How Finance Modelers and Professionals Align Stakeholders and Support M&A Success with Morten
In this episode of Financial Modeler's Corner, host Paul Barnhurst is joined by Morten Lykke Pedersen, a seasoned financial expert and Partner at Deloitte, where he leads the financial modeling division within the Strategy, Risk, and Transaction Advisory group. Morten discusses his extensive experience in mergers and acquisitions (M&A), strategic financial modeling, and how financial models can empower businesses to make informed, data-driven decisions. He also shares insights on the importance of collaboration during the modeling process, tips for ensuring client engagement, and the role of financial models in presenting a company’s equity story.
Morten Lykke Pedersen, CFA, CFM, is a financial expert with over a decade of experience. He specializes in mergers and acquisitions (M&A), providing strategic insights that empower businesses to optimize their strategies through forecasting and risk assessment. Morten's career spans notable roles, including his tenure at PwC, where he managed valuation and modeling services. At Deloitte, Morten is dedicated to guiding businesses through complex transactions and strategic initiatives, helping them navigate industry dynamics and execute transformative transactions successfully. He holds a CFA charter and certifications in financial modeling, and his educational journey includes advanced degrees from Aarhus University, Saint Mary’s University, and the CFA Institute.
Expect to Learn
The critical role of collaboration in transaction modeling
How to build financial models that communicate a company’s story and manage risk
The importance of scenario analysis in M&A transactions
Why financial models should reflect business realities, not just numbers
How formal training programs, like the Chartered Financial Modeler (CFM), can elevate modeling skills and team capabilities
Here are a few quotes from the episode:
“Financial modeling is about understanding the business, not just crunching numbers.” - Morten Lykke Pedersen
“A financial model should only do what it’s supposed to do, keep it simple and fit for purpose.” - Morten Lykke Pedersen
“It’s not about the formulas; it’s about making sure the people who own the numbers understand what’s going on in the model.” - Morten Lykke Pedersen
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In today’s episode:
[02:16] - Guest Background
[03:43] - Worst Model Horror Story
[07:58] - Client Engagement
[11:52] - Conveying Company Value
[13:35] - Supporting Assumptions with Data
[21:11] - The CFM Journey with Morten's Team
[31:19] - Favorite Excel shortcut.
[32:14] - The Number One Career Lesson
[33:39] - Rapid-Fire Questions
[37:38] - Final Advice
Full Show Transcript
[00:01:03] Welcome to Financial Modeler’s Corner. I am your host, Paul Barnhurst, aka The FP&A Guy, and this is a podcast where we talk all about the art and science of financial modeling with distinguished modelers from around the globe. The Financial Modeler’s Corner podcast is brought to you by the Financial Modeling Institute. FMI offers the most respected accreditations in financial modeling, and that's why I completed the Advanced Financial Modeler. And I'm such a big fan of the program. I am thrilled today to be welcome on the show. Morten Lykke Pedersen, Morten. Welcome to the show.
[00:01:44] Guest: Morten Lykke Pedersen: Thank you for having me, Paul. It's a pleasure to be here.
[00:01:47] Host: Paul Barnhurst: Yeah, I'm really excited to have you. I know we touched base a few months ago and talked about doing a show. And modeling. Got in the way for a little while, but we were able to make it happen, so I'm. I'm thrilled to have you today.
[00:01:59] Guest: Morten Lykke Pedersen: Thank you. And I actually like your introduction about the FMI and the and the trading that they do, because I'm a very big fan of it, but we thought we were gonna dig into that.
