mectomorph or mesomorph body type:

Mectomorph body type: Cannot put on fat and can put on some muscle
mass. Muscle is entirely fast twitch.
Mesomorph body type: Can put on muscle mass without fat without limit.
Muscle is a combination of fast twitch and slow twitch.
Bodybuild
Workouts that include the major masculine muscle groups including:
bench, arms, shrugs, back/lats

Chapter 36:
Bioelectricity & Evolution
In order to become an alpha male, it is crucial to understand human
behavior and its drivers. Humans, while possessing free will are ultimately
driven by pleasure in the form of bioelectricity. Bioelectricity is the cause
of pleasure for and governs the behavior of organic life.
After the needs of survival are met (i.e. food, shelter, water, clothing),
bioelectricity guides humans towards more pleasure. Organic matter
moves towards more bioelectricity (i.e. pleasure) automatically without
choice.
The human brain and body evolved to conduct more pleasure in the form
of bioelectricity. Human behavior can be explained by the effort to obtain
more and experience bioelectricity.
The nature of the mind is bioelectricity in the brain. The brain acts as the
infrastructure conducting the bioelectricity (ie mind).
The earliest organic life found that bioelectricity was increased when they
integrated with other organic life and worked as one. Bioelectricity acted
as a coordinating mechanism allowing the new life form to operate as one
and continue evolving to maximize bioelectricity. The cells that make up
the human are guided by bioelectricity individually. The precursors to
human life were guided by bioelectricity and found out that working
together created the infrastructure for the maximum conduction of
bioelectricity. The human brain evolved to conduct more bioelectricity
and bring maximum pleasure to the human.
Evolution is towards the maximization of bioelectricity. The male and
female evolved to maximize bioelectricity and what evolved was the
human ego (alpha for the male, beta for the female). Human progress is
towards the maximization of bioelectricity; it can be said that evolution is
a selfish phenomena.


The magical thing about bioelectricity is that it facilitates reasoning and
is pleasureful at the same time!

Chapter 37:
Value & Pleasure
As mentioned, bioelectricity not only facilitates reasoning (i.e. the mind)
but is also pleasureful. The human ego and pleasure are intertwined. The
reward for creating value and being valuable is bioelectricity. This speaks
to the relationship between value and pleasure.
The key to being high value is to be bioelectricity causing (i.e. value
creating). The key to this is being the gender archetype in health, love,
and finance (discussed in Alpha and Beta in Love presentation). One can
do this especially with game as it spikes and maintains high levels of
bioelectricity in the female.
Implications:
Attraction is not a choice. Bioelectricity drives human behavior.
High value males maximize their own bioelectricity through relationships,
finance, and health. Being high value means maximizing your own
bioelectricity and the bioelectricity of others.
Alpha is high value (bioelectricity maximizing) for the male and beta is
high value (bioelectricity maximizing) for the female.
There is a difference between being high value and being rich. High value
means that you maximize bioelectricity in yourself and others (alpha for
male and beta for female). Rich people are not necessarily high value.
There is a distinction between money and value. Those that only pursue
money are not high value even if they have more money than those that
are high value.
The key question that all should ask is, "how do I become high value?"
The answer is alpha for the male and beta for the female.


Would you rather have the most pleasure in the world or the most money
in the world?
The reasoned answer is the most pleasure in the world. Money simply
allows us to pursue our self-interest and have our essential needs met.
The reasoned human maximizes bioelectricity (i.e. pleasure) rather than
money.

Chapter 38:
Attraction
Attraction is the spiking and sustainment of bioelectricity (i.e. pleasure).
Attraction is not a choice. Attraction is a result of being in the presence
of a gender archetype. One can demonstrate the gender archetype
physically or behaviorally. Demonstrating higher value is done by
demonstrating alpha for the male. This amounts to behaving in a
confident and cocky manner coupled with teasing and playful behavior.

Chapter 39:
By using the Positive Tension Model we are intentionally trying to create
positive tension with the girl that is the source of attraction and which
allows for the creation of love. We are not going to break the tension but
merely satisfy the tension through sex and repeat as shown in the model.
Positive Tension Model:

1.
2.
3.
4.
5.
6.
7.
Teasing & playful,

Sexual & direct
Physical escalation
Sex
Cuddle
Commit (tell I love you)
Repeat


Build and maintain positive tension which means spiking bioelectricity
(i.e. pleasure) in the girl. Lead this bioelectricity towards love and turn
into a lifetime of Alpha and Beta in Love.

Chapter 40:
Game
Introduction
Game has to do with creating and sustaining peak levels of bioelectricity.
Game is the ability to generate attraction in female and escalate
physically to sex.
The best model to learn game is the Positive Tension Model. The Positive
Tension Model involves cocky & teasing communication with a girl to spike
her bioelectricity and then not breaking the tension but escalating the
positive tension by escalating physically, handling logistics where you can
pursue sex, and ultimately having oral sex with her and then penetration.
Using the Positive Tension Model we are intentionally trying to create
positive tension with the girl that is the source of attraction and love. We
are not trying to build rapport with the girl but rather we are trying to
playfully break rapport with her. We are not going to break the tension
but merely satisfy the tension through sex and repeat as shown in the
model.


1.
2.
3.
4.
5.
6.
Teasing, playful, sexual, and direct

Physical escalation
Sex
Cuddle
Repeat
Conclusion
into a lifetime of Alpha and Beta in Love. Game should continue in the
relationship with playful, sexual and direct communication daily.

Chapter 41:
Game in Relationship
Game through the Positive Tension Model is essential to maintaining
attraction and passion in a relationship. Simply because you are in a
relationship with a girl does not mean that game stops, in fact game gets
taken to a new level as you begin to integrate more cuddling and I love
you's.
Fulfill your dreams of love and sex. Any time you think of sex or want sex,
be sexual and speak sexually with your girl. This is what alpha males do.
Get her talking about how much she wants your dick and how much she
loves your cum. She will get more comfortable discussing sex openly with
you the more sexual you are with her. Always be moving your encounters
with women towards sex.
Become an attractive man. The type of man a woman wants is a sexual
man that leads the interaction. Don't make her lead. Move your
encounters with women towards sex.

Chapter 42:
Marriage: The Sex Perpetuity
The purpose of pickup is to build a sex perpetuity with a girl. Men that do
not take the time to build relationships with women are not building sex
perpetuities. The ultimate sex perpetuity is known as marriage. The male
simply has to be sure that she is a beta female. Marriage with an alpha
female is not the goal.

Chapter 43:
The Horniness Principle
The alpha male is constantly horny and so is the girl. It is evolutionarily
hardwired into the male and female and bioelectrically automatic.
Horniness is not a choice but is automatic and a part of everyday life for
both sexes. Bloodflow through the genitals is a part of existence. This
constant bloodflow through genitals means continuous horniness as the
nature of life. The girl wants sex all time but relies on the male to initiate
and lead.

Chapter 44:
Assume Horniness
Alphas have a high sex drive and want sex all the time. Some men were
born with lower sex drives than others. For those that find themselves
having sex infrequently, one should assume that they are horny even if
they do not currently feel it and then take action to satisfy that
horniness. In doing so you condition yourself to be horny more often and
in doing so increases your sex drive. Simply by consciously choosing
horniness, you can make yourself more horny. As a rule of thumb, you
should either be busy doing work (i.e. career, building perpetuities,
working out) or you should be escalating physically with your girl towards
sex. When the logistics are not right for sex, you should be communicating
your horniness to your girl via text, phone call, or directly telling her.
Alphas sexualize all interactions with their women and their women love
them for it. Assume horniness and become alpha.

Chapter 45:
A Day in the Life of an Alpha
Male
For those that desire to become an alpha male, it is important to have an
idea or a mental picture of what the life of an alpha male actually looks
like.
7:00 am I wake up naked next to beta female wife. Cuddle and have sex
using morning wood. We tell each other I love you while I am inside of
her.
8:00 am Naked wife is making breakfast. Check work email for IOIs from
buyers as well as appointments for the day. Running a boutique M&A shop
means that time is spent winning engagements as well as working with
buyers on existing engagements to move them towards making and offer
and ultimately closing. There are three calls for the day; one at 11 am
with a potential seller. The business has approximately $10M in revenues
as well as $1.5M in EBITDA. Multiples for businesses that are under $25M
in total enterprise value (TEV) typically get done at a 5x to 5.5x EBITDA
multiple. The two other calls are in the afternoon at 1pm and 2pm and
they are both with lower middle market PE firms that are interested in
the firms engagements. Eat breakfast with the wife. She made eggs, irish
oatmeal, fresh fruit, and black coffee. Delicious.
9:00 am Put workout clothes on and bring wife to the gym inside the
building. Workout for an hour doing bodybuilding, working on the major
masculine muscle groups. After strength training begin to run on the
treadmill. Running generates a natural high. The wife loves to see me
bodybuild; it turns her on.
10:00 am Back to the condo and I strip my wife naked. We take a shower
together and wash each other.


11:00 am I call the seller and discuss our firm and what we do. I ask the
seller about price expectations of the business as well as how
performance has been last year. We get a general agreement as to
multiple range which is 5x to 5.5x EBITDA and fee which turns out to be
6%. After the call I make a note to draft the engagement agreement
which I send to the seller later in the day.
12:00 pm Check Alpha University email account for recent enrollments.
Make video article on game in relationship and discuss the Positive
Tension Model. Upload to YouTube and link to the site for Alpha TV.
1:00 pm Call East coast private equity group that is interested in
manufacturing engagement. Discuss industry interest and if there is any
experience dealing with similar companies. Write down the questions that
the PE firm has; these will be relayed to the seller. Finally, ask what
multiples that they are seeing in the marketplace for deals like this as
well as where they typically come in at. This is going to help in
prioritizing buyers.
2:00 pm Call with Florida based private equity group that is interested in
business services engagement. You find out that they typically come in at
5x but will go higher depending on whether the business has substantial %
of recurring revenue as well as low CAPEX.
3:00 pm I check work emails to see if any buyers have sent an IOI. My
analyst has scheduled another meeting for tomorrow meeting with a
communications company that does $20M in revenues.
4:00 pm I go to a closing in Fort Lauderdale, FL. The purchase price is
$4M with a 6% fee. This means a $240,000 fee. I drive to the bank after
receiving the check and deposit it into my savings account. I am going to
hit my $1M cash target in another few years.
5:30 pm - My wife gets dressed is a sexy skirt and top and we are going
out on South Beach for dinner, drinks and dancing. I am in a dress shirt
and jeans.
6:30 pm We are dining at a high end seafood restaurant. She orders fish
and a mojito. I order the lobster and a vodka tonic with a lime.
8:00 pm We go to a lounge/dance club playing house music. She orders
another mojito and I have another vodka tonic. We drink and dance
together. It is so much fun having a beautiful, sexy and loving wife.


10:30 pm We take a cab back to the condo. Once we get back inside, I
kiss her and take her clothes off. We have oral sex first and then we fuck
on the couch overlooking the city.
11:30 pm We shower, brush our teeth and go to bed
12:00 am We say I love you and cuddle until we fall asleep together.
Life is amazing.
You can see what this looks like visually by watching our show, How to Be
an Alpha Male, on Alpha TV at our website, www.UniversityAlpha.com.

Chapter 46:
The Alpha Code
The alpha male does not cheat on a beta female but is free to be with
other women if the female is not beta. The key is to determine if the
female is beta or not. If she is not beta, then the male should simply
enjoy sex with her and then spend his time looking for a beta female.
When he finds a beta female he should be exclusive with her and enjoy
alpha and beta in love.

Chapter 47:
The Alpha & Beta Lifestyle
The alpha & beta lifestyle is what we should all be working towards. The
alpha & beta lifestyle is characterized by an alpha male and beta female
being married, working out together daily, having sex together daily, the
male having a perpetuity, and both being reasoned/objective
philosophically.

Chapter 48:
Winning the Game
Winning the game means achieving the Alpha & Beta way of life by
becoming alpha, finding and building love with a beta female, and
building one perpetuity with passive income larger than your expenses.
Investing is not an end itself but is towards maximizing quality of life as
represented by owning a perpetuity that generates passive income greater
than ones expenses. The most efficient way to win the game is through
syndicating the perpetuity yourself.
The highest quality of life is the alpha and beta lifestyle. When you have
achieved this, you have won the game.

ALPHA IN FINANCE
Alpha in
Philosophy
Alpha in
Health
Alpha Male
Alpha in
Love
Alpha in
Finance

Perpetuity Science
The standard undergraduate business and MBA curriculum at most

business schools is broken down along siloed subjects such as
accounting, finance, management, operations, and marketing and
attempts to teach students how to be a mid-level manager at a large
corporation for the rest of their lives. Unfortunately, these jobs are
mostly gone, having been shipped overseas or automated. This
undergraduate business and MBA curriculum is thus outdated and
not appropriate for the 21st century when most individuals will have
multiple jobs and roles throughout their careers and lives.
The more appropriate field of study which has yet to make it to
undergraduate and graduate business schools is known as Perpetuity
Science. Perpetuity Science is the body of knowledge, methodologies,
and optimization models related to the building, selling, and buying
of perpetuities. It explains how perpetuities can be built, managed
and exited from to create wealth. Perpetuity science is a paradigm
shift in business and finance education in that it replaces the siloed
subjects traditionally taught in undergraduate and graduate business

schools with a holistic methodology that integrates industry and the
capital markets into one framework.
Instead of a disparate business taxonomy along the lines of
economics, finance, accounting, marketing, etc., we have an initial
taxonomy broken down in relation to the perpetuity, namely:
Build-side the building of perpetuities (entrepreneurs, corporations)
Sell-side the selling of perpetuities (investment bankers, wall street)
Buy-side the buying of perpetuities (private equity, corporate M&A)
Within each of the three, we have various methodologies and
optimization models that may touch on various subjects such as
accounting, finance, economics. By starting with perpetuity science,
the student can better synthesize the various moving parts of industry
and the capital markets.
When first learning about industry and the capital markets, one
should first understand the nature of the perpetuity, which is the
basis for industry & the capital markets. The perpetuity can be
modeled with the following formula:
Perpetuity value = CF / r
Where CF represents the benefit stream associated with the
perpetuity and r represents the discount rate associated with the
perpetuitys risk of receiving the benefit stream.
After understanding the nature of the perpetuity in general, we can
then analyze the perpetuity within each industry. The nature of the
CF, r, value chain, and value being offered will be different. We
investigate each industry according to these variables by building an
index for each industry and then sub-sectors within the industry.


After building the index and sub-sector indices we can then begin
analyzing the value chain and leaders in each part of the value chain.
We then build financial statement models for the leaders in each
section of the value chain and understand the drivers of performance
in each section.
We analyze each leader or target in relation to the phases of
perpetuity in terms of where they are now and the next steps that
they can take to move to the next phase. In doing so, one begins to
think in terms of being a CEO. The CEOs role is to bring the
company/opportunity through the stages of the perpetuity by
building recurring benefit streams (i.e. cash flows) and at the same
time derisking those benefit streams. In doing so, the valuation of the
perpetuity moves from backward looking towards forward looking
and the valuation is thus maximized (based upon a multiple of future
earnings).
The CEO should thus be familiar with perpetuity science and the
phases of the perpetuity.
As the perpetuity changes, the formula for valuing the perpetuity
changes as well. There are five phases of perpetuity building. As we
move through the phases, the role of the owner of the perpetuity
becomes more passive and the valuation becomes larger due to size
of EBITDA increasing, EBITDA multiple increasing, and the discount
rate decreasing. The perpetuity becomes less dependent on the
owner to exist and run as an organizational structure is formed
coinciding with the division of labor, processes are automated, and
revenue becomes recurring.
Phases of the Perpetuity:
I. Syndication (Getting to PMT)


II. Job Shop (From PMT1 to PMT2, PMT3, etc)
III. Perpetuity (From PMTi to CF/r)
IV. Growing Perpetuity (From CF/r to CF/r g)
V. Diversified (Perpetuity 1 + Perpetuity 2)
The goal of Perpetuity Science is the building, growing, management,
exit and buying of perpetuities, so ultimately, while learning about
Perpetuity Science itself, we are also actively looking for:
1.
Perpetuities to create
2.
How to advance a perpetuity to the next phase
3.
Perpetuities that should be exited from
4.
Perpetuities that should be purchased
Capabilities that each business student should have are associated

with the 3 key questions of Perpetuity Science:
Perpetuity Science:
I.
Build side: How to build a perpetuity?
II.
Sell side: How to sell a perpetuity?
III.
Buy side: How to buy a perpetuity?
The key questions are associated with capabilities to be built learning

perpetuity science.

Part I:
Perpetuity Methodology
This text and Investment Banking University are concerned primarily

with how to become an actual investment banker. Investment
Banking University has created a methodology for doing so. This is
the Perpetuity Methodology:
Foundations
of Finance
Buy-Side
Perptuity
Build-Side
Sell-Side

Chapter 49:
Perpetuity Methodology
This text and Investment Banking University are concerned primarily
with how to become an actual investment banker. Investment
Banking University has created a methodology for doing so. This is
the Perpetuity Methodology:
Foundations
of Finance
Buy-Side
Perptuity
Build-Side
Sell-Side
From this methodology, Investment Banking University has built a

body of knowledge which turned into the course, How to Become an
Investment Banker. The book, Investment Banking, is meant to


accompany the course which can be taken online, in the weekend
workshop, or in the month-long training.
When asking the question, How to Become an Investment Banker?,

we are really asking four questions simultaneously:
How to use finance to model the concept in a perpetuity format?
How to physically build the perpetuity?
How to exit the perpetuity?
How to buy a perpetuity?
For each question, Investment Banking University has developed
proprietary methodologies which are the basis for building a
capability which is the ultimate answer to the question.
When the individual implements these models and builds the
capabilities in finance, the build side, the sell side and the buy side,


and then sells a perpetuity, one may claim to have become an
investment banker.