[00:02:07] Host: Paul Barnhurst: Yeah, we'll definitely dig into that. I know you and I talk quite a bit about that and I'm really excited for you to share, you know, some of the things you've seen. So I'm going to go ahead and read a little bit of your background here. Morten Lykke Pedersen, CFA, CFM, is a seasoned financial expert and Partner at Deloitte, where he leads as Head of Financial Modelling within the Strategy, Risk & Transaction Advisory division. With over a decade of experience, Morten specializes in mergers and acquisitions (M&A), offering strategic insights that empower businesses to make informed, data-driven decisions. His proficiency in advanced financial modelling allows companies to optimize their strategies through precise forecasting and risk assessment, fortifying profitability and competitive positioning. Morten's career spans notable leadership roles, including his tenure at PwC, where he managed valuation and modelling services. His background in foreign exchange analysis at Jyske Bank and strategic consultancy further underscores his multifaceted expertise. Holding a CFA charter and certifications in financial modelling, Morten's educational journey includes advanced degrees from Aarhus University, Saint Mary's University, and CFA Institute. Morten is dedicated to guiding businesses in navigating industry dynamics and executing transformative transactions successfully. Love the background so you probably know this is coming. We start every episode with this question. Tell me that horror story is the worst model you built, you worked with, you've seen. I'm sure you have some kind of story.
[00:03:50] Guest: Morten Lykke Pedersen: We all have. And I guess there have been many across my career, and I think I'm probably going to go back to where I was quite early in my career. When you have that model, you take over from another person where you need to adapt and adjust and you just end up with that nine headed dragon of a monster model that no one really knows what goes on in there. Didn't have the experience to actually do that at that point. They didn't have the formal training. We managed to do the analysis we did and ended up with a happy client in the end. But it's still one of those models where I really would have liked to have more experience that I had at that point in time.
[00:04:29] Host: Paul Barnhurst: At least a good story, in the sense that you're able to get it across the line with the client. But yeah, anytime you inherit somebody else's model, it's always dicey and doubly dicey if you don't know what they're doing, which there's usually almost always one area where you're kind of like, what's going on? Sometimes you just open a file and you wonder what's going on.
[00:04:48] Guest: Morten Lykke Pedersen: Yeah, exactly.
[00:04:50] Host: Paul Barnhurst: I'm curious. This is that question we recently started asking. We ask each guest if I was to ask you how you define what is a financial model? How would you do that? What do you think about that?
[00:05:01] Guest: Morten Lykke Pedersen: Well, I look at a financial model as a strategic tool that is really used by the company or the advisors to present the business or the target business. In my case, the structured presentation showing the equity story, the financial performance based on various assumptions on market customers, profitability and so forth. So it's really how is that expected to develop in the future? That's how I would define it.
[00:05:28] Host: Paul Barnhurst: Great, I appreciate that. I always love to see the little different nuances everybody has on them. So I want to start here. You have quite a bit of experience on the transactional side of the business. It looks like that's kind of where you've carved out a lot of your career. What is it you like about transactional modeling? Like why is your focus been there?
[00:05:48] Guest: Morten Lykke Pedersen: In the beginning, it was all about building the models and helping the clients. But as I progressed in my career, it has become becoming more and more about helping clients. The people that I work with, because many of them are in potential life changing positions. If they build a company throughout their life and they want to sell that to someone else. They go from being just regular people to being perhaps very, very wealthy people. And that is life changing. And having those discussions about them, about the passion for the business. Having the commercial discussions, how to present the business in the best way, and then of course, also building the financial model in the end. That's also very, very interesting to do that.
[00:06:30] Host: Paul Barnhurst: So it sounds like, you know, which I'm not surprised by early on, a lot of fun and excitement in building that model. But as you've worked more and more with the clients, that's kind of come. The passion is really helping them see their successful conclusion, exit, merger, whatever that might be.
[00:06:47] Guest: Morten Lykke Pedersen: That is really where you create value to the clients that we work with. It is not the fact that we are building a financial model. It's the fact that we are co-developing together with them, collaborating with them and building something that they can use to get further in their life or wherever they want to go.
[00:07:05] Host: Paul Barnhurst: Agreed. Right. I mean, the model is nothing but a tool, and in this case, it's a means to helping them accomplish the transaction they're seeking.
[00:07:15] Guest: Morten Lykke Pedersen: Exactly.
[00:07:16] Host: Paul Barnhurst: And, you know, a bad model can kill a deal if the numbers don't make sense. And a lot of other things, it can have a huge impact.
[00:07:23] Guest: Morten Lykke Pedersen: It can for sure kill the deal. And I've also seen a lack of collaboration between advisors. Not necessarily kill the deal, but it's become a less optimal kind of a deal. So that's actually also one of the things I really enjoy when I do transaction modeling, that is to have that, like being that centerpiece, having everything knit together. So we have that stellar product that we can go out with to potential buyers of the company. I really enjoy working together with the diligence advisors, legal advisors, the company management and so forth.
[00:07:56] Host: Paul Barnhurst: Kind of speaking about that process. How do you ensure as you're doing the model, you're going through that whole process, you keep client engagement and kind of, you know, everything on the same page, so to speak. What do you think about that? Because I think sometimes it's easy, especially early in the career, to just get caught up in the model and forget a little bit about making sure the client's engaged and you're on the same page.
[00:08:20] Guest: Morten Lykke Pedersen: Yeah, we actually spend a lot of time, especially in the beginning of the model build process, engaging with the client. We spend quite a bit of time on actually not doing the financial model. We spend a lot of time on PowerPoint ING, structuring the financial model, having a discussion with the deleted leading and the advisor, the management, the owners. How do we want to present this? How can we make sure that if we want to go this route, looking at these customers or these end markets, how can we support that with that data? And of course, also having a discussion with the, uh, the, uh, due diligence advisors on, on what kind of data is actually recorded, because you want to make sure that you can show that everything links together the, the past, the current and the future as well. So it's really about having that discussion in the beginning and then of course, uh, having ongoing discussions with the clients on, on how it looks like if we do this or that instead. And I'm not talking if we use this and that formula because most people don't really care. I mean, my key goal is to make sure that our clients knows exactly what goes on in the financial model without actually opening it.
[00:09:38] Host: Paul Barnhurst: Yeah. No, nobody's ever seen, uh, a model or a deal fall apart because somebody chose to use Vlookup over index match. You know, I mean, no, nobody cares. I heard a really good example of how you kind of mentioned, you know, this is an exercise in business. Just the other day, we were one, if, you know, talking about budgeting and forecasting because this is my experience. They said if all you're doing is a math exercise, you might as well just stop because you're just kind of wasting everybody's time. Was the idea like, that's not the goal here isn't a math exercise. Yes, you can get a budget and could even be right, but you didn't really accomplish anything. It sounds like, you know, kind of similar in these M&A. It's a lot about the planning, the conversations, and the model is an outgrowth of that. But without all that, it's just a math exercise.
[00:10:26] Guest: Morten Lykke Pedersen: I, I fully agree, Paul. And, in our experience, it's, uh, one thing you could be certain of is that you can do the best forecast that you do, but you're probably not going to hit it like it's going to turn out in the future or you're not for sure. So what we tend to do is, build a lot of scenarios around the future and see if it's something like this. And so the most likely scenarios, how can we make sure that the business is prepared to take care of, of something if some risk suddenly arises. And so fully agreed.
[00:11:00] Host: Paul Barnhurst: Yeah. And I imagine you're doing a lot of scenarios comparable multiples, all kinds of different things because. Right. There's not a right answer to how much a company's worth. No, there's an estimate and then there's different opinions.
[00:11:15] Guest: Morten Lykke Pedersen: Yeah. That's actually where I really like that. I also have a valuation background because that really helps when you prepare that financial model, how do you want to present the case. So it looks like you have very much control about what's happening in the business. Having control of those risks. I mean, you cannot run a business without risk, but that's just how it is. But what investors really would like to see is that the management knows about the risk and how to handle those risks. And if you can get that into the model, then you are in a very good place.