Part II:
Standard of Living
The reason why finance exists is to improve our standard of living.

Finance is a set of concepts, methodologies, and optimization models
applied to value creation.

Chapter 50:
Standard of Living: Perpetuities
& Investment
The Goal
To increase standard of living without sacrificing quality of life.
How to Get the Goal

In order to increase standard of living without sacrificing quality of
life, one is to build or buy perpetuities.
Perpetuity


Perpetuities increase standard of living without sacrificing quality of
life by possessing recurring revenue and automated work processes
to achieve the revenue.
Building Perpetuities
The building of perpetuities is known as being on the build-side;
commonly referred to as entrepreneurship.
Buying Perpetuities
The buying of perpetuities is known as investment or being on the
buy-side.
Selling Perpetuities
The selling of perpetuities is known as the sell-side.
The Science of Perpetuities

The science of perpetuities is known as business while the valuation
and market for perpetuities is known as finance.
The Lab of Finance

The experimentation and optimization tool of finance is known as
Excel.


Excel
Is the scientific computational tool of finance to aid us in the
modeling and valuation of perpetuities.

Part III:
Perpetuities
The main avenue to improve ones standard of living is to build or

buy a perpetuity. Perpetuities generate value on a continual basis for
both the owner and the consumer of the product/service.

Chapter 51:
Perpetuities: Build or Buy
The Goal
The goal is to build/buy at least one perpetuity in order to maximize
standard of living while not sacrificing quality of life.
Demand for Perpetuities

There is always demand for perpetuities and especially by institutional
investors which means that the market for corporate control more
closely mirrors the DCF (intrinsic value) of the perpetuity
(corporation). Institutional investors can pay higher multiples in order
to realize returns over longer periods of time.
Types of Perpetuities
Perpetuities can be created from companies that possess some aspect
of recurring revenue and automated work processes associated with
product creation.

At a high level, types of perpetuities include:

I.
Commodity
i. Durables
ii. Non-durables
II.
Platform
i. Digital
ii. Physical
III.
Content
i. Educational
ii. Entertainment
IV.
Service
i. Analysis
ii. Allocation
iii. Engineering
iv. Logistics
v. Management
vi. Advocacy
vii. Relationship
V.
Infrastructure
i. Private
1.
Real estate
ii. Public
There are corporate perpetuities as well as financial perpetuities.

Financial perpetuities include the market portfolio.
From the types of perpetuities, when applied to the main value

themes of human existence we arrive at industries associated with the
perpetuities (according to Aswath Damodaran at NYU):


When looking at the different industries in which perpetuities are
located, it becomes helpful to understand the nature of the
perpetuities including risk (as represented by the discount rate in the
perpetuity formula), return, growth, margins, multiples, and cash flow:
Risk (discount rate) on the following page:



Return:


Growth:


Margins (Cash flow):


Multiples:

Part IV:
The Science of the
Perpetuity
In order to build perpetuities, one should follow a methodology and

understand the process associated with its creation. We start out with
the basic formula for a perpetuity and then build up to sources and
uses for a specific perpetuity.

Chapter 52:
Business: The Science of the
Perpetuity
Introduction to Business
Business is the science of the perpetuity (buy vs. build)
Perpetuity value = PMT / Discount rate
As you can see we can increase value by increasing PMT (increasing

revenues, decreasing COGS, SG&A) or decreasing the discount rate.
Business as Science
To maximize returns, one either invests in building perpetuities in the
form of positive NPV (net present value) projects or one invests in the
market portfolio when there are no positive NPV projects. If an


opportunity is not positive NPV, one does not invest time, energy or
resources into the opportunity.
Business Methodology
When referring to business, we are referring to the science of the
perpetuity and we can break this down further into a methodology:
I.
Build side Participants, roles, methodologies and models associated

with the creation of a perpetuity
II.
Sell side Participants, roles, methodologies and models associated

with the sale of a perpetuity
III.
Buy side Participants, roles, methodologies and models associated

with the purchase of a perpetuity
The Corporations Two Goals

1.
Become a perpetuity - as characterized by recurring revenue as

automated work processes.
2.
Become a growing perpetuity

Value of growing perpetuity = D1 / r g
g decreases the discount rate

FOUNDATIONS OF
FINANCE
In order to understand the role and work of the investment banker,

we need to first have a strong understanding of the foundations of
finance. This helps us to understand why it is that the investment
banking industry exists and where investment bankers fit into the
bigger picture.
Finance is the science of the perpetuity is broken down into the

following methodology:
IV.
Build side Participants, roles, methodologies and models associated

with the creation of a perpetuity
V.
Sell side Participants, roles, methodologies and models associated

with the sale of a perpetuity
VI.
Buy side Participants, roles, methodologies and models associated

with the purchase of a perpetuity

Part V:
Tracking Value
(Accounting)
As a perpetuity is built, it becomes necessary to track the financial

existence of the perpetuity through time. Accounting is the set of
concepts, methodologies, and models that allows us to do exactly
that.

Chapter 53:
Tracking Value with Accounts
Value
The formula for value is:
Accounts and Accounting

In order to track valuation performance of the perpetuity (i..e
business), companies create accounts for each item of its financial
existence. These accounts are the basis of valuation. Valuation is the
basis of actions taken in a capitalist economy.
Accounts, Accounting & Excel

Excel is the software used to model the accounts of the enterprise
and determine the valuation of the perpetuity (i.e. business).


Account Filings & Public Data
10-K annual
10-Q quarterly
Account Statements: P&L

Income statement (P&L):
Revenues
COGS
Gross Profit
Operating Expenses
EBIT
Interest Cost
EBT
Taxes
Earnings
Account Statements: Balance Sheet

Assets = Liabilities + Shareholders Equity
Total Assets = Total Liabilities + Shareholders Equity


Current Assets + Long Term Assets = Current Liabilities + Long Term
Liabilities + Value of Shares Previously Issued + Retained Earnings
Treasury Stock
Account Statements: Statement of Cash Flows

CF from Operating
CF from Investing
CF from Financing
Statement of Cash Flows is the linkage between the income

statement and the balance sheet.
Get D&A from SCF (CF from Operations) and CAPEX from SCF (CF
from Investing)

Part VI:
Analyzing Value with
Models (Finance)
As the economic existence of the perpetuity continues to grow, one

becomes interested in the value of the perpetuity. Enter finance,
whose concepts, methodologies, and models allow us to understand
the valuation of the perpetuity.

Chapter 54:
Analyzing Value with Models
Analyzing Value
Strategics, financials, and entrepreneurs undertake investment with
the expectation of NPV & IRR. They accept projects that have positive
NPV and IRR higher than the cost of capital. They actively find and
structure positive NPV projects and then match financial products to
them.
The positive NPV project is ideally a perpetuity with the value of the
business being the perpetuity value:
Calculating NPV & IRR is the main analytical work of finance.

*Growth statistic CAGR (Compound Annual Growth Rate) is yearly IRR
From Accounts to Models

To go from accounts (accounting) to a finance number we use
models. We only use Free Cash Flow to determine valuation for major
transactions in a capitalist economy including restructuring, growth,
M&A, and capital raising.
To go from account filings to models, we need to clean the

numbers, scrub the financials, normalize the financials. This
amounts to recasting accounts to get to a finance number. We try to
get to a finance number to get to a valuation. We get to a valuation
to then take actions in a capitalist economy.
*We want more add backs to get to a higher valuation
Modeling
After getting valuation, we can then model the different actions we
can take in a capitalist economy to increase the valuation of the
strategic, financial or entrepreneurial firm.
Modeling in Excel


Just like our account statements, our models are built and exist in
Excel
Analysis of Account Statements

Analysis of account statements (ratio of analysis) has various uses
including from a liquidity perspective, commercial bank perspective,
activity perspective, profitability perspective, and growth perspective.
Ex. 4x-7x debt multiple for lending purposes

Part VII:
Modeling Value
Continuing deeper into the field of finance we now discuss the actual
work associated with understanding the value of a perpetuity. The
work is done by modeling the perpetuity in Excel.

Chapter 55:
Finance with Excel
Finance with Excel

Express your decisions using Excel. Excel is the premier business
computational tool
Implement financial analysis using the tool for financial analysis, Excel
Valuation process
Heart of finance is time value of money and discounting
Excel Concepts Needed for Finance


Write down variables (defining the parameters of the decision)
Absolute or relative values copying (=A1) (=$A$1) and formulas
Functions (=fx(
))
Data tables (sensitivity tables)
Express Decisions with Excel

Implement financial analysis with Excel

Using a Financial Model for Decision Making: The Investment

Decision
Ability to get financing from financial institutions depends on ability
to make a financial model for the new or existing business
The financial model projects future earnings from the organization
Predict the future performance of a firm.
Accounting statements report what happened to the firm in the past.

A financial model predicts what the firms accounting statements
will look like in the future. Start by taking the initial accounting
statements and inputting them into Excel
Difference between accounting and financial model is in the current

assets and current liabilities. In financial model we are concerned only
with operating assets and operating liabilities. We exclude financing
related
Financial model has three components:
Model parameters (value drivers)


Financing decision assumptions (i.e. Mix between debt and equity,
what does firm do with excess cash? Repay debt, payments to
shareholders, or as cash balance)
Pro forma financial statements
Cash in the financial model is a plug. The plug is so that the balance
sheet balances.
Cash = total liabilities and equity current assets net fixed assets
The plug is the balance sheet item that guarantees the equality of the
future projected total assets and future projected total liabilities and
equity. Every financial model has a plug and the plug is almost always
cash, debt, or stock.
Financial Model and Valuation Process:
Assumptions (value drivers)

Existing accounting statements (IS and BS)
Projected financial statements
Free cash flow calculation (FCFs)
Terminal value calculation


Valuation calculation
Sensitivity table for major value drivers to see range of valuation
Once the financial model is complete (i.e. accounting statements have

been projected), we can use the model to:
Value the firm by projecting free cash flows (FCFs)

Determine ability of firm to pay its debts (i.e. credit analysis)
Using a Financial Model for Decision Making: The Financing

Decision
All companies must decide how to finance their activities
Proportion of debt and equity
The discount rate should be appropriate to the riskiness (i.e.

variability or beta) of the cash flows being discounted.
Discount rate is also called interest rate, cost of capital, opportunity

cost.


Compute annualized IRR
The cost of capital of an investment is related to the risk of the cash

flows of the investment. The relationship of individual asset returns to
the risk is called the security market line (SML). You can use SML to
get the discount rate for individual investments. The SML is used for
private companies.
The cost of capital of an organization is related to the risk of the

combined riskiness of the investments in the portfolio. The
relationship of portfolio returns to the risk is called the capital asset
pricing model (CAPM). You use CAPM to get the discount rate (i.e.
cost of capital). When the investment is a public security, you use
CAPM since the buyer of the security will have a portfolio to diversify
away risk.
Portfolio risk is associated with statistics.
Wealth Maximizing Decisions

Investment decision What is it worth? NPV of strategic alternative
Financing decision What does it cost? IRR of financing alternative
Cash is King


Wealth maximization has to do with maximizing cash. Cash in the
context or organizations is known as cash flow.
Return is a word for cash flows
Cash Flow Definition (FCF)

Profit after taxes
+ Depreciation (noncash expense)
+ Change in net working capital (- increase in current assets and +
increase in current liabilities)
Capital expenditures (CAPEX)
+ After-tax interest payments
= Free Cash Flow (FCF)
Role of the Finance Professional
The role of the financial professional is to quantify the cash flows and
risk of strategic alternatives available to the individual or
organization.
Investment bankers compute the IRR and NPV of strategic

alternatives.
Capital Markets

The capital markets is made up of cash flows and discounts
Capital Markets and Information

Information is valuable in determining investment and financing
decisions in the capital markets. Overall, markets are weak form
efficient meaning that their valuations reflect previous stock price
performance (i.e. stock price data) and are sometimes semistrong
meaning that valuations incorporate all public information. Capital
markets are not strong form efficient meaning that valuations do not
reflect private information.
Multiple Investment and Financing Decisions: Portfolio

When there is multiple investment and financing decisions, we have
something called a portfolio. The discount rate can be decreased by
diversifying with a portfolio. When the discount rate is decreased, the
valuation of the portfolio increases as cash flows have maintained
more value.
A corporation/organization is simply a portfolio of sources and uses
Modeling a Strategic Alternative

Put all variables (value drivers) at the top of the spreadsheet
Never use a number where a formula will also work


Blue for hard codes
Black for links and outputs
Finance: Exchanging Value Through Time

Assets have a time dimension
Future value function =FV( )

Value in the future of a sum of money compounded into the future
Present value =PV( )

Value today of future payments discounted to present
Net present value (NPV) =-First payment + NPV( )

Incremental wealth increase earned by a strategic alternative. NPV
tells you economic value of an investment today. Always use NPV in
the investment decision.
Internal rate of return (IRR) =IRR( )

Compound rate of return earned by a strategic alternative
VIII. Rate of Return vs. Cost of Capital

What is the assets IRR?
Compare to the cost of capital (Effective annual interest rate which

is the annualized IRR used to compare financing alternatives aka
Compound Annual Growth Rate (CAGR))
Cost of Capital
Calculate IRR of financing alternatives to determine cost of capital
Need to get IRR in annual terms to facilitate comparison. May have to

start with monthly IRR then annualize
Annualized IRR = (1 + Monthly IRR)^n-1
Finding a Value in a Financial Model

When we want to find a value by setting a particular value to another
cell, we use:
Goal seek Alt, A, G

Financing Alternatives: Loan Amortization

=PMT( )
To calculate the debt payment per period
=IPMT( )
To calculate the interest portion of the payment of debt
=PPMT( )
To calculate the principal portion of the payment
VIII. Financing Alternatives: Direct Comparison
IRR of differential cash flows tells you the cost of the option
IRR tells you the cost of the financing alternative
CAGR is Effective Annual Interest Rate (EAIR) to allow for comparison
Analyzing the Strategic Alternative: Sensitivity Table

Data Table is Alt, A, W, T


Tells you how output changes with incremental changes in the inputs
(i.e. variables)


The Financing Alternative: Nominal vs. Real Cost
In determining the true cost of a financing alternative, it is important
to use the real rate of interest which incorporates inflation. The real
rate of interest is determined by using the real cash flows.
Inflation acts as a discount rate
Strategic Alternatives Analysis

For each strategic alternative, compute the NPV and IRR, then have
decision rules for investing including:
Minimum NPV
Hurdle rate (IRR)
You are using NPV and IRR to make investment decisions but you
need the discount rate. The discount rate is associated with the
financing decision
Cash Flows and Risk

Are cash flows riskless (i.e. treasury bills) or are they risky (i.e. market
portfolio)


Cost of Capital and Opportunity Cost
The returns of similar investments should be used as the cost of
capital
The Discount Rate

An organizations discount rate is the cost of equity and cost of
debt. The cost of the total capital structure is known as the Weighted
Average Cost of Capital (WACC):
WACC = rE* (E/(E+D)) + rD (1-Tc)*(D/(E+D))
Value of Equity
The value of equity is the present value of all future dividends
Sources & Uses
Uses
Sources
Free Cash Flows WACC

CAPM to get cost of equity
Accounting Statements: Statement of Cash Flows

The purpose of the statement of cash flow is to explain the increase in
the cash accounts on the balance sheet as a function of the firms
operating, investing, and financing activities.
Valuation Methods: Total Enterprise Value (TEV) vs. DCF

Market valuation:
Total Enterprise Value (TEV) = MVE + MVD + Preferred Cash
2. DCF Method (intrinsic value) = PV(FCFs) @ WACC + liquid assets
Accounting Value vs. Finance Value

Accounting value of firm is backward looking and thus incorrect to
use in valuation. Finance value is forward looking and consistent with
the fact that the owner of an organization or security has claims on
the future cash flows of the business.
FCF and DCF

Free cash flow (FCF) calculations is DCF
Portfolio Analysis and the Capital Asset Pricing Model (CAPM)

Discount rate is a measure of risk associated with:
Horizon
Safety


Liquidity
We get the discount rate by analyzing the distribution of an

investments returns. We get the standard deviation which is a
measure of variance in returns. Standard deviation is a component to
finding the discount rate:
=STDEVP( )
What does the frequency distribution look like?
Determine risk measure known as beta and plug this into CAPM to
get the discount rate of equity. Derive the cost of debt and then
calculate WACC to get the discount rate of the firm.
Ex Ante vs. Ex Post Returns

Ex Ante is the expected return
Ex Post is the actual return

VIII. Statistics for Portfolios
=Average( )
To get mean return
=Varp( )
To get variance of returns
=Stdevp( )
To get standard deviation of returns
=Covar( )
To get covariance between two sets of returns
=Correl( )
To get correlation between two sets of returns
Trendline (regression) click on points of XY graph and right click to

Add Trendline with linear regression and display equation and Rsquared on chart
Portfolio Returns and The Efficient Frontier

Statistics are used to determine acceptable and unacceptable
portfolios


Diversification lowers standard deviation of the portfolio
Are the returns correlated? If no, then add security to the portfolio
(i.e. diversify)
The efficient frontier is the set of all portfolios that are on the
upward-sloping part of the graph starting with the minimum variance
portfolio (i.e. the market portfolio). Choose the portfolio that is on the
efficient frontier.
The Efficient Frontier and the Optimal Portfolio

The best investment portfolio is made up of the risk free asset and a
risky asset representing the market (i.e. the market portfolio)
Determine the market portfolio (the portfolio with the highest

attainable sharpe ratio)
Market portfolio is the best combination of risky assets available to

the investor
Security Market Line & CAPM

The security market line says that the expected return of an asset is a
function of the assets beta (i.e. sensitivity to the market).
Only relevant risk is systematic risk since the investors will all be
diversified
Security Market Line & Investment Performance

diversified
Security Market Line & Investment Performance

diversified
VIII. Security Market Line & Investment Performance Continued
Investment performance:
Risk adjusted performance; excess returns?