[00:11:51] Host: Paul Barnhurst: Agreed. And kind of speaking to that, I know a big part of it is you're building those models and working on the transactions if you have to tell a story around the value of the company. You know what? There's equity's worth. Why is it something somebody wants is a going concern, right? Not just the values there today, but what am I going to get out of it in the future? How do you go about sharing that story? Kind of. How do you think about, you know, going from all those conversations and modeling to make sure that story is conveyed?
[00:12:21] Guest: Morten Lykke Pedersen: Well, first of all, you need to align with the different stakeholders. And that is, of course, the onus of the company, the management and the lead advisor. Also, the due diligence advice. You need to make sure that everybody is aligned on how that story is going to look from a modeling or technical perspective. You want to take it like that. You need to look at the targets, customers. What kind of end markets do they have? How is the growth expected in the different end markets? And of course, combine that with the strategy that the company is actually following. Uh, do they have certain initiatives or options, strategic options they are looking to deliver on? What does the profitability look like and can we show this data? this entire equity story with the available data. And that goes back to the fact that you can create a very, very good forecast. But if you don't have historical data to back that up, then it's going to be a difficult story to tell.
[00:13:19] Host: Paul Barnhurst: Sure. It becomes much harder to tell the story and have others find it believable, with nothing to do without hard data to support it. I don't want to say anything because there's other work you do and assumptions, but they're much easier to poke holes in.
[00:13:35] Guest: Morten Lykke Pedersen: Yeah, and of course, when you look into the future and that is what you do with the financial model in my line of work, then it's all based on assumptions. But the more you can kind of support those assumptions with historical data or having a market outlooks or something like that. It creates a more credible story about the business.
[00:13:54] Host: Paul Barnhurst: Totally agree. I had a professor in college, Professor Gallagher, and he was really big on every exercise we did. We had to do a complete five forces analysis, you know, Porter's five forces on the company. And he spent more time writing up and wanting us to understand the business. He didn't care so much about the assumptions we used as long as he could see. We thought about it. And there was thought going into why we did what we did. And then he also, you know, he graded the model and he wanted it to be right. He taught us good finance, but he drilled home that importance of really understanding what's going on. It's not just about the numbers. And I always hated some of it at the time because there's a lot of work, but I really appreciate it. As I look back now. Yeah, I can totally relate to what you're saying there. So now to ask you this question, you know, when it comes to building financial models, it seems like a lot of time you're on the team. The youngest person, the least experienced person is often building the model. Why is that? Why do you think we often end up? You don't generally see that. You know, the lawyer on the deal is often very experienced, a lot of the others, but it seems to happen more often than not almost that, you know, sometimes the least experienced modeler is often building the model.
[00:15:10] Guest: Morten Lykke Pedersen: Yeah, it's actually something we try not to do. Uh, because in, uh, in my opinion, it takes, uh, not just a half a year of experience because before your profession matures, it actually takes years. It's not just 1 or 2 years. You need multiple years of training and practicing before you are proficient in doing financial models. The exact reason why the youngest guy ends up with the financial model and I. I see the same thing in different kinds of transactions that is how it's, uh, going to play out. I don't actually think I have an answer for that, because it's not what creates most value to the transaction. It's simply not.
[00:15:49] Host: Paul Barnhurst: And I appreciate that, I like that I'm glad you don't try to do that, because I know even, you know, sometimes in PHP and a it was always a frustration, mind you, join a new company and they just kind of throw the model at you. There's no training, you know, investment banking, you're at least training everybody on how to build a model. A lot of finance companies, you know, in a lot of companies in FBA corporate finance, don't do that. And then you're building some awful models. I mean, we make mistakes in the beginning anyway. But if you don't have any training and you're just kind of trying to figure it out on your own, most people don't know best practice or where to get it.