Risk Adjusted Performance

Market portfolio proxy is S&P 500
Beta is measure of riskiness of security
Alpha measures excess return
Market portfolio proxy is S&P 500
Beta is measure of riskiness of security
Alpha measures excess return
It is about investment performance versus the risk involved in the

investment
CAPM & Investment Performance

Use CAPM to get the discount rate of equity and compare to cost of
financing alternatives


Is there risk adjusted overperformance or underperformance?
Is performance commensurate with risk?
Excess Return
Excess return is the investments spread over the one year treasury
(i.e. risk free rate)
Use regression equation to determine if underperformance (negative

alpha) or overperformance (positive alpha)
When regressing assets returns against the market portfolio, alpha

measures excess returns over the market portfolio
Beta & R^2

High beta is an aggressive stock
Low beta is a defensive stock
R^2 is percentage of variability that is market related risk when

returns are regressed on the market portfolio

Diversification increases R^2 of the portfolio and decreases

nonsystematic risk
Alpha and Efficient Markets

In efficient markets, there is no alpha and investments earn their riskadjusted return
CAPM and the Cost of Capital

CAPM = rf + Beta [ E(rm) rf]
In CAPM, use Beta of asset to calculate cost of equity
WACC is the discount rate based upon the capital structure of the
investment
Valuing Securities in Efficient Markets

Market efficiency and the role of information in determining asset
prices
Publicly available information should be reflected in market price

Chapter 56:
Financial Statement Modeling
Financial statement modeling refers to the creation of a standalone

operating model for a company. The operating model is built using
historical performance (i.e. historical financial statements). We use the
operating model to see pro forma performance of a company given
certain assumptions. These pro formas are the basis for decision
making within the corporation.
Financial statement modeling best practices:

Blue is hard codes, black is formulas
Be consistent with millions and billions (keep conventions the same)
Footnote everything in presentation
Keep your model simple (1,000 cells is better than 10,000 cells)
Financial Modeling Steps:

1.
Spread historical financial statements


a.
3 to 5 years history for IS, BS, and SCF
b.
Public information for company 10K, 10Q
c.
If private company, get audited financial statements provided by

company
2.
Adjust for non-recurrings
3.
Build cases into the operating model
a.
Best case
b.
Base case
c.
Worst case
d.
Disruption case
4.
Build assumptions based upon historical trends in assumptions tab

(margins and growth rates)
5.
Project LIBOR and interest rates
a.
Spread over LIBOR
b.
LIBOR is the base that banks use to price spread their loans to make
money (called L)
c.
3 month LIBOR is the standard reference
6.
Project IS and BS & two items on SCF (D&A and CAPEX (before gross
PPE on BS))
a.
Maintenance CAPEX vs. Discretionary (growth) CAPEX
7.
Separate debt and interest schedule (calculate debt and interest

schedule before calculating BS items for revolver, term loan, and
unsecured debt)
8.
Project Working Capital
a.
Days payable & Days receivable (360 day method)
9.
Project rest of SCF (all items pulled from IS or BS)
a.
AR goes up, need negative sign on SCF
b.
AP goes up, need positive sign on SCF
c.
BS cash is ending cash position on SCF
10. Calculate paydown/drawdown for revolver as minimum (Min

function) of CF before revolver and beginning revolver balance


11. Operating model is done when you finish SCF. Operating model
check (zero for Assets (Liabilities + Owners Equity)
NEXT STEP IS TO USE THE OPERATING MODEL FOR VARIOUS

ANALYSES INCLUDING ORGANIC GROWTH & INORGANIC GROWTH
(STRATEGIC ALTERNATIVES). THE KEY QUESTION TO ASK IS: WHAT IS
THE BEST STRATEGIC ALTERNATIVE FOR THE CORPORATION (I.E.
HOW TO BE A GROWING PERPETUITY OR PARENT COMPANY OF
MULTIPLE GROWING PERPETUITIES)?

BUILD-SIDE
Related to the intentional creation of perpetuities following a

methodology, we have what is known as the build-side. The buildside is associated with the creation and management of perpetuities.
Participants on the buy-side include startups, growing businesses,
and established corporations.

Part VIII:
Perpetuity Analysis
On the build-side, we are ultimately concerned with the creation and

management of perpetuities. We first explore the perpetuity analysis,
perpetuity building process/timeline (including sources and uses) and
then move towards a methodology for perpetuity management.

Chapter 57:
Perpetuity Science
The AltQuest Group (www.AltQuest.com) proprietary methodology is

known as Perpetuity Science, Science of the Perpetuity, or the Build
Side. Perpetuity science explains how perpetuities can be built,
managed and exited from to create wealth. As such, it inherently has
an owner focus rather than simply a capital markets focus which is
manifested by the dual goals of decreasing the owners active
involvement in the day to day of the business and the maximizing of
valuation.
Perpetuity science is where entrepreneurship, strategy & finance
come together. It a field of study complete with a body of knowledge,
methodologies, and optimization models towards improving the
individual's quality of life by the building of a perpetuity that
accomplishes two dual goals:
1. ever decreasing involvement of the perpetuity owner in the
perpetuity
2. ever increasing valuation of the perpetuity
Perpetuity science is ultimately about maximizing quality of life rather
than wealth by building perpetuities with recurring revenue streams

that are not reliant on the daily participation of the owner of the
perpetuity. We can take a look in a visual format of what we are trying
to accomplish:
As you will notice, the owners direct involvement in the perpetuity

decreases as the perpetuity moves through the phases of
development. Also, valuation increases as the perpetuity moves
through the phases of development for three reasons; EBITDA
increase, EBITDA multiple expansion, decrease in discount rate.
The key question is: How to build a perpetuity that minimizes the
daily involvement of the owner and at the same time maximizes its
valuation.
Though applicable to all industries, the focus industries of perpetuity
science are thus those that do not require significant capital outlays
which could otherwise be used to invest in a diversified portfolio.
These industries include:


1.
Technology
2.
Media
3.
Education
4.
Business Services
As you will notice, these industries have to do with knowledge

working and benefit from information arbitrage and/or network
arbitrage. While it is possible to structure arbitrage in other industries
by preselling various products and services, knowledge working
industries offer genuine information/network arbitrage as well as
allowing for recurring revenue business models rather than being one
time commodity or project-based. You will also notice that margins
are much larger in knowledge working industries which translates into
larger EBITDA multiples. Thus, the owner of the perpetuity is
rewarded multiple times more for the value that their perpetuity
creates than they would for commodity or project-based
syndications.
Given that the human has a limited amount of time on earth and
limited resources within which to invest (energy, capital), one should
invest their time in knowledge working industries and build
perpetuities there first. Only after a perpetuity has been built in a
knowledge working industry should the owner explore other nonknowledge related industries.
One should thoroughly understand these industries overall and their
sub-sectors when syndicating a new perpetuity. We will go into these
industries in detail after explaining the perpetuity building process,
the perpetuity management process, and perpetuity exit process.


The science of the perpetuity can be broken down into three
sequential categories including:
I.
Perpetuity Analysis
II.
Perpetuity Building
III.
Perpetuity Management
IV.
Perpetuity Exit

Chapter 58:
Market Analysis
GDP
Industry Spend


Sub sector spending
Sub sector spending by product

Chapter 59:
Value Chain Analysis
General
Industry
Sub-sector
Sub-sector by product

Chapter 60:
Gap Analysis
General
Industry
Sub-sector
Sub-sector by product

Chapter 61:
Product/Platform Analysis
Base
Mods

Part IX:
Perpetuity Building &
Management
On the build-side, we are ultimately concerned with the creation and

management of perpetuities. We first explore the perpetuity analysis,
perpetuity building process/timeline (including sources and uses) and
then move towards a methodology for perpetuity management.

Chapter 62:
Perpetuity Building
To begin our study of the perpetuity, we can observe the formula for
the perpetuity:
Perpetuity Value = CF / r
To understand the drivers of value for the perpetuity which include:

Multiple EBITDA (size, % recurring, growth rate) which is represented
by CF in the formula
EBITDA multiple (peer group, level of disruption)
Discount rate (% recurring, diversification) which is represented by r in
the formula
As the perpetuity changes, the formula for valuing the perpetuity

changes as well. There are five phases of perpetuity building. As we
move through the phases, the role of the owner of the perpetuity


becomes more passive and the valuation becomes larger due to size
of EBITDA increasing, EBITDA multiple increasing, and the discount
rate decreasing. The perpetuity becomes less dependent on the
owner to exist and run as an organizational structure is formed
coinciding with the division of labor, processes are automated, and
revenue becomes recurring.
Perpetuity Building Process

I. Syndication
A. Perpetuity Concept
B. Perpetuity architecture
C. Perpetuity engineering
1. In house
2. Outsource
3. White label customization
D. Perpetuity marketing
E. Perpetuity Monetization
F. Value Tracking
G. Value Analysis
II. Job shop
A. Diversification of labor
B. Diversification of clients/users


C. Operations automation
D. Marketing automation
III. Perpetuity
IV. Growing perpetuity
V. Diversified
Phases of Building the Perpetuity:

I.
Syndication
II.
Job Shop
III.
Perpetuity
IV.
Growing Perpetuity
V.
Diversified
PHASE I: SYNDICATION - From concept to platform
The key here is taking a concept that has a large enough total
addressable market and turning it into a single sale as represented by
PMT. This demonstrates product market fit between the minimum
viable product/platform and allows the owner to invest additional
time/energy/resources into turning the syndication into a perpetuity.
The syndications value to the owner will be related to the NPV/DCF
value, however, since there is an inefficient market for syndications,
the value is going to be discounted at a high rate, in the 80% to 100%


range. This means an implied beta of 12.2. There is no multiple here
since the syndication does not have a long enough history of
operations. The syndication is entirely reliant on the owners active
involvement. If the owner no longer works in the syndication, the
syndication will cease to operate.
Syndication value = PMT
EBITDA (size, % recurring, growth rate) Drivers:

Minimum total addressable market
Minimum viable product
Minimum viable content
Minimum viable service
Minimum viable platform
Minimum viable marketing
EBITDA multiple (peer group, level of disruption) Drivers:

Capabilities
Markets
Discount rate (% recurring, diversification) Drivers:

Minimum viable capital


Minimum viable return
Sales:
EBITDA:
Discount rate: 80%
Implied beta: 12.2
Multiple: NA
Perpetuity reliance on owner: 10/10
PHASE II: JOB SHOP (SMB) - Monetizing jobs off of platform
The key here is taking a syndication that has demonstrated

product/market fit and turning it into a job shop with multiple
projects as represented by PMT1, PMT2, PMT3. This demonstrates
product market fit between the minimum viable product/platform
and allows the owner to invest additional time/energy/resources into
turning the syndication into a perpetuity. The syndications value to
the owner will be related to the NPV/DCF value, however, since there
is an inefficient market for syndications, the value is going to be
discounted at a high rate, in the 80% to 100% range. This means an
implied beta of 12.2. There is no multiple here since the syndication
does not have a long enough history of operations. The syndication is
entirely reliant on the owners active involvement. If the owner no
longer works in the syndication, the syndication will cease to operate.


The owners primary responsibility is to first turn the company into a
project or job shop (PMT representing a given job). The company is
looked at solely as the sum of the value of its projects/jobs meaning
that the valuation of the company is backward looking. The formula
looks like the following:
Project/job shop = PMT1 + PMT2 + PMTi.

Addressable market monetization
product completion
content completion
service completion
platform completion
marketing completion

Capabilities
Markets

Minimum viable capital


Minimum viable return
Sales: <$5M
EBITDA: <$500k
Discount rate: 50%
Implied beta: 7.6
Multiple: 3x-4x EBITDA
PHASE III: PERPETUITY (Lower Middle Market) - from separate jobs to

capabilities


From here, the owner is to turn the company into a perpetuity as

characterized by predictable, preferably recurring revenue. This can
be done by building an organizational structure with division of labor,
automated processes with technology, and a business model that is
recurring by nature. When this is accomplished, the valuation
becomes forward looking and the company is modeled following the
perpetuity value formula:

Addressable market penetration
Product differentiation
Content differentiation
Service differentiation
Platform differentiation
Marketing differentiation

Capability differentiation
Market share


Capital reinvestment
Sales: $5M to $150M

EBITDA:
Discount rate: 15% to 25%
Implied beta: 4.5
Multiple: 4x 7x EBITDA
Owner activity: 5/10
PHASE IV: GROWING PERPETUITY (Middle Market to Upper Middle

Market) - from capabilities to scaling capabilities



Next the owner is to turn the perpetuity into a growing perpetuity.

This can be accomplished by increased levels of paid/unpaid
marketing and scalable technology platform as part of the core
business. The valuation of the company now has to incorporate a
growth factor as seem in the formula below:
Value of growing perpetuity = D1 / Discount rate g


Market share


Sales: $150M to $500M & $500M to $1bn

EBITDA:
Discount rate: 15%
Implied beta: 2
Multiple: 7x-10x
Owner activity: 2/10
PHASE V: DIVERSIFIED (SMALL CAP, MID CAP, LARGE CAP) - from

scaling capabilities to new perpetuity building/acquisition



Finally, the owner is to diversify either organically (new product, new

business) or inorganically. If the diversification is organic, the new
product/business will naturally move through the phases of:
1.
Project/job shop
2.
Perpetuity
3.
Growing perpetuity
Since the valuation is forward looking, it has to incorporate the new

product/business financial performance. Since the parent company is
now becoming diversified, the discount rate will now decrease which
adds value to the parent company. The formula for the parent
company now becomes:
Diversified parent company = (D1 / Lower discount rate g) + (PMT1

+ PMT2 + PMTi)
As the new product/business moves through the phases of

development, the parent companys discount rate will continue to get
lower. The formula for the company becomes:


Diversified parent company = (D1 / Lower discount rate g) + (PMT /
Lower discount rate)
Ideally, the goal is to build a diversified parent company with a

portfolio of growing perpetuities so that the parent company itself
remains a growing perpetuity. The formula for the parent company
looks like this:
Diversified parent company = (D1 / Lower discount rate g) + (D1 /

Lower discount rate g)


Market share


Sales:
EBITDA:
Discount rate: 6%
Implied beta: 1
Multiple: 11x-13x EBITDA

Chapter 63:
The Purpose of the Company

Companies exist to create value
How Companies Create Value

Companies create value by investing capital at rates of return that
exceed their cost of capital. This is the principle of value creation.
The only thing that differs across companies is the implementation

(i.e. different asset and capitalization mix)


Strategy & Finance
Valuation Drivers

The Role of the CEO


Valuation

Perpetuity Management with Discounted Cash Flows
Growth or Restructuring
Perpetuity Management Process



Measuring Value Added: ROIC vs. Market Return
Measure return on invested capital (after-tax operating profits divided

by capital invested in working capital, PP&E) and compare it with
stock market returns
Measuring Value Added: Economic Profit & NPV
Economic profit = ROIC spread % over cost of capital x invested

capital
The objective is to maximize economic profit. When the company is

larger, one should use Net Present Value (NPV) which calculates
economic profit in a more robust and flexible fashion.
Valuation in the Public Markets
Valuation in the public markets has investors paying for the

performance they expect the company to achieve in the future;
investors ultimately end up paying more since their valuations are not
based upon the past or cost of the assets.
The CEO should endeavor to have his company in the public markets
since the largest multiples are applied in valuation
Real Markets & Financial Markets
When a public company, the CEO has to both maximize the intrinsic
(DCF) value of the company and manage the expectations of the
financial market
Differences between actual performance and market expectations and

changes in these expectations drive share prices. The delivery of
surprises produces higher or lower total shareholder returns
Perpetuity Planning & Control (i.e. Management)
Planning & control system should be put in place to monitor the NPV
of every business unit and summed to get the NPV of the
corporation. Economic profit (i.e. NPV) targets set annually for next
three years, progress monitored monthly and managers
compensation tied to economic profit against these targets
Value Metrics
Metrics are to drive decisions and guide all employees toward value
creation.


Perpetuity Planning & Control (i.e. Management) in Practice
Corporate management sets long-term value creation targets in

terms of market value of a company or total returns to shareholders
(TRS)
Strategic alternatives valued in DCF (i.e. NPV)
Intrinsic value of chosen strategic alternative translated into short and
medium term financial targets and then targets for operating and
strategic value drivers
Performance assessed by comparing results with targets on both

financial indicators and key value drivers. Managerial rewards linked
to performance on financial measures and key value drivers
Value Metrics: Market Value Added & Total Return to

Shareholders
Market Value Added is the difference between the market value of a

companys debt and equity and the amount of capital invested.
Measures financial markets view of future performance relative to
capital invested in business.
Total Return to Shareholders measure performance against the

expectations of financial markets and changes in these expectations.


TRS measures how well a company betas the target set by market
expectations
Value Metrics: DCF vs. Earnings Multiple
DCF is intrinsic value. Earnings multiples are market values.
Earnings alone is inadequate without understanding the investment

required to generate the earnings. Should know ROIC
Cash Flow
Cash flow equals the operating profits of the company less the net
investment in working capital and fixed assets to support the
companys growth.
Perpetuity Management Capability
1.
Set aspirations and targets
a.
An inspirational statement of intent
i.
State that the goal is to maximize shareholder value
ii.
Vision is To create shareholder value by being the worlds premier

_____ company from a strategic and financial standpoint
iii.
States what businesses we are in and what we aspire to be known for

b.

Value-linked quantitative target
i.
Mark the milestones toward their aspiration with value linked targets
ii.
Target share price (i.e. double every three, four or five years)
iii.
Target key value drivers (ex. Financial (EBIT) or operational (ex.

Number of customers)
iv.
Calibrate proposed targets against historical performance to observe

how large a gap needs to be closed
2.
Manage the corporate portfolio - Determine to what extent its

current portfolio of businesses will help meet its aspirations.
Determine the strategic advantages of the parent corporation.
Improvement opportunities continuously. Manage growth pipeline
a.
i.
b.
i.
Strategic theme analysis

Which capabilities does the corporation possess?
Value management process
Do DCF to quantify impact of value creation levers: investor
communication, internal improvements, disposals, growth
opportunities (organic or inorganic), and financial engineering
c.
i.
Three horizon analysis

Ensure that portfolios always include businesses in all three stages of
development
1.
Horizon 1: core businesses
2.
Horizon 2: emerging opportunities (have revenues but no CF)
3.
Horizon 3: future options (initial activity has begun)
3.
Orient the organization toward value
a.
Having the right organization in place ensures companys value

creation aspirations and strategy are translated into disciplined
execution
b.
i.
Hard areas:
Structure (who reports to whom), Decision rights, people (key jobs),
and coordination mechanisms (how do things get communicated or
done)
c.
Soft areas:

i.

Beliefs (how much potential people believe exists in market), values
(what people think is important, and leadership style
d.
Should be clearly designed performance units and individual

accountabilities
e.
Organization to then set targets, measure performance, and reward

success
4.
Understand value drivers
a.
What elements in day to day operations have the most impact on

value. These are value drivers
b.
Prioritizing these drivers and thus determining where resources

should be placed or removed is key
c.
Value driver is a performance variable that has impact on the results

of a business (ex. Production effectiveness or customer satisfaction)
d.
The metrics associated with value drivers are called key performance
indicators (KPIs) (ex. Capacity utilization or customer retention rate)
e.
KPIs used for target setting and performance measurement
f.
Value drivers should be directly linked to shareholder value creation

and cascade down through the organization
g.
Each business unit should have its own key value drivers and KPIs
h.
Managers should monitor these numbers regularly to obtain an

overview of business performance
i.
5 to 10 KPIs
j.
Value driver definition starts with creating value trees linking

operating elements of business with value creation, then prioritizing
which drivers have greatest impact on value (use DCF to determine
sensitivity of business units value to changes in value drivers), then
institutionalizing the value drivers by incorporating them into the
targets and scorecards of business performance management
5.
Manage business performance - Manage each business to attain

results consistent with top-down aspirations by process of setting
targets for a performance unit and regularly reviewing progress
against them
a.
Create business unit strategy to maximize value


b.
Set value-linked targets
i.
Translating strategy into specific quantitative goals
ii.
Agree on a target, corporate center and business unit formalize

commitment in a performance contract. Contract contains milestones
and quantitative and qualitative goals that business unit needs to
achieve through performance period.
iii.
Targets should cascade through organization (CEO gets financial

indicators, business unit head gets key performance indicators,
managers get operational levers)
c.
Review performance
i.
Structured calendar of performance reviews
ii.
Scorecard incorporating value metrics and KPIs from value driver

analysis
iii.
Custom scorecards in each business unit
6.
Manage individual performance
a.
Link managerial rewards to behavior that creates overall shareholder

value
b.
People performance management includes target setting and

performance reviews. These targets should link to KPIs.
c.
CEOs get TRS, MVA; Business unit manager gets Economic profit;
Functional manager gets operating profit and ROIC; Mid
level/frontline gets operating value drivers
Perpetuity Lifecycle
Product development includes market analysis, product design,

invention and testing
Market introduction initial release of the product and usually
followed by high levels of advertisement


Rapid Growth sales growth accelerates with increasing sales year
over year
Maturity phase the sales growth rate approach the average growth
rate of the economy
Decline demand will slowly decline as newer inventions make it
obsolete
Valuation Process: Discounted Cash Flows
1.
Forecast Free Cash Flow
a.
Recasting financials from accounting statements to financial. This

process is also called normalizing the financials. Normalizing strips
out non-recurring events and non-cash charges which are not part of
normal operations of the company. These changes help you get to
Free Cash Flow (FCF)
i.
Nonrecurring and non-cash charges usually found in MD&A or

financial footnotes (above or below operating income line? abnormal
expense (reverse expense) or income (reverse income) and what time
period does it impact?)
ii.
Must tax effect when normalizing earnings (expenses reduced tax

expense and gains increased tax expense) = Non-recurring item x (1tax rate)
iii.
Want to get to EBITDA = earnings before taxes, depreciation &

amortization (operating income + D&A)
iv.
D&A is from the Income Statement
b.
Note historicals
c.
Project financials using assumptions
2.
Estimate Cost of Capital
a.
Perform WACC analysis

b.

Develop target capital structure
c.
Estimate cost of equity
3.
Estimate Terminal Value
a.
Use either cash flow multiple (i.e. EBITDA multiple) or growth rate
method (i.e. Gordon Growth method)
b.
Discount it back to present value
4.
Calculate results
a.
Bring all cash flows to present
b.
Perform sensitivity analysis
c.
Interpret results
Forecast Free Cash Flow
FCF = EBIT Taxes Increase in working capital capital expenditures

+ Depreciation and Amortization
DCF projects 5 years of FCF plus a terminal value

Terminal value is a perpetuity
Gordon growth multiple vs. terminal multiple. Use terminal multiple
Terminal multiple = (LTM multiple from comps) x EBITDA
Estimate Cost of Capital

Cost of capital (aka discount rate) is an investors required rate of
return


The cost of capital should match the cash flows to be discounted
Discount rate in two forms; cost of equity and cost of debt. Combined
on balance sheet so discount rate is weighted average cost of capital
WACC is the required rate of return for the overall enterprise. This is
simply a weighted average of the required rates of return for each of
the different sources of capital (equity and debt)
Perform WACC analysis
WACC = [Re x (E/(E+D)] + [(Rd x (D/(E+D)) x (1-T)]
Cost of equity calculated using the capital asset pricing model

(CAPM)
Re = Rf + Beta (Rm Rf)
Beta is measure of volatility or systematic risk of a security compared

to the market as a whole (ex. S&P 500). Firms use 2 year to 5 year
betas
Un-levering and relevering beta. First unlever beta and re-lever with
the subject companys capital structure (i.e. debt to equity ratio)

Bu = BL / [1 + D/E x (1-T)]
BL = Bu x [1 + D/E x (1-T)]
Cost of debt calculated by averaging (weighted) the coupon rates of

its various pieces of debt and multiplying it by the tax shield (1 tax
rate)
Valuation Process: Comparable Companies
Based on how similar companies trade in the public markets

Select comp universe
Spread comps
Same time frame (Last twelve months)
Normalize numbers
Back out non-recurring items
Treasury stock method to calculate share price
Select multiples for implied valuation
Apply multiples to target to get valuation


Valuation Process: Comparable Transactions
Based on how similar transactions occurred. Control premiums of 2025%

Select comp universe
Spread comps
Same time frame (Last twelve months)
Implied valuation multiples
Market premiums
Select multiples for implied valuation
Apply multiples to target to get valuation
Modeling Value: Financial Statement Modeling
Spread historical financial statements and adjust historical income

statement for onetime, extraordinary and non-recurring items
Derive historical ratios, trends and variables
Project financial statements
Integrate financial statement projects with revolver

Chapter 64:
Valuation Methodologies
1.
Public Company Valuation
2.
Comp Companies Also known as trading comps. Management

team gives you 1 to 2 years projections or equity research comp
reports to get forward multiples (x Revenue or x EBITDA ) which may
be used as the basis for this valuation. You can get comps from the
general overview as it will discuss the targets comps in the 10K. Find
comps with good multiples to then tell your story to the marketplace
to then get a certain valuation.

a.

Select the universe of comparable companies Choose 7, 8, 10
comps, need their 10K, 10Q, analyst reports to get TEV for each comp
then divide by line item to get multiple.
b.
Locate financial information on comp companies Information must

come from latest filing (10K or 10Q). Print out 10K, 10Q, analyst
reports.
c.
Spread key financial information, ratios and multiples Calculate TEV

(in comp spread tab). To get MVE, use TSM method. TSM =
Exercisable options outstanding x (share price strike) / share price.
d.
Benchmark comp companies Get the multiple that the company is

trading at for each metric for each comp and get mean and median
of comps for the metrics (ex. TEV/EBITDA)
e.
Determine implied valuation Multiply mean and median multiple x

the revenue or EBITDA to get the valuation range for your target
company.
Notes:
The better the company, the higher the multiple and the better
valuation you get.
In IB/PE/CorpFin, you need to know comp companies and transaction

comps. Here are the comps in your sector
Higher multiple because

Operating in better markets, better operations


The multiple tells you which company is better, margin analysis tells
you why they are better.
Sell side key question:

Which comp would you use to guide potential buyers?
3.
Precedent Transactions comp transactions
a.
Select universe of comp transactions
b.
Locate deal-related and financial information Need press release of

the deal, 8K, 10K, and 10Q. Type of payment: cash, stock, cash &
stock.
c.
Spread financial information, ratios and multiples Get transaction

TEV (implied) & transaction MVE (implied)
d.
Benchmark precedent transactions
e.
Determine implied valuation
Notes:
20% to 25% control premium paid with the transaction multiple being
an implied one based upon the valuation.
Determine whether the market is good or bad based upon whether

people are paying good premiums (control premiums).
When a transaction occurs, update client on the latest transaction to

show them impact on the control premiums being paid and implied
multiple as well.
Point to the transaction comps that have the highest control

premium.
4.
Discounted Cash Flow (DCF)
a.
Spread historical financial statements (input historicals) and derive

historical ratios, trends and variables (drivers of future performance;
margins and growth rates). Project financial statements (proforma).
Revolver modeling to link IS, BS, and SCF
b.
Project free cash flow (FCF)
c.
Determine Weighted Average Cost of Capital (WACC) Discount rate
Cost of equity:
Rf = 10 year treasury
Market risk premium = Rm Rf. Refer to Ibbotson. Ultimately this is
S&P returns over 70, 80, or 90 years
Beta = Levered beta of comps to unlevered median and mean of
comps (unlevered beta); should be .5 to 2.5; 2 year to 5 year betas
(taking out capital structure and relever to actual capital structure.
With beta, we are putting capital structure on unlevered beta mean
and median of comps to calculate WACC of own company.
Cost of debt: weighted average of tranches of debt tax effected;

found in 10K. Rates from the notes. If private company, get from


clients the tranches and to get rates, go to DCM to get
approximation.
Cost of equity 20% to 25% in private markets. No use of debt is an

inefficient use of capital. Trying to optimize the D/E ratio to minimize
cost of financing.
d.
Determine terminal value EBITDA multiple which is going to be

almost 80% of the company value. Terminal value = LTM multiple
from comps x EBITDA. Perpetuity growth rate should be 2.5% to 3%
and should not be larger than the size of the GDP of the country
e.
Calculate net present value (NPV) and determine implied valuation
Notes:
Need the valuation date; this determines stub year fraction (i.e. period
left in the year). Stub year fraction investor does not have claim on


revenues before that. DCF value always moving through time
consistent with valuation date.
IB interviews test you on DCF. Everything else that you know is a

bonus.
Do DCF to find yield to decide whether or not to invest principal.
Creating value:
$ dollars of value increased by
Changing multiple on valuation
Decreasing the discount rate

Chapter 65:
Framing Valuation
We are not looking at each valuation methodology in isolation but

are ultimately using the methodologies together to frame the
valuation in a valuation summary format. We use a football field
(valuation summary) to frame the valuation which looks like the
following:
Regarding the football field, we add control premiums to comp

companies and DCF (% addition that is equal to the control premium
average for the transaction comps) if doing valuation for selling the
company.


Footnote everything (assumptions) in the football field. The football
field takes one day to a few days depending on how easy it is to
obtain the precedent transactions data.
Banker should know what valuation the client expects to be at; 10%
to 15% spread of range of valuation (tighten the range if needed by
eliminating comps that skew the range)
For each valuation methodology we are going to do a sensitivity
analysis to determine a valuation range:

Chapter 66:
The Market for Perpetuities
As finance emerges, so too does the market for the perpetuity. The
market for the perpetuity at its initial stages is inefficient, but as it
moves through the stages of a perpetuity, the market becomes more
efficient. You can observe the coinciding cost of capital move from
almost 100% going all the way down to 3.5%.
You can observe the decreasing discount rate for the perpetuity as
the perpetuity moves through the phases of the perpetuity.


SELL-SIDE
As perpetuities continue to grow, the builder of the perpetuity seeks

to grow the perpetuity inorganically or exit the perpetuity. This is the
primary role of the sell-side, which is to aid in the buying and selling
of perpetuities. Investment bankers now enter the picture as this is
their core work.

Part X:
Perpetuity Exit
On the sell side, the primary responsibility of the investment banker is

to aid those owning perpetuities in analyzing their strategic
alternatives related to inorganic growth or exit.
Which phase is the perpetuity in? (SMB, LMM, MM, UMM, L)
Which buyers are likely interested in the perpetuity? (Individual,

Financial, Strategic, Special Situation)
Each of these buyers have a different valuation range

Individual Desire 30% to 40% IRR, 3x EBITDA
Financial 4x to 7x EBITDA
Strategic 5x to 10x EBITDA

Valuation is a range
Determine valuation method (DCF, comp companies, precedent

transactions)
Calculate benefit stream (synergistic vs. owner benefit)
Determine required rate of return given the phase of the perpetuity

and the buyer (discount rate)
Convert benefit stream into present value at the discount rate

Sensitize the variables for a range of values to see effect on valuation
(sensitivity table)
Strategics and financials establish their filter criteria (hurdle IRRs for
financial and minimum EPS increase for strategics) and test targets
against this filter
Strategics have a range of values with standalone value as the lower

end and valuation with all synergies on the higher end. A deal
happens usually in the middle

Chapter 67:
Investment Banking
The investment banking core product is M&A. As such, the

investment bankers role is to aid in the growth of perpetuities via an
inorganic strategy (merger, acquisition).
As investment bankers, we are matching strategic and financial

buyers' investment mandates to targets that meet their criterion
including hurdle rates.
The real work of M&A is origination, matching and deal-structuring.

Financial modeling and valuation is merely for decision support and
deals often get done simply based upon precedent transactions
analysis.


Thus, the priority of the investment bankers is to obtain a base level
understanding of financial modeling & valuation but then to
immediately start originating sell side and buy side mandates.
An investment banker = investment (perpetuity) broker. Investment

bankers are investment brokers for the largest investment in the
capital markets, controlling interest of a company.
Controlling interest of a company is an M&A transaction and the

method of purchase is an LBO for a financial acquirer (use of debt to
fund majority of purchase price) or merger for a strategic acquirer.
Investment bankers explore strategic alternatives (value creation

opportunities) with corporations CEOs/owners.
1. Calculate valuation and create valuation football field to get to

valuation midpoint (compare intrinsic value to market value; intrinsic
should be more). Valuation informs the investment decision
2. Calculate NPV and IRR to the sponsor (entry and exit) in LBO (LBO
is the proper method of purchase) OR calculate EPS change and
balance sheet effects for strategic
Valuation Football Field and the Midpoint is the final valuation of the
company.


Calculate NPV and IRR to the sponsor in LBO or EPS Change and
Balance Sheet Effects in Merger
Compare NPV and IRR OR compare EPS change and BS effects to

other strategic alternatives and choose the highest return/EPS
alternative
Ultimately, as an investment banker, you are to:
Use valuation methodologies to determine valuation ranges of each

strategic alternative and see if capital sources match uses. IBankers
should provide the client with tight ranges on valuation.
Use an operating model of the target (and acquirer if strategic) and

then tailor it to the specific client:
Financial (LBO)
Strategic (Merger)
Determine:
NPV and IRR for financial in LBO
EPS change and balance sheet effects for strategic in merger M&A
Run the M&A process

Junior Banker:
Industry coverage
Comps and comp transactions (where are multiples)
Valuation
Mid Banker:
Operating model creation + tailored to transaction client (LBO or
Merger)
Manage M&A process
Senior Banker:
Revenue center
Personal contacts at firms to win engagements

Part XI:
The Middle Market
The majority of perpetuities are in what is known as the middle

market, a classification for mid-sized perpetuities. This is where the
majority of the transactions occur and where the average investment
banker will make his living.

Chapter 68:
The Middle Market
Because of the wide range of company sizes within the definition, the
middle market can be further broken down into the following:
Lower Middle Market: $5 - $50 million of revenue;

Middle Market: $50 - $500 million of revenue; and
Upper Middle Market: $500 million - $1 billion of revenue.
Overview of Middle Market

We view the middle market as having three distinct segments,
defined by a company's ownership type, prospects, and access to
capital. Companies with EBITDA below about $10 million (lower
middle market) are typically family or entrepreneur owned and
individual customer wins and losses greatly impact performance.
Many of those sales relationships are concentrated in the family, and
senior management ranks are often populated with family members.
Such companies are generally well served by local banking

relationships, government-sponsored entities such as Small Business
Investment Companies (SBICs) in the U.S., or public entities such as
Business Development Corporations (BDCs).
At the other extreme, upper middle market companies typically have

$75 million of EBITDA or more, and are often publicly held or sponsor
backed. These companies, given their size, typically ebb and flow with
their respective industries. They have myriad options for accessing
capital, notably including the public high yield market. Some
institutional investors who are looking to write large checks ($100
million or more) also participate in this space, though volume is
limited. Given the relatively lower yields in this segment, as well as
structural disadvantages such as the lack of maintenance covenants
and limited information rights.
We define the core middle market as companies with $10 to $75

million of EBITDA and this is the segment where we are most active.
Companies are typically sponsor owned with several opportunities for
growth, from taking share to expanding into related products or new
geographies.
Pitchbook defines the middle market as companies with total

enterprise value between $25 million and $1 billion and the core
middle market as between $100 million and $500 million.

Part XII:
M&A Multiples
It is crucial for investment bankers to understand the M&A

marketplace in the middle market and particularly for the industries
that they cover.

Chapter 69:
M&A Multiples
Since the investment banker will most likely be starting in the lower
middle market or middle market, it is important to have a strong
understanding of the multiples in the M&A marketplace in general
and then in your sector and sub-sector. The following are 2016 M&A
multiples from the data provider, Pitchbook (Morningstar), that you
can use initially. Here are the EBITDA multiples for transactions in the
lower middle market:



These are EBITDA multiples for transactions in the middle market:
Finally, we have EBITDA multiples for transactions in the upper middle

market:

Notice how the multiples increase as the size of the perpetuity

increases due to the scarcity value of larger perpetuities (increased
demand for large perpetuities and less of them).
The following is a chart depicting the average debt to equity

breakdown for LBOs. You will notice that equity levels are steadily
increasing, indicating a tighter credit market:

In this chart, you will see the average time that is it taking for deals to
close. You will notice that the majority of transactions get done in the
5-9 weeks and 10-14 weeks timeframe:

Next, the following is a chart that depicts the % of deals getting done
with some aspect of an earnout, meaning portion of the purchase
price contingent on future performance of the business:

Finally, we see a chart depicting activity for the buyers of perpetuities:

Part XIII:
Origination
The following methodology describes the primary work of the

investment banker, origination. The methodology arose through the
work of Michael Herlache in his M&A career and the lack of content
about the actual work of senior M&A professionals. There is plenty of
knowledge around the technical support work of investment bankers
including financial modeling and valuation, but there are no current
texts on origination, let alone a methodology.

Chapter 70:
Origination Methodology
The M&A origination methodology is the following:
1.
Determine coverage industries and sub-sectors
2.
Build industry and sub-sector index
3.
Pull national screens for the coverage area from Salesgenie
4.
Collect emails for CEOs/owners from Salesgenie and RocketReach.co
5.
Origination email to identify target considering selling and get price

expectations
6.
Obtain sell side mandate
7.
If cannot, develop buyer list and pitch M&A idea to them in a buy
side capacity clarifying that the target is not running a process and
that you do not have the mandate but that you have been in talks
with their CEO/owner. The target is willing to listen to reasonable
offers

Step 1: Database Utilization & Emails Collected

The following email is used after pulling a county list from
infousa.com or screening in Salesgenie and screening for revenue size
($2.5M +) and contact person (owner, CEO, President). Starting from
the end of the database (Z), go through each account in the database
and determine the business owners primary email address either
from the database itself or by going to the website and acquiring the
email address. Once 30 to 50 emails are obtained in one day, the
process of emailing begins with the best practice below. The response
rate to the emails should be approximately 3%.
Step 2: Email Inquiry

John,


It's a pleasure. I work with AltQuest Group right here in Fort
Lauderdale. Would you be willing to take an offer on your business
from a private equity group?
Please let me know.
Best,
Michael
Step 3: Offer & Price Inquiry

After receiving initial response, you will then message them that you
will email them when you have the offers and ask for the price of the
business. The following is the email that should be sent:
John,
Alright. I'll notify you when I receive the offers. What is your
expectation regarding the price of your business?
Best,
Michael


Step 4: Phone Call Request (by Sellers) or Meeting Request
After requesting price, some sellers will request a phone call and
provide their contact information. If the seller provides price
information, they reply with the following email:
John,
Alright. Lets sit down and discuss next steps. Does Monday afternoon
at 1pm work for you?
Best,
Michael
If the seller accepts a meeting then the engagement is going to be

sell side. If the seller does not accept the meeting and instead states
that he would like you to represent the buyer then it will be buy side.
Sell side engagements get an RBCA. For buy side engagements, make
a buyer list of the largest likely buyers including public companies
then contact the head of M&A at these companies and ask:
Brian,


It's a pleasure. Would you care to take a look at a premier business
group with a presence in multiple states? $40M revenues and $6M
EBITDA.
Please let me know.
Best,
Michael
After hearing back from the heads of M&A, let them know that the
seller has requested that we represent the buyer and that the buy
side fee will be 1.5%. You then ask them to accept in writing to the
fee and once they do you can tell them the target name and then
proceed to contact the seller and let them know that there is interest
and ask what multiple range they are targeting for a sale. From there
you send an advisor NDA and request financials. After giving
financials to buyer, the company is assessed and a valuation range is
determined and an IOI with this valuation range is submitted to the
seller.
Step 5: Phone Call or Meeting

Phone call:
During the phone call you will introduce yourself and state that you
work on behalf of private equity firms in locating quality cash flowing

companies and that is how you found their company. From there you
will state that you want to get an initial understanding as to the price
of the business. After the price of the business is found, ask how the
business performed last year (revenue and net income). Finally,
request a meeting at the end of the call (in person). The following is
your outline for the phone call:
Price:
Revenue:
Net Income:
Meeting:
Meeting:
During the meeting you will introduce yourself and state that you
work on behalf of private equity firms in locating quality cash flowing
companies and that is how you found their company. From there you
will state that you want to get an initial understanding as to the price
of the business. After the price of the business is found, ask how the
business performed last year (revenue and net income). If this
information is already known, you can move straight to giving the
seller the signed NDA and explaining that any information that we
receive is confidential and will not be shared without the approval of
the business owner. Next you discuss the structure of the
engagement that you are requesting a non-exclusive relationship
whereby you only get paid when your buyers purchase the company.


You can hand them the Registered Buyer Commission Agreement and
have them sign right there or to have them review it. Finally, you ask
if they have their financials on hand to view and you view them. You
can ask to keep a copy to aid in recasting.
Step 6: Add Backs Calculated and Teaser Created

After the meeting, you now have the financials or financial data
needed to do add backs to get to an owners benefit or EBITDA
number. From here you can input the recasted financials into the
teaser and then complete the teaser based upon the general
information (usually from the website and meeting conversation) of
the business
Step 7: Deal Put on M&A Marketplaces

Once the teaser is finished and financials recasted, you can put the
deal on the M&A marketplaces including BizBuySell for smaller deals
and DealNexus and Axial for larger deals.
Step 8: NDAs Signed with Buyers

Once inquiries are received from buyers from the M&A marketplaces,
you will send NDAs to the buyers which they will then sign and send
back to you.
Step 9: Teaser with Name Given to Buyer


Once the NDA is received, you can give the buyer the name of the
business on the teaser and request an IOI from the buyer after
reviewing the teaser and summary financials. The following is the
email to accompany the teaser:
Buyer,
After reviewing the teaser and summary financials, please submit your
initial indication of interest (IOI) and we will set up a buyer/seller
meeting.
Best,
Michael
Step 9: Teaser with Name Given to Buyer

Often times a call will be requested by the buyer. On the phone the
M&A professional finds out the following, taking notes on the call:
Industry interest:
Questions (that the buyer has):
Multiples that buyer is seeing or that they typically do:
Step 10: IOI from Buyer


After reviewing the teaser and summary financials, the buyer will
notify you that they are interested in purchasing the company (IOI).
Step 11: Buyer Seller Meeting

After submitting the IOI, you will arrange an in person meeting with
the seller which is called the buyer seller meeting. If the buyer is
unavailable due to distance or timing, a phone call can be set up.
Step 12: Purchase Agreement Given to Seller

After the buyer seller meeting, you prompt the buyer to submit a
purchase agreement and then give this purchase agreement to the
seller.
Step 13: Signed Purchase Agreement with Different Terms

After the seller reviews the purchase agreement they will either sign
the contract or counter with different terms. They are to sign the
contract with the contingencies written into the contract.
Step 14: Enter Due Diligence
After receiving the counter, the buyer can sign the agreement with
makes for a legally binding purchase agreement contingent to the
items that will now be explored during the due diligence period. As
items are explored, the buyer signs off that the items are no longer in
question one by one.


Step 15: Complete Due Diligence
After all the items in the due diligence list are completed, due
diligence is now completed and the closing can be scheduled. The
documents are sent to the closing agent with instructions as to the
M&A fee as well.
Step 16: Closing & Checks Cut

After the both the buyer and seller sign at the closing, the checks are
cut and you receive your M&A fee and bring it to your bank.

Chapter 71:
Mandate/Target Matching
Methodology
1.
Build relationships with strategic and financial buyers in a given

industry sector or subsector
2.
Indicate your interest in sourcing deals on their behalf and obtain

their investment mandate. This will usually be detailed in a one-page
teaser or presentation that they will send to you
3.
Screen for companies that match the mandate(s) in Salesgenie and

obtain CEO/owner emails and phone numbers
4.
Begin emailing and calling CEO/owners and soliciting interest in

taking an offer on their business from a financial or strategic buyer
5.
Structure as a sell-side engagement or a buy-side engagement

depending on CEO/owners level of interest in selling
6.
Collect historical financial data for the last three years
7.
Introduce the financial and/or strategic buyer to the opportunity with

the summary financial information and have them sign an NDA
8.
Have a call with the financial and/or strategic buyer and then make
the formal introduction to the CEO/owner and have a buyer/seller
meeting

Chapter 72:
Deal Structuring
After matching a financial or strategic buyers mandate with a target,

it is up to the investment banker to work with the buyer and seller to
structure a deal. Deal structures can be along the following lines:
I.
Majority vs. Minority
II.
Cash vs. Stock vs. Cash & Stock
III.
Seller financing
IV.
Earn out
V.
Seller stays on as management vs. consulting agreement for shorter

term

Part XIV: M&A Process
When the owner of a perpetuity has decided to grow inorganically or

exit the perpetuity, the M&A process must be executed/run.

Chapter 73:
M&A Process
From Origination to M&A Execution

Once the investment banker has originated 8 to 10 multimillion dollar
listings, one should transition from origination to M&A execution
process creating a shortlist for each deal (10 in the shortlist). The
investment banker should concurrently prepare the marketing
package which includes the teaser and the executive summary. Once
the teaser is finished, the investment banker should begin emailing
the shortlist with the teaser. From this shortlist, a percentage will
reply seeking additional information on the target. NDAs should be
sent out and after being signed, the executive summary should be
sent to the shortlist member. After the executive summary is sent, a
percentage will decide to request a buyer/seller meeting. After the
buyer/seller meeting, a percentage will decide to make an offer.
Building the Buyer Shortlist

The shortlist should include strategic and financial buyers and the
investment banker should screen each that make it onto the shortlist


for financial capacity to pay. The investment banker should use
Salesgenie to pull the geographic competitors (geography screen
with SIC code screen) and have 10 strategics. The investment banker
should use the massinvestor database to determine which 10
financials to include in shortlist:
Strategic
Competitors - synergies
Indirect Competitor
Financial
Hybrid strategic financial buyer with asset in the sector
Pure financial
For deals that are $500k earnings and above, BizBuySell.com and
DealNexus.com should be used to find buyers. For deals below $500k
in earnings, only BizBuySell.com should be used.
The Teaser
The teaser will contain an overall financial profile: three years of
historical revenue and EBIT/EBITDA and at least two years of
projected revenue and EBIT/EBITDA
Indicate type of transaction


Professional font (Times New Roman or Arial)
Send as PDF
Do not capitalize words or use flowery language
No grammar or spelling errors
Indicate sustainable growth potential based upon competitive
advantage:
Customer entrenchment and high switching costs (ex. Software)
Long term contracts (ex. Equipment service companies)
Brand recognition (ex. Consumer products)
Intellectual property
Stable management teams
Culture
The NDA
The NDA in a sell side engagement is a unilateral NDA meaning that
only one side has to not disclose confidential information
Teaser With Name of Business & Financials

After the NDA is signed, a teaser with the business name is then sent
to the buyer along with the financials in PDF form.
The CIM

Executive summary
Company history
Sales process and/or manufacturing capabilities
Management team structure
Growth opportunities
Competitive landscape or industry outlook
Intellectual property overview and/or company assets
High-level financials (preferably five years of historical data and
projections, if available)
The IOI (Indication of Interest)

Approximate price range. This can be expressed in a dollar value
range (e.g., $10-15 million) or stated as a multiple of EBITDA (e.g., 35x EBITDA).
Buyer's general availability of funds, including sources of financing
Necessary due diligence items and a rough estimate of the due
diligence timeline
Potential proposed elements of the transaction structure, e.g., asset
vs. equity, leveraged transaction, cash vs. equity, etc.
Management retention plan and role of the equity owner(s) posttransaction
Time frame to close the transaction


The Buyer/Selling Meeting
First conference call
In person meeting & tour the facilities
In person handshake meeting
The LOI (Letter of Intent)

Official deal structure and terms. Acceptance of engagement means
that company cannot receive other offers
Deal Structure. Defines the transaction as a stock or asset purchase.
Generally, the seller prefers a stock transaction from a tax and legal
perspective. Asset transactions are preferred by the buyer to protect
against prior liabilities and provides a stepped-up tax basis.
Consideration. Outlines the form(s) of payment including cash,
stock, seller notes, earn-outs, rollover equity, and contingent pricing.
Closing Date. The projected date for completing the transaction. This
date is an estimation and often changes based on due diligence or
the purchase agreement.
Closing Conditions. Lists the tasks, approvals, and consents that must
be obtained prior to or on the Closing Date.
Exclusivity Period (Binding). It is common practice for a buyer to
request an exclusive negotiating period to ensure the seller is not
shopping their deal to a higher bidder while appearing to negotiate
in good faith. Expect to see requested periods of 30 to 120 days. The
duration may be negotiable, but the presence of the exclusivity term
rarely is.


Break-up Fee (Binding). A fee to be paid to the buyer if the business
owner decides to cancel the deal. Break-up fees are relatively
common in larger deals (above $500 million). The fee can either be a
percentage (typically 3%) or a fixed amount.
Management Compensation. Outlines plan for senior-management
post-sale. This term describes who in the management will be
provided employment, equity plans, and employment agreement.
This term is often vaguely worded to provide the buyer with latitude
since they may not be prepared to make commitments to senior
management.
Due Diligence. Describes the buyers due diligence requirements,
including time frame and access.
Confidentiality (Binding). Although both parties have probably signed
a confidentiality agreement at this point, this additional term ensures
all discussions regarding the transaction are confidential.
Approvals. Lists any approvals needed by the buyer (e.g., board of
directors) or seller (e.g., regulatory agencies, customers) to complete
the transaction.
Escrow. Provides the summary terms of the buyer's expected escrow
terms for holding back some percentage of the purchase price to
cover future payments for past liabilities. The escrow is typically
highly negotiable and often excluded from the LOI and presented for
the first time in the purchase agreement.
Representations and Warranties. This clause will include
indemnifications in the purchase agreement. It is best practice to
include any terms that may be contentious or non-standard.


Due Diligence
Financial books and records
Incorporation documents
Employee benefits, policies and compliance issues
Internal systems and procedures
Customer contracts
Intellectual property
Condition of assets
Any key area of concern identified while negotiating the letter of
intent
Digital deal rooms are now used (ex. Firmex and V-rooms). Due
Diligence is usually 60 to 90 days
The Purchase Agreement

Incorporates all terms of the LOI and is written to address issues
discovered in due diligence. The agreement will lay out a structure to
handle this (a hold back account, deductions from future payments,
price adjustment, etc.)


Pitchbook Table of Contents (exploring strategic alternatives to
win a mandate):
I.
Executive summary
II.
Industry specific market update (discuss control premiums and

multiples)
III.
Review of companys strategic priorities
IV.
Potential strategic targets

a.
Vertical I
b.
Vertical II
c.
Vertical III
Sell side after winning the mandate:

I.
Discuss and demonstrate knowledge of buyer universe (strategic vs.

financial)
II.
Discuss valuation range (I believe that you can get $_____, providing
that these things hold true)
III.
Process and timing
IV.
Tax consequences
V.
What is going to happen to key management and employees
Confidential Information Memorandum (CIM) Table of Contents:

I.
Executive summary
II.
Key investment considerations
III.
Growth opportunities
IV.
Industry overview
V.
Company overview
a.
Overview
b.
Products and services
c.
Sales and marketing
d.
Operations

e.
VI.
Organization
Financial overview
Confidentiality Discuss in terms of project name, never mention

name of company. No comment and refer press to PR department.
M&A Bankers Role: M&A banker is hired to run a process:

1.
Defining exit options and strategies (4 types: auction process,

controlled sale, targeted high level solicitation, closed negotiation)
2.
Valuation
3.
Recast financials
4.
Presentation and packaging
5.
Buyer qualifications
6.
Marketing
7.
Management coaching
8.
Due diligence facilitation (data room)
9.
Price and contract negotiation
From 100 buyer universe, narrow it down to 20 to 30 target buyers
Auction Process:
100-150 companies initial call
4 months; 6-12 months actual
Initial call interest, then send teaser
If interested after teaser, sign NDA, send CIM

Controlled Sale:
10-12 companies
4 months, 6-8 months actual
Targeted High Level Solicitation:

4-5 companies
2-4 months
Closed Negotiation:
1-2 parties
1-3 months
Regarding valuation, the investment banker will form the story which
is either:
I.
Growth story
II.
Well operating story
Presentation and Packaging

CIM (1st round):
Week 1: interviews with CEO, CFO
2-3 weeks to create

70, 80, 90 pages
Teaser (1st round)

Management presentation (2nd round) all info in CIM
Buyer Qualification:
Finalize to list of 50, bankers begin making phone calls
Marketing:
Sign NDAs, send CIM
Weekly calls with client to update (buyer list updates)
Pitching:
To win new business. Pitching can take years. This is ultimately deal
sourcing with MDs calling on clients for 10-15 years.
Bake Off to Win Mandate:

To win sell side mandate there are 9 to 10 banks with 2 to 3 banks in
the next round. They present to management and the board.
The Pitchbook to Win Business:


I.
Intros and quals
II.
Industry overview
III.
Capital market overview (capital markets and products perspective

(ex. M&A and IPO))
IV.
Company and situation overview
V.
Valuation (football field)
VI.
Process
VII.
Buyers/investors

Part XV: Firm

Management
Since the M&A market is so fragmented in the middle market, it may

become necessary for the investment banker to run his own M&A
practice.

Chapter 74:
Running the Boutique
Investment Bank
In building AltQuests initial book of business, we sent over 2,000

emails to our initial coverage group, industrials/manufacturers. The
response rate was approximately 2%. Of those that responded
approximately 50% were interested in seller and 50% were interested
in taking an offer on their business. Of those that were interested in
selling their business, approximately 50% accepted our fee
agreement.
When first starting the M&A firm, majority of time should be spent
originating sell side mandates. Once the investment banker gets to 20
sell side mandates, one can ease up on origination and transfer those
responsibilities to analysts and associates hired as interns which then
turn into full time analysts/associates.


This means that all of the investment bankers time will now be spent
in M&A execution with sell-side pitches from time to time when the
analyst/associate originates an opportunity.
Good analysts and associates will originate 2 to 3 sell-side pitch

opportunities per week so the investment banker will stay busy on
the phone with these CEOs/Founders/Partners.
Realistically it will take a year to a year and a half to close your first
deal if you are just starting out in M&A. If you have been in M&A and
have a book of business, the timeframe shortens to the typical time it
takes to close a deal which is shown below.
It is important for the M&A professional to plan for this extended

time frame and not to get discouraged when deals blow up, get
delayed, or change. All deals associated with an actual perpetuity
close, it is just a matter of time.

Part XVI: Deliverables &

Coverage
Investment banking requires a certain set of deliverables from

coverage, to origination through sell side representation.

Chapter 75:
Investment Banking Deliverables
Investment banking deliverables include the following in order from

left to right:
I.
Industry financial report and newsletter (coverage)
II.
Pitchbook (origination)
III.
Teaser & CIM (sell side mandate)

Chapter 76:
Coverage
The investment banker will often focus on a product group (i.e. M&A)
and/or an industry (industrials, healthcare, technology). Proper
coverage comes in the form of maintaining a coverage index for a
sector and its sub-sectors which is broken down in the following
manner:
I.
Industry macroeconomics
a.
Industry spending
b.
Sub-sector spending
c.
Stock market performance of industry
II.
Public sub-sector financial and valuation performance

a.
Sub-sector index
b.
Sub-sector index: financial performance
c.
Sub-sector index: public market multiples
d.
Sub-sector index by product category
e.
Sub-sector index by product category: financial performance
f.
Sub-sector index by product category: public market multiples
III.
Industry M&A Market Update

a.
Industry M&A deal volume and spending
b.
Industry M&A exit multiples

c.

Sub-sector M&A deal volume and spending
d.
Sub-sector M&A exit multiples
e.
Sub-sector M&A deal volume by product category
f.
Sub-sector M&A exit multiples by product category
IV.
Appendix
a.
Sub-sector index key metrics
b.
Sub-sector index key metrics by product category
c.
Industry most active buyers
d.
Sub-sector most active buyers
e.
Sub-sector most active buyers by product category

Chapter 77:
Index Building & Analysis
General (Dow)





Industry
Sub-sector



Sub sector by product


Chapter 78:
Financial Data Sources
If you are at a larger investment bank, you will have various paid data
sources at your disposal. These include:
1.
Bloomberg
2.
CapitalIQ
3.
FactSet
For those that are not at a larger bank, one can use the free sources
of financial data including:
Yahoo Finance
Google Finance
Yahoo Finance and Google Finance get their EBITDA numbers from
CapitalIQ and their analyst EPS consensus estimates from there as
well.
Investment banks typically do not want you to use the EBITDA from
CapitalIQ, Bloomberg, FactSet and would prefer that you spread the
comps individually to get to EBITDA.
We are ultimately using the financial data sources to build and
maintain our various indices associated with our coverage group.
Chapter 79:
Industry or Sector Newsletter
When maintaining coverage of an industry or sector, one prepares a

newsletter to be send to prospective sell side clients in the industry or
sector. Investment bankers use the index information to create this
newsletter. The newsletter is about 2 to 6 pages.

Chapter 80:
Industry or Sector Report
When maintaining coverage of an industry or sector, one prepares a

report to be send to prospective sell side clients in the industry or
sector. Investment bankers use the index information to create this
report. The report goes more in depth than the newsletter. The report
can be about 50 pages.

Chapter 81:
Rolodex Building
As an investment banker it is important to establish relationships with

the strategics in your coverage group as well as relationships with
targets and their potential buyers. After building the index containing
relevant strategics, one should go to RocketReach.co and find the
email addresses for each of the CEOs, CFOs, and/or corporate M&A
department head for the potential acquirer.

BUY-SIDE
For those that have already built perpetuities and their

representation, there is another category known as the buy-side. The
buy-side is made up of financial (private equity) and strategic buyers
(corporate).

Part XVII:
Buying a Perpetuity
On the buy-side, we are concerned with the purchasing of

perpetuities.

Chapter 82:
The Operating Model
We are going to start with the operating model previously built

(integrated financial statement model). From here we are going to
build on a transaction (ex. LBO, Merger, ECM, DCM).

Chapter 83:
Financial Buyer aka Private
Equity (LBO)
There are over 4,000 financial buyers in the world. They command
over $2 trillion in capital and are broken down into the following
categories:
Leveraged buyout
Growth
Mezzanine
While each of these private equity firms have different hurdle rates,
each perform an LBO analysis to determine whether or not to
purchase a perpetuity.


Private equity firms have 7 to 8 years to invest and get returns and be
done with the fund. They have a 2% management fee generally. They
are targeting 20% to 25% and think in terms of spread over
treasuries. IRR is the name of the game which the main drivers of
returns being; acquisition price, amount of debt raised, and future
operating performance (model projections). There is an aspect of buy
low, sell high regarding multiples (ex. 11x entry and 13x exit). You can
use the following as a general rule of thumb for a private equity
group:
15% IRR dont do the deal

25% IRR do the deal
30% IRR, you must do the deal
Regarding ideal private equity targets, the private equity firm will
specialize in a few sectors and does not want a lot of discretionary
CAPEX. They will however do maintenance CAPEX. They will look to
rework AR and AP contracts.
Furthermore, after an acquisition, the PE group will look to pay debt

down as fast as possible. They ideally want dividend recaps (add
additional cash and then pay self a dividend after paying back
additional debt).
The PE firm when considering an investment will run multiple cases to

determine what case to bid on. They will do sensitivity tables as well.
The PE group will work with LevFin, SLF & DCM within a given
investment bank with SLF syndicating the loans and then selling the
paper. The IB charges a financing fee, advisory fee, and syndication
fee.
Leveraged Buyout (LBO) Analysis:
1.
Locate financial information
2.
Build the operating model
3.
Input transaction structure
4.
Complete LBO model with new structure
5.
Run the LBO analysis
Notes:
Banks want 20% to 30% for financial sponsor. This depends on the
industry; 50% necessary for technology company. Bank looks at
leverage ratios and interest coverage to determine which covenants
to put in place.
Construction of LBO Model

Purchase price and considerations
Sources and uses
Cap structure alternatives (sources)


Integrate proforma BS into operating model (change in debt level and
intangibles)
IS, BS, and SCF projections integration
IRR analysis for FS and hybrid debt lender (to find what is EBITDA,
how much is cash and how much is debt
Sensitivity tables
Credit ratios
PIK allows you to get more leverage
LBO model is an M&A & DCM transaction in one
EBITDA multiple determined from midpoint of the football field
Transaction fees:
Financing fees SLF & DCM
IB fees M&A
Legal Lawyer
Other fees
Leverage is spoken in terms of x leverage which means x EBITDA

SLF & DCM go through cases of operating model to find optimal

tranche of debt to provide highest leverage to the FS but can still be
sold in the marketplace
Proforma is AS IF after the transaction. Adjustments (changes) ->

Proforma (after changes)
Retained earnings: Old RE gets wiped out and new RE starts negative
due to financing fees.
Assumptions for projects:

Operating model start with base case without transaction
Sponsor upside case
Sponsor downside case
Each case underneath line item in Assumptions tab
Use choose function to choose case
Key question: Is capital structure correct to allow you to pay down

amortized debt and other tranches of debt?
Look at net cash flow being generated and then determine if

unsecured needs to be PIK (if not enough net CF, then need PIK)
Talk to credit officer to get to capital structure that is optimal
Need to do accounting quality of earnings analysis to get to true

EBITDA?
Financial sponsors want to see sensitivity table with highlighted

options that make sense. Sensitize entry multiple and exit multiple for
IRR.
Reverse LBO: If I have a hurdle rate of x%, what is the max price I can
pay for the asset? Also get an implied entry multiple.
PE transaction rationale: Offense (growth) vs. defense (protecting

territory aka maintain margins)
Credit officer meeting:

25-30 page deck
Industry
Sponsor thesis
1 sheet summary of relevant financial statistics (one for each capital
structure)


How quickly do you draw on revolver? Do not want to draw on
revolver too quickly
Credit officer looks at BS/CF statistics, leverage ratios, and interest
coverage statistics
Want to see debt ratios steadily going down; want a few turns of the
company being delivered
How quickly does this company get delivered?
PE work: 10, 20, 30 CIMs (confidential information memorandums)

per month.
PE interview:
Interview 1 Experience
Interview 2 You have 2 hrs to build an LBO model and tell me
whether or not to invest

Chapter 84:
Strategic Buyer aka Corporation
(Merger)
There are over 3,000 strategic buyers in the world.
While each of these strategic buyers have different hurdle rates, each
perform a merger analysis to determine whether or not to purchase a
perpetuity.
Merger Analysis:
1.
Locate financial information
2.
Build the standalone operating model for target & acquirer
3.
Input transaction structure
4.
Complete merger model with new structure
5.
Run the merger consequences analysis (accretion/dilution, balance

sheet effects, contribution analysis)

Notes:
Merger Modeling
2 operating models put together with synergies
Dont want to give away more than 50% of your synergies in your bid
Accretion (EPS goes up with combined company)/dilution merger

model to see impact of acquisition on acquirers EPS
Offensive play vs. defensive play (protecting your market or size)
Dilution is proforma decrease in EPS. What causes dilution?

Buyer with higher PE multiple than target, then accretive as the target
is less expensive. If target has PE that is higher than the acquirer,
always dilutive. If premium paid causes PE of target to be higher, then
dilutive.
Accretion/dilution always forward looking as it takes years to get

synergies
Proforma ownership structure want to control 50.1% of company

Pretax synergies required to break even: How much synergies does

acquirer need to have for the transaction to be accretive:
((Proforma EPS Acquirer EPS) x proforma shares outstanding) / (1

tax rate))
We then take this number as a % of revenue or EBITDA of combined

company
Know where your stocks value is going:

If undervalued, then dont use stock
If overvalued, then use stock to fund the transaction
Collars: When announce transaction, establish exchange ratio as the

stock price will move so have either:
A. Fixed value collar favors target
B. Fixed share collar favors acquirer
Sensitivity tables are used to help structure deals and in negotiations


Surviving entity (acquirer)

PART VI:
HOW TO BECOME A
BILLIONAIRE

Chapter 85:
How to Build a Unicorn
Buy-side. Sell-side. Build-Side?
Buy-side (buying perpetuities)

Sell-side (selling perpetuities)
Build-side (building perpetuities) - combining Wall Street valuation with
Silicon Valley platform building
We have all heard about the buy side and the sell side of finance, but who
is actually building the perpetuities. What if there was a third side of
finance? What if there was a build-side, with individuals possessing IB/PE
and platform development talents to use in building perpetuities?
Shouldn't that be the logical course of events with individuals taking their
knowledge of valuation and industries and putting them to use in building
the next unicorns?
So what would this look like? IB/PE professionals joining startup labs such
as the one I run called Founders Ventures (www.VCFounders.com) to work
on concepts that have a legitimate chance of being a unicorn. Rather than
leaving one's job to join a questionable startup, join a startup lab and be
directly involved in the build-side, even if it part-time. The work of the
build-side is syndication.
Shouldn't we all be working towards getting on the build-side?

Introduction to the Unicorn Methodology

Unicorn Methodology
Concept:
Market size:
Total addressable market:
UNIT ECONOMICS (PROFITABILITY) OF THE COMPANY:
a.
IDENTIFY COST OF ACQUISITION PER CUSTOMER (CAC):
b.
IDENTIFY COST PER USER PER MONTH:
c.
IDENTIFY REVENUE PER USER PER MONTH:
d.
IDENTIFY LIFETIME VALUE PER USER (LTV):
MODEL PLATFORM ARCHITECTURE IN TERMS OF BASE PHP PLATFORM AND

MODS ONTO IT. DOMAIN WITH MVP DONE: www.domainnamehere.com
DATABASE OF 25 HIGHEST PRIORITY USERS OF PLATFORM AND COLLECT
EMAIL, NAME, NUMBER. .XLS NAME WITH TOP 25 DATABASE:
databasenamehere.xls
SELF-ADVOCATE TO THE 25 HIGHEST PRIORITY USERS OF PLATFORM AND
NOTIFY THEM THAT YOU WILL BE SENDING THEM VALUE AND THAT THIS IS
THEIR ACCOUNT TO CLAIM IT GIVING THEM LOGIN CREDENTIALS. .DOC
NAME WITH MESSAGE TO BE SENT: companyname.doc
SCREEN SHARE WALK THROUGH WITH THE HIGH PRIORITY USER AND SHOW
THEM HOW IT WORKS AND GET THEM TO LOGIN BY THEMSELVES
USER UTILIZES PLATFORM BY THEMSELVES FOR A TRIAL PERIOD OF TIME (3
TO 6 MONTHS)
SEND USER THE INVOICE FOR USING THE PLATFORM. FEE SHOULD BE
MEMBERSHIP FEE BASED UPON STANDARD MARKET FEE. AMOUNT OF FEE &
INVOICING METHOD: $XXX.00 per month & PayPal
BUILD DATABASE OF 26-50th HIGHEST PRIORITY USERS OF PLATFORM AND
COLLECT EMAIL, NAME, NUMBER. .XLS NAME WITH TOP 26-50 DATABASE:
databasenamehere2.xls


IDENTIFY 3 TO 5 MOST LIKELY STRATEGIC BUYERS OF YOUR PLATFORM.
REACH OUT TO THE PERSONALLY WHEN YOU HAVE $100M IN RECURRING
REVENUE AND EXIT AT THE MARKET REVENUE MULTIPLE BASED UPON
PRECEDENT TRANSACTIONS: Facebook, Google, LinkedIn, Alibaba
DISCOUNT RATE STATUS:

Seed: pre-database MVP: 80% discount rate
Angel: self-advocacy & activation: 50%-70% discount rate
Series A: utilization & monetization: 40%-60% discount rate
Series B: monetization & scale: 30%-50% discount rate
Growth: Scale & new markets: 20%-40% discount rate
Mezzanine: Scale in old & new markets: 15%-30% discount rate
IPO: Scale globally: 7-15% discount rate
Post-IPO Minority Ownership: Mature & New Product Development: 3.5%10% discount rate
FINANCIAL MODEL & VALUATION (DCF):


Concept
1.
IDENTIFY MARKET SIZE (REVENUES PER YEAR):
2.
IDENTIFY TOTAL ADDRESSABLE MARKET SIZE (REVENUES PER
YEAR):
To build a unicorn, both of these should be in the billions. You need to be

able to show that the company can capture $100M in recurring revenues
in years 5 to 10. This means that you have built a unicorn.
1.
IDENTIFY UNIT ECONOMICS (PROFITABILITY) OF THE COMPANY:
a.
IDENTIFY COST OF ACQUISITION PER CUSTOMER (CAC):
b.
IDENTIFY COST PER USER PER MONTH:
c.
IDENTIFY REVENUE PER USER PER MONTH:
d.
IDENTIFY LIFETIME VALUE PER USER (LTV):
To build a unicorn, the REVENUE PER USER PER MONTH SHOULD BE 30% to
50% higher than COST PER USER PER MONTH. This means that when you
scale, you do so extremely profitably. These sort of margins are what
billion-dollar consumer/internet companies get including Facebook and
Linkedin.
Size of market means how many revenues per year is generated by that
industry. You want to achieve $100M recurring revenue per year of that
market in 7 years. What % is that? This means a billion dollar company.


Billion Dollar Markets that are (y) Ripe for Disruption checks the box. If
you're at a $2.9B TAM, and that's truly an addressable market ... that
works. Check.
The tactical question though is can you get to $100m in ARR in 6-7 years if
everything goes really well?
Even if your nominal TAM is high, my #1 recommendation if you are preMSP (Minimum Sellable Product) is to do your own model to get to $100m
in 7 years.
Any product that can really sell at a $100m ARR in 7 years has a billion+
TAM, by definition.
that TAM needs to be very large. At least a Billion.


Platform
1.
MODEL PLATFORM ARCHITECTURE IN TERMS OF BASE PHP
PLATFORM AND MODS ONTO IT
Database(s)
1.
BUILD DATABASE OF 25 HIGHEST PRIORITY USERS OF PLATFORM
AND COLLECT EMAIL, NAME, NUMBER
Self-Advocacy
SELF-ADVOCATE TO THE 25 HIGHEST PRIORITY USERS OF PLATFORM AND

NOTIFY THEM THAT YOU WILL BE SENDING THEM VALUE AND THAT THIS IS
THEIR ACCOUNT TO CLAIM IT GIVING THEM LOGIN CREDENTIALS
Activation
Utilization
USER UTILIZES PLATFORM BY THEMSELVES FOR A TRIAL PERIOD OF TIME (3

TO 6 MONTHS)


Monetization
MEMBERSHIP FEE BASED UPON STANDARD MARKET FEE.
Scale

COLLECT EMAIL, NAME, NUMBER
Exit
IDENTIFY 3 TO 5 MOST LIKELY STRATEGIC BUYERS OF YOUR PLATFORM.

REACH OUT TO THE PERSONALLY WHEN YOU HAVE $100M IN RECURRING
REVENUE AND EXIT AT THE MARKET REVENUE MULTIPLE BASED UPON
PRECEDENT TRANSACTIONS.
Exiting at a 10x+ revenue multiple means that you have exited at a

valuation of $1 billion dollars and have thus created a unicorn.

Cases:
M&A Nexus:
Concept: M&A network and marketplace connecting strategic and financial buyers
to advisors representing middle market companies for sale.
Market size: $1.4 Trillion (capital marketplace)
Total addressable market: $900 Billion (M&A transactions in non-tech companies)
a.
IDENTIFY COST OF ACQUISITION PER CUSTOMER (CAC): database cost/#
of companies in database = $3000/12,000 = $.25
b.
IDENTIFY COST PER USER PER MONTH: server cost/total users =
$150/12,000 = $.02
c.
IDENTIFY REVENUE PER USER PER MONTH: revenue per year/12 =
$2,000/12 = $166.66
d.
IDENTIFY LIFETIME VALUE PER USER (LTV): revenue per year x life
expectancy = $2,000 x 60 = $120,000
MODEL PLATFORM ARCHITECTURE IN TERMS OF BASE PHP PLATFORM AND MODS
ONTO IT
DATABASE OF 25 HIGHEST PRIORITY USERS OF PLATFORM AND COLLECT EMAIL,
NAME, NUMBER. .XLS DATABASE NAME:
SELF-ADVOCATE TO THE 25 HIGHEST PRIORITY USERS OF PLATFORM AND NOTIFY
THEM THAT YOU WILL BE SENDING THEM VALUE AND THAT THIS IS THEIR
ACCOUNT TO CLAIM IT GIVING THEM LOGIN CREDENTIALS. .DOC MESSAGE FILE
NAME:
USER UTILIZES PLATFORM BY THEMSELVES FOR A TRIAL PERIOD OF TIME (3 TO 6
MONTHS)


IDENTIFY 3 TO 5 MOST LIKELY STRATEGIC BUYERS OF YOUR PLATFORM. REACH
OUT TO THE PERSONALLY WHEN YOU HAVE $100M IN RECURRING REVENUE AND
EXIT AT THE MARKET REVENUE MULTIPLE BASED UPON PRECEDENT
TRANSACTIONS.
Axial, LinkedIn, Alibaba

Post-IPO Minority Ownership: Mature & New Product Development: 3.5%-10%
discount rate



DegreeLinked:
Concept: DegreeLinked simplifies the college application process by allowing
would be students to complete one digital college application that gets used for all
college applications.
Market size: $250 billion (amount spent by universities on acquiring and
matriculating students)
Total addressable market: $25 billion (digital advertising to students)
a.
IDENTIFY COST OF ACQUISITION PER CUSTOMER (CAC): cost to custom
build database/# of universities in database = $2,000/14,000 = $.14
b.
IDENTIFY COST PER USER PER MONTH: server cost per month/users =
$150/14,000 = $.01
c.
IDENTIFY REVENUE PER USER PER MONTH: total revenue per year/12
months = $50,000/12 = $4,100
d.
IDENTIFY LIFETIME VALUE PER USER (LTV): revenue per user per year x
life expectancy = $50,000 x 60 = $3,000,000
ONTO IT
NAME:
MONTHS)


TRANSACTIONS: Facebook, LinkedIn, Google, Alibaba

discount rate

FundLinked:


Concept: Private equity network and marketplace connecting limited partners (LPs)
with general partners (GPs) representing funds being raised.
Market size: $454 billion (total LP commitments)
Total addressable market: $15 bn (fund placement)
a.
IDENTIFY COST OF ACQUISITION PER CUSTOMER (CAC): database cost/#
of companies in database = $3000/12,000 = $.25
b.
IDENTIFY COST PER USER PER MONTH: server cost/total users =
$150/12,000 = $.02
c.
IDENTIFY REVENUE PER USER PER MONTH: revenue per year/12 =
$2,000/12 = $166.66
d.
IDENTIFY LIFETIME VALUE PER USER (LTV): revenue per year x life
expectancy = $2,000 x 60 = $120,000
ONTO IT
NAME:
MONTHS)


TRANSACTIONS.
DISCOUNT RATE STATUS: Palico, LinkedIn, Google, Alibaba

discount rate



Asiansbook:
Concept: Facebook for Asia
Market size: $121 billion (Digital advertising)
Total addressable market: $25 bn (digital advertising spend in Asia)
a.
IDENTIFY COST OF ACQUISITION PER CUSTOMER (CAC): cost of country
database/# of consumers in database = $200/1,000,000 = $.02
b.
80%)
IDENTIFY COST PER USER PER MONTH: $2.40 (Facebook data discounted
c.
IDENTIFY REVENUE PER USER PER MONTH: $3.80 (Facebook data
discounted 80%)
d.
IDENTIFY LIFETIME VALUE PER USER (LTV): Revenue per user per month x
12 x life expectancy = $3.80 x 12 x 60 = $2,736
ONTO IT
NAME:
MONTHS)

TRANSACTIONS: Facebook, Google, Alibaba, LinkedIn

discount rate



FameLinked:
Concept: Monetizing Social with Microsponsorships via a ranked social network
Market size: $121 billion (Digital advertising and digital subscriptions for USA
businesses)
Total addressable market: $75 billion (digital advertising on social networks)
a.
IDENTIFY COST OF ACQUISITION PER CUSTOMER (CAC): cost of
database/# of consumers in database = $2000/1,000,000 = $.20
b.
80%)
c.
discounted 80%)
d.
ONTO IT
NAME:
MONTHS)


TRANSACTIONS: Facebook, Google, LinkedIn, Alibaba

discount rate

NationLinked:


Concept: It is a government representatives civic duty to represent their constituents
and NationLinked is the platform in which constituents directly voice their issues to
their representatives. NationLinked is the social governance platform.
Market size: $500 billion (total spend on influencing constituencies)

Total addressable market: $25 billion (total spend)
a.
IDENTIFY COST OF ACQUISITION PER CUSTOMER (CAC): cost to build
federal/state/local governance database/# of entries in database = $2,500/2000 =
$.25
b.
80%)
c.
discounted 80%)
d.
ONTO IT
NAME:
MONTHS)


TRANSACTIONS: Facebook, LinkedIn, Google, Alibaba
discount rate


Chapter 86:
The Four Habits of Billionaires
1.
Research/Read Understand many industries that are ripe for
disruption. Which have TAMs (total addressable market) of at least $1
billion?
2.
Valuation - Building a DCF/EBO (Equity Build Out) to understand
NPV & IRR of the concepts with billion-dollar addressable markets. Which
concepts get you to $100M ARR (annual recurring revenue in 7 years)?
3.
Syndication - Building a Minimum Viable Product (MVP) for each
of the concepts
4.
Self-advocacy - PPC, SEO, Quora, custom database, industry
events, social media, PR to get initial traction and scale from there

Chapter 87:
Total Theme Monetization
Total theme monetization is an approach to building a portfolio of
synergistic companies around one value theme.
For example, for the value theme, Investment Banking, I have utilized the
total theme monetization strategy as displayed here:
University: Investment Banking University
(www.InvestmentBankingU.com)
Book: Investment Banking, Middle Market M&A, Execution, Financial
Modeling & Valuation
Platform: M&A Nexus (www.MnANexus.com)
Designation: Chartered Investor (CI) (www.CharteredInvestor.org)
Transaction: AltQuest Group (www.AltQuest.com)

Chapter 88:
Venture Capital Valuation
Startup Valuation
The startup valuation method is a standard DCF with an individual
adjustment of the beta coefficient that is applicable to the startup.
So we ultimately want to build a financial statement model (with 10 to 15
years projection period) and then a DCF on top of it.
The adjusted beta is put into the CAPM (Capital Asset Pricing Model) to
get to cost of equity (rE). The cost of equity (rE) is the IRR of the startup
required by the investor. Since startups are completely financed with
equity, the cost of equity is the cost of capital.
Risk free rate is government bonds and treasuries (ex. 4.1%)
Market risk premium (ex. 5.5%)
Company tax rate (ex. 35%)
Required IRR by startup investors (Angel, Micro VC, VC) is 39.5%
(Achleitner 2004). Backing into the beta coefficient implied by this cost of
equity yields a beta of 6.4. For startups with a lower business risk, this
6.4 number can be adjusted lower. A premium or discount to the beta
coefficient is determined by the risk profile as determined by the
financial statement model and management team.
VC Perspective on Valuation
The NPV is calculated at a 39.5% IRR (implied beta of 6.4) and is the
incremental wealth increase at t=0 by taking on an opportunity. The goal
is to buy as much of this NPV (% of the company) for as little capital as
possible


Ex. 50M NPV at 25% for $2M investment gets you $12.5M worth of NPV
(i.e. increase in wealth at t=0 by taking on the investment). We can then
calculate the ROI or multiple on cash with an entry of $2M and an exit for
$12.5M which is a 6.25x multiple on cash. This is the VCs perspective
VC Work
Build financial statement model
Determine adjusted beta (starting from 6.4 rule)
Determine investment value with exit
Compare against strategic alternatives
Entrepreneur Perspective on Valuation
Founders can ask what beta the VC is using to calculate the cost of equity
(rE) and how they calculated this. You can use the 6.4 beta rule as a
starting point for negotiations and adjust upward or downward from
there. This allows for an objective negotiation.

PERSONAL FINANCE
While finding and building love with a beta female as well as building
a perpetuity and maintaining an alpha body type, the male is to
manage his personal finances. Namely, he is to budget his cash flow
to be able to support his girlfriend/wife as well as fund his
perpetuitys cash flow needs.

PART V:
COST OF LIVING

Chapter 89:
Passive Income vs. Expenses
One should build a perpetuity whose monthly income exceeds one's level
of monthly expenses. This phenomena is a part of the Alpha & Beta
lifestyle or way of life.
Regarding expenses, one should be aware of their monthly expenses in
their current country as well as developing countries in order to plan for
an early retirement (i.e. Living off of the perpetuity) in a target
developing country (ex. Ukraine, China, Thailand).
Once one's perpetuity exceeds the expense level of the developing
country, one can enjoy the Alpha & Beta lifestyle overseas with the
chosen beta female.

Chapter 90:
Target Countries
Our target countries are those where the cost of living is 3x to 4x less
expansive to live in the downtown of a major metropolitan city than it is
to live in the downtown of a major metropolitan city in the United States
of America. For example, if the cost of living in downtown Miami for one
year is $45,000 per year, the cost of living in Kiev, Ukraine is $15,000 per
year.
Podil, Kiev, Ukraine

Flight: $600 one way from USA
Apartment: $500 per month
Residency: 1 year after using legal service
Larnaca, Cyprus
Flight: $232 one way from Kiev
Residency:
Bangkok, Thailand
Flight: $500 one way from Kiev

Residency:

PART VI:
EDUCATION

Chapter 91:
Undergraduate
One should take university very seriously and strive for the highest grades
possible. This will have a material effect on your career and thus earning
potential.
For example, in my undergraduate at the University of Massachusetts,
Amherst, I received a 3.8/4.0 and was cum laude.



Chapter 92:
Graduate
After undergraduate, one should pursue graduate school as quickly as
possible and prepare for a knowledge working career. Graduate school has
become the standard for those that wish to be knowledge workers be it
finance, law, medicine, or engineering.
For example, I received a scholarship to Texas A&M directly after my
undergraduate due to my high grades and received an MBA in Finance.


Chapter 93:
Post-Graduate
After you have established your career in a knowledge working field and
have begun syndicating on the side, I suggest that you formalize your
research efforts as you come up with various theses regarding cases for
disruption in various industries. You will ultimately end up publishing
these cases in various texts. It is not necessary, but continuing your
formal education is always a good idea. I suggest getting a Doctorate in
your career field part time from a University that is low cost. In doing so
you will earn the credential without having to sacrifice your career/cash.
For example, I have just gotten accepted/started at California Southern
University in their Doctorate of Business Administration program.


PART VII:
CAREER
The first perpetuity that is usually built by the alpha male is his career
which should be in a knowledge working field. In order to building a
career, it is important to have a solid education along with strong
performance from a GPA perspective.

Chapter 94:
The Value of a Career
How much is your career worth?
Lets do some calculations to show your career worth now and in the
future: From the ages of:
20-30 = $750,000(based on an average salary of $75k per annum) 30-40 =

$1,750,000(based on an average salary of $175k per annum) 40-65 =
$7,500,000(based on an average salary of $300k per annum)

Chapter 95:
Choosing a Career
Your choice of graduate school has ultimately decided your career path.
As mentioned, this should be some form of knowledge working that will
allow you to build a career perpetuity.
For example, my choice of career was finance so I pursued an MBA in
finance. While in graduate school, I founded the boutique investment
bank, AltQuest Group, which has allowed me to get origination,
mandate/target matching, and deal structuring experience usually only
reserved for Directors and Managing Directors at investment banks.
AltQuest Group has become a perpetuity for myself. We average 10 sellside mandates at any given time and close 2 to 3 deals per year. When
possible, I would suggest that those desiring a career in investment
banking get origination experience at an early age and build a book of
business.

Chapter 96:
Wall Street Career Paths
Letter to a Future Worker on Wall Street
Though the nature of financial system continues to change in order to
reflect the demands/needs/priorities of the society at large, there will
continue to be a wide breadth of opportunities available for those looking
to pursue a financial career on Wall Street. From investment banking to
private equity to research, there are numerous careers available for those
willing to venture to the East Coast.
There are however, certain skill sets and knowledge bases that remain
critical to your successful performance in each of the prospective careers.
This guide seeks to match the relevant skill sets and knowledge bases to
the given Wall Street career in addition to providing you with a general
overview of the respective career path.
Furthermore, in addition to the pertinent technical skills and knowledge,
Wall Street employers look for fit in their potential employees. This
means that they are looking to understand why it is that you are uniquely
qualified to work in their environment.
Now more than ever, each future worker on Wall Street must
differentiate themselves in order to gain an edge in the hypercompetitive
recruitment process that defines Wall Street. This means not only
possessing the humility, integrity, and tireless work ethic which
characterizes the American Spirit, but ultimately mastering the skill sets
and knowledge bases required by the given career.
It is our sincere hope that this document may guide your efforts in
determining your career path on Wall Street and the acquisition of its
respective compulsory knowledge and competencies.

Michael Herlache
Alpha University
Wall Street Preparation

As you meet with potential employers, you need to be well-informed as
possible about the finance industry in general and the employers sector
within the overall industry in addition to the specific firm that you will be
visiting. When preparing to engage professionals at a Wall Street firm, one
must know the following:
CURRENT CLIMATE
Know the sector within the industry
Know how the sector is segmented and where the company you
are meeting with fits within the industry
Be able to explain the competitive landscape, including the top

players/organizations
Be able to identify the market size (i.e. revenue base, number of

clients, number of employees) for the top players/organizations
What changes in the external environment have had the most

dramatic impact on the sector and how has this changed the business
model?
FORECASTING
Consider what is likely to happen in the sector over the next

three to five years
How will this sector grow/change?
Which organizations are likely to benefit or be harmed by these

changes?
FIRM
Know the primary products and/or services offered by the firm

and how they are unique
Know the culture of the organization, how it is different from the

competitors, and how it affects the way work gets accomplished

Be knowledgeable about significant as well as recent

transactions and what the firms role was in the transaction
Be knowledgeable about the background of the leaders of the

firm as well as the people that you will be interacting with
Wall Street Career Progression
While each financial services firm on Wall Street will ultimately have its
own unique organizational structure, most follow a common promotional
path for their employees characterized by similar job titles. Thus, what
follows is a break-down of the most common career path starting from an
entry-level position.
ANALYST
Those first entering the financial services industry typically begin their
careers with the title of analyst. While an analysts actual job
responsibility will differ across industries, time is mostly spent performing
company or sector research, manipulating and updating financial models,
and drafting marketing material in effort to help the firm win business.
Analysts can expect to spend approximately three years in this position
before being considered for a promotion. It is at this time, the top
performers will have the option to renew their contract with the firm,
switch firms or careers, or attend business school.
ASSOCIATE
The position of associate is held by either a former analyst that has been
promoted, or a recent MBA grad. An associates work involves managing of
a team of analysts to ensure that the work being performed is accurate
and timely. Additionally, an associate begins to interact with the client in
order to address their lower-level needs. An associate will usually spend
three years in this position before being considered for a promotion.
VICE PRESIDENT
Those holding the title of vice president (VP) are typically former
associates who have made it to the next level. The role of a vice
president involves managing a group of analysts and associates in order to
deliver on business that the firm has won. This ultimately means a higher
level of client interaction and responsibility for the given output of the
work process. A VP may spend a number of years in this role as until they
are either promoted or change companies.
DIRECTOR

For those steadfast and unique individuals whom can make it this far, the
end game is in sight. At this level, the nature of the work changes, as the
primary focus of the director is helping the managing directors manage
client relationship. While delivering on business remains crucial, the bulk
of the day-to-day minutia is delegated to the VPs whom report to the
directors. The time period until promotion is highly variable at this level.
MANAGING DIRECTOR
The highest level employees in financial services firms typically hold the
title of managing director (MD). Managing directors are responsible for
bringing in new business and maintaining relationships with existing
clients. Thus, they are the ones using the marketing material and
research created by the analysts and associates.
Investment Banking
Investment banking is the business of raising capital for companies and
providing advice on financing and mergers and acquisition restructuring
alternatives. The field of investment banking does not refer to one
function but a wide breadth of activities.
Careers in this field may involve the valuation of potential acquisitions,
assessing the credit-worthiness of bonds, company valuation,
management of initial public offerings, equity and bond financing, in
addition to a variety of consulting services.
Investment banks are usually classified into two categories; Corporate
Finance (Investment Banking) and Sales & Trading. Corporate finance
divisions are tasked with raising capital and providing M&A advisory while
the sales & trading divisions perform research and broker financial
transactions on behalf of clients and the firm. It is important to note that
although they may exist inside an investment bank; those working in sales
& trading are not to be referred to as investment bankers. Rather, these
professionals are known as either sales brokers or traders that work in
sales & trading.
Furthermore, within the corporate finance division of the investment
bank, there exist groups that are divided along industry- or product-lines.
Industry groups include: Financials, Institutions, and Governments
(FIG); Health Care; energy; Technology, Media, and
Telecommunications (TMT); and Consumer Goods among others.
Product groups include M&A, debt and equity capital markets, and
merchant banking in addition to others.


While many of the largest investment banks have converted to bank
holding companies in the wake of the financial crises, a typical fullservice investment bank will offer the following services which further
segment careers within the field of investment banking:
MERGERS AND ACQUISITIONS
Mergers and acquisitions (M&A), otherwise known as financial advisory,
is the product group within the bank that advises clients on the strategic
alternatives and analyzes the corresponding affects on the firms valuecreation efforts. This product group includes M&A and restructurings &
reorganizations in addition to other client-specific transaction expertise.
M&A bankers guide their clients in determining which companies and/or
divisions to acquire and which to divest (i.e. sell) in order to execute
their respective corporate-level strategies. Ultimately, these
processionals run what is known as the M&A process on either a sellers
behalf (sell-side) or a buyers behalf (buy-side). The M&A process
involves evaluating the performance of a prospective client, formulating a
buyer or target list, facilitating interactions between parties, performing
valuation analysis and due diligence, making or assessing bids, structure
the terms of the transaction, ultimately implement chosen alternative.
DEBT AND EQUITY CAPITAL MARKETS
The debt and equity capital markets groups within an investment bank
facilitate the raising and placement of capital on behalf of organizations
that need capital and those which excess capital to invest. The type of
financial instrument (i.e. debt, equity, hybrid) used in the placement of
capital depends on the nature of the investment, the desired level of risk
of the investor, and the general climate in the financial markets and
sector.
When approaching the public markets for an initial offering, investment
banks are said to underwrite the issue when they take possession of the
securities before they are subsequently sold to investors. Once the issue
has been purchased by investors, the client firm is said to have gone
public if the organization had not previously raised capital in the public
markets.
On the other hand, when raising capital in the private markets,
investment banks are said to sell the securities to investors in a private
placement. Private placements are subject to less regulatory
requirements than public offerings, but may ultimately be more expensive
to the clients firm since the secondary market (i.e. buying and selling of
existing securities) is much less liquid (i.e. able to buy and sell securities

without moving prices) when compared to the secondary markets for
publicly issued securities.
SALES AND TRADING
Sales and trading refers to the department within the bank that is
responsible for distributing/selling all of the financial products developed
by the investment bank. Once, the capital needs of a client have been
determined and the type, amount, and structure of the financial
instrument identified, the sales & trading arm acts to place the financial
asset in public or private markets. While an investment bank may treat
this as one group, sales and trading do in fact possess distinct roles and
responsibilities.
Additionally, those in sales seek to provide their institutional clients with
guidance on new issues of financial products, portfolio optimization, and
transaction support.
Sales and trading can be further segmented into investment research,
proprietary trading, and private equity/merchant banking.
Investment Banking Skill Set & Knowledge
Investment Management
Investment management involves the management of a variety of
securities such as shares and bonds, and assets such as real estate, to
meet an investors goals. Investors may be institutions such as insurance
companies, pension funds, corporations or private investors. Investment
management firms provide investment numerous investment options in
the equity, fixed income, real estate, and private equity industries.
One pursuing a career in investment management may perform research
or portfolio management at an investment bank, mutual fund, hedge
fund, insurance company, or with a pension or retirement plan sponsor.
BUY-SIDE RESEARCH
Investment Research on what is termed the buy-side is the primary focus
of Investment Management. Investment Management is the stewardship
of financial assets (equity securities, bonds, real estate, etc.) in many
organizational forms such as mutual funds, pension funds, and insurance
companies. The reason behind the buy-side moniker is that these firms
actually purchase the assets that they research to earn returns for their
clients. They make money by earning fees from the assets under
management.


The typical career path for individuals interested in a career in
Investment Research is Analyst > Associate > Portfolio Manager > Chief
Investment Officer (CIO). In the Investment Research arena, individuals
typically specialize in one industry and may make one or two shifts in
industry specialization to broaden their talents and overall investment
experience as they try to progress to Portfolio Manager and eventually
strive to become the Chief Investment Officer. Pursuing the Chartered
Financial Analyst (CFA) designation will also go a long way in advancing
your career.
Key skills needed to succeed in Investment Research are finance,
accounting, excel modeling, and statistics. Accounting cannot be
overemphasized because scrubbing of the financials to find a firms
true value is paramount and mastery of financial statement analysis is
extremely valuable. Too often finance majors overlook the value of
sound accounting fundamentals. Additionally, a deft touch in excel will
go a long way in modeling your discounted cash flow analysis quickly and
giving you a leg up on your peers.
The primary purpose of buy-side Investment Research is to analyze and
purchase financial assets with attractive return potential on behalf of
clients. It can be a very rewarding career, both personally and
financially.
SELL-SIDE RESEARCH
Investment Research on the sell-side in terms of skills required of the
employee is extremely similar to the buy-side. Additionally, sell-side
research is also trying to find attractive investment opportunities. These
are the only dimensions where these careers maintain similarities.
Sell-side research will not purchase financial assets. They earn money by
selling their research, thus the title of sell-side research. Often a
financial firm will have both an Investment Banking division and Research
(sell-side) division. There is supposed to be a clear separation here or
Chinese wall to ensure no conflicts of interest within the firm. Wall
Street has come under much scrutiny recently for accusations of not
strictly following this separation.
The career path here is much different as there is not an opportunity to
move into a Portfolio Manager role as there is no portfolio to manage.
Again, a career in sell-side Investment Research can be very personally
and financially rewarding.
HEDGE FUNDS


Hedge Funds have similarities to traditional investment management
mentioned in the section on Investment Research, Buy-Side in that a
Hedge Fund will analyze and purchase financial assets on behalf of
clients. However, Hedge Funds deal with very little regulation due to the
small amount of investors they open themselves up to. They are often
located anywhere throughout the world as opposed to mutual funds that
are primarily located in major financial hubs. Hedge Funds may employ
as little as 1 individual.
Hedge Funds fall into the class of alternative strategies. They have far
less restrictions as to what types of assets they can invest in than mutual
funds, pension funds, or insurance companies. The term Hedge Fund
originated from the strategy of hedging to attempt to neutralize downside
risks. Today, the term Hedge Fund will tell you nothing about the
strategy employed.
The primary skills necessary to succeed in a Hedge Fund are the same as
in the Investment Research field. However, due to its unique
characteristics regarding asset class choice availability, unique knowledge
of specific asset classes would be very useful. Gaining a position in the
Hedge Fund industry is very competitive, much more so than in traditional
Investment Management positions. Additionally, the compensation is very
lucrative.
PRIVATE EQUITY
Like investment banks, private equity funds seek to raise capital for
entities in need of funding. However, the method by which they raise and
place funds is entirely different. Instead of accessing the pubic markets to
broker the transaction, private equity firms first raise a pool of money
(i.e. fund) by tapping wealthy individuals and institutions looking for
above-average returns. After raising a fund, PE firms will then take
controlling stakes in target companies utilizing moderate to high levels of
debt to finance the remaining purchase price. This allows PE firms and
their investors to lever up their returns by taking advantage of the
favorable tax treatment of interest on debt financing. When the purchase
price of a target is primarily funded through debt, the transaction is
said to be a leveraged buy-out (LBO).
Often, one may hear venture capital and private equity mentioned in the
same breath. Venture capital refers to firms solely focused on the funding
and development of new ventures, while private equity firms choose
mostly to allocate their capital to established companies.


While it is possible to land a private equity position without prior relevant
work experience, the odds are against you. PE firms prefer individuals to
have worked for a few years in banking, management consulting, or
accounting (This goes for undergraduates as well as MBAs). This makes
sense, as the skills developed in these career fields are highly
transferrable to private equity. So if private equity is your end game, you
may have to first gain some deal experience before being considered
for a position.
Investment Management Skill Set & Knowledge
Investment Management Skill Set & Knowledge Continued
Private Wealth Management
Private Wealth Management is the management of financial assets for
high-net worth individuals. Key skills necessary here would be finance,
communication, and relationship building. Even though a Private Banker
must be financial savvy, just as importantly they must be customer
focused and be able to communicate clearly with their clientele,
especially during economically turbulent times when portfolios are losing
values.
Certified Public Accountants (CPAs) have found success in career switches

to Private Banking as the knowledge of individual income tax laws are
valuable in high-net worth estate planning. Pursuing the Certified
Financial Planner (CFP) designation is also highly recommended to be
noticed in the Private Wealth Management industry.
Daily duties of a Private Banker would be the monitoring of client

positions, reviewing client performance, and prospecting new clients.
Knowledge of Modern Portfolio Theory is crucial for a Private Banker, as
they make investment decisions in mutual funds and bonds on their
clients behalf. They must constantly monitor these positions, move
money as necessary, review performance to keep the clients disciplined in
the investment philosophy, and always be looking to grow their book of
business. The pay here can be good but the two best aspects versus all
other careers described are a better work life balance, more client focus
and interaction, and more autonomy.
Private Wealth Management Skill Set & Knowledge

Corporate Finance
Professionals in the field of corporate finance are employed multinational

firms, and focus on the strategic financial objectives associated with
increasing the value of their given firm to its shareholders. Increasing a
firms value includes the decisions that determine how an organization;
raises and manages capital, identifies suitable investments, apportions
dividends returns to shareholders, and identifies opportunities to merge
with or acquire another firm.
Careers in this field require the ability to evaluate investment projects or
engage in capital budgetary management, mergers and acquisitions,
public equity offerings, public and private debt placement, management
of existing debt, cash flow and foreign exchange management for ones
respective corporation.
Corporate Finance Skill Set & Knowledge

ALPHA IN HEALTH
Alpha in
Philosophy
Alpha in
Health
Alpha Male
Alpha in
Love
Alpha in
Finance

Chapter 97:
Archetypal Body Types
Fitness increases levels of bioelectricity in a sustained manner. Working
out itself increases bioelectricity and then there is a sustained higher
level of bioelectricity permanently.
Alpha in health means obtaining and maintaining a body type that is
between mectomorph and mesomorph with the ideal being no fat and all
fast twitch muscle.
Girls are also the most interested in mectomorph and mesomorph body
types in males evolutionarily speaking.
It is important for the male to obtain a mectomorph or mesomorph body
type in order to maximize his own bioelectricity as well as maximize
attraction with females.

Chapter 98:
Developing an Archetypal Body
Type
Mectomorph is all fast twitch muscle and no fat while mesomorph has
both fast and slow twitch muscle and no fat. If you are an ectomorph and
cannot put on muscle or fat, your goal is mectomorph. The training is high
levels of weight lifting focusing on the major masculine muscle groups. If
you are an endomorph and cannot lose fat, your goal is mesomorph. The
training should be high levels of cardio particularly running. Fast twitch
muscle is the ideal as it maximizes bioelectricity. Slow twitch still has
bioelectricity, just not as much as fast twitch muscle.

Chapter 99:
The Alpha Diet
The alpha diet involves no sugar, low carbs, and no fat. This also includes
high protein and large amounts of liquids (water, fresh juice).

ALPHA IN LOVE
Alpha in
Philosophy
Alpha in
Health
Alpha Male
Alpha in
Love
Alpha in
Finance

Chapter 100:
Alpha and Beta Methodology
The Alpha and Beta methodology is a behavioral model as well as a value
analysis model. In short the Alpha and Beta model tells us what behavior
has value. It makes the distinction between male behavior and female
behavior as value is different for the male and female just as attraction is
different for the male and female.
The female is evolutionarily programmed to be attracted to the male
gender archetype called alpha. The male is evolutionarily programmed to
be attracted to the female gender archetype called beta. These
distinctions are at the core of the Alpha and Beta model.
The model also explains what behavior is unattractive in males and
females. The behavior that is unattractive is that which models the
opposite sexs gender archetype. In other words, beta (i.e. feminine)
behavior is unattractive for the male and alpha (i.e. masculine) behavior
is unattractive for the female.
The Alpha and Beta model aids males and females in finding high value
sexual & love partners. It states that the male should select a beta female
and avoid alpha females. It also states that the female should select an
alpha male and avoid beta males.



Chapter 101:
Positive Tension Methodology
Spiking and Sustaining Bioelectricity
Using the Positive Tension Model we are intentionally trying to create
positive tension with the girl that is the source of attraction and love. We
are not going to break the tension but merely satisfy the tension through
sex and repeat as shown in the model.
Positive Tension Model:

1.
2.
3.
Teasing & playful,

Verbal sexual and direct
Physical escalation

4.
5.
6.
7.

Sex
Cuddle
Repeat
Conclusion
into a lifetime of Alpha and Beta in Love.

Chapter 102:
Selection is the single most important thing in the search for love.
Selecting the right girl (i.e. beta female) is the difference between Alpha
and Beta in Love for life and ending up with a feminist woman that does
not love men.
The number one determinant as to whether or not she is a beta female is
culture. Does she come from an objective culture or a biased culture?
The key is to target countries with objective cultures to find love. The
USA and Western Europe has a biased culture. East Asia and Eastern
Europe have objective cultures.


1.
2.
Selection Objective culture countries and the corresponding

social network for the country (ex. VK.com for USSR states)
Messaging - direct FB, VK messaging and coinciding friend
request:
Hey, I noticed you in the cooking group and found you interesting and
pretty. I'd like to get to know you better. How was your day?
3. Interaction Playful, sexual, love
4. Logistics Coordination of physical meetings
5. Escalate - Sexually
6. Commit Promise rings, marriage
Improve at each step in the process.
Notes


Beauty is common and that beta (femininity) is the real value driver.
For people that do not know what beta is you can simply say it is
femininity that is the most attractive in a female; beauty is common.
She will then know she is only valuable to you inasmuch as she is feminine
to you.
Would you rather be with a girl that truly loves you or with a girl that
does not believe in or value love?
The girl that does not believe or value love has less value. Despite their
physical attractiveness.
There are pretty girls with high love drives. High love drives come from
the culture.
Eastern Europe and East Asia have objective cultures.
Ideal wife is a beta female that is 5' 0" to 5' 9", 100 to 130 lbs with a
pretty face.

Chapter 103:
Relationship Methodology
1.
2.
3.
4.
5.
6.
Pickup
Sex
Cuddle & Commit (Exclusive discussion)
Promise ring
Engagement
Marriage

PART X:
NEXT STEPS

Chapter 103:
How to Be an Alpha Male Course
Now that you have read through the How to Be an Alpha Male book, you
are ready to formally go through the course and obtain:
i.
Beta girlfriend/wife
Whether you are looking for same night lays, a girlfriend or a
wife, you are going to need to start the process beginning with
selection. During the course we go through the selection process
with our students one by one and build a list of beta females. We
aid our students in shaping their initial message and ultimately
transition this into a relationship including face to face meetings
and sex.
ii.
An investment banking internship

Breaking into finance is difficult. It requires strong grades from
target schools. Not everyone went to Harvard or Berkeley and
even some of those that did are not successful in doing so. All of
our students that go through Alpha University receive an
investment banking internship working with a boutique
investment bank. This gets your foot in the door and finance
experience on your resume.
iii.
An alpha physique
If you have an ectomorph or endomorph body type, this portion
of the course is crucial. We form a diet with each one of our
students in order to get them to the target range of body types
which is between mectomorph and mesomorph.


Our course is not cheap. We priced it at the market for a combination of a
pickup course which runs $2,000 and a live investment banking training
course which costs $2,000. So in total our course is $4,000 since you are
getting value on the love front and finance front. Our initial city is Miami,
Florida since that is where I am located so you will need to make travel
arrangements. The course runs Friday, Saturday and Sunday every week of
the month.
To register for the course, you can go to www.UniversityAlpha.com and
make a payment via PayPal on the Prices & Plans page. Once you make a
payment you will receive an email in the next day coordinating the
schedule with you.
If you have any questions or to comment how awesome the book is, please
send me an email at:
mike.herlache@universityalpha.com


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