[00:16:23] Guest: Morten Lykke Pedersen: And that's actually why I really like that. We see more and more of those, uh, training options and accreditations out there in the market. We did not have that when I started out my career. A I wouldn't say that everybody fumbled around, but, I mean, you're very much depending on having someone senior on the team that could teach you how to do it. Now it's probably a bit easier because you could do that formal training and actually get to a pretty decent level using some of that training. Fmi is a very good example of that.
[00:16:56] Host: Paul Barnhurst: Yeah, no, I totally agree. There's a lot of great training resources out there. In a minute. Here we'll get to FMI and kind of your experience because I know you've been using that with your team. But I'm curious. You've obviously interviewed a lot of people. Any advice on how you determine if someone is a good modeler during the interview process? It's not like you can ask them to build an all day model. I mean, I guess you can take a day and build one, but it's probably not realistic for, you know, the majority of us. So how do you think about that or try to ensure that they really have those skills?
[00:17:31] Guest: Morten Lykke Pedersen: It's really, really difficult to be quite honest. And I mean as you've just mentioned yourself, Paul, you cannot ask someone in a one hour interview to build a financial model. You can, of course, ask them for credentials. What kind of training did they do? Do they have some kind of accreditation? And then, of course, I like to ask them. So, uh, when you build a financial model, what is important to you? How do you go about building that? And, uh, what I really would like to hear in the beginning is that we separate input output and calculations. If you don't have that somewhere, then you're probably not that skilled. Uh, so it's for sure some of those quite, I would say basic things, uh, that, that we ask about. And then I look for passion. I look for passion in the line of work that we do. Uh, I look for someone who has a structured and probably a mathematical mindset because those, in my experience, are the easiest to to train to do financial models, but they also need to have a commercial mindset. And that part is really, really important because if you really like to go into financial models, or you really like to write codes, but don't have an interest in commercials. Then you should probably not aim for a career in financial modeling in the way that we do financial models. Then you should probably go into coding instead, and that's totally fine. But you need to have that commercial mindset.
[00:18:58] Host: Paul Barnhurst: Totally understanding. I know what you're talking about is right. You have people that just want to be technical and there are great places for them. But if they need to be customer facing and have that commercial aspect and they don't want to do it, you're setting them up for failure if you need them to do that.
[00:19:14] Guest: Morten Lykke Pedersen: Yeah, exactly.
[00:19:15] Host: Paul Barnhurst: Fully with you on that. I've seen that before. Both sides of that. People that are commercial but don't have the technical skills and they have the technical but not the commercial. It's tough sometimes to develop both and kind of, you know, speaking to that and that challenge, how do you think about building a modeling team to make sure you have the right capabilities? Right, because you're going to have everybody have their strengths and weaknesses, and some are going to be stronger on commercials and stronger on modeling. And what do you think about that? You've had to build several teams several times over your career.
[00:19:44] Guest: Morten Lykke Pedersen: The foundation is the right people. You need to have the right people on the team. If you don't have any, then you need to hire the right people. And when you have the people on board, then you need to train people in the same way. So they start working in the same way. Structuring the financial models in the same way. Having the same training, having the same practice, having the same way of thinking. Because then you kind of get around the fact that all modelers probably have their own style, but the more you can make that style similar, the better. The more efficient, the better client experience you can create when you do the financial models and you can build the models in much less time.
[00:20:26] Host: Paul Barnhurst: While my background is in FP&A. I am also passionate about financial modeling. Like many financial Modelers, I was self-taught. Then I discovered the Financial Modeling Institute, the organization that offers the advanced financial modeling program. I am a proud holder of the AFM. Preparing for the AFM exam made me a better modeler. If you want to improve your modeling skills, I recommend the AFM program. Podcast listeners. Save 15% on the AFM program. Just use Code Podcast.
[00:21:07] Host: Paul Barnhurst: It's funny how often it comes back to hiring the right people. All right. So when you and I chatted, you mentioned teams, your entire team completed the Chartered Financial Modeler, which is level two of the FMI very involved test. I know it takes a long time. So can you talk about why you guys decided to do that and just tell us a little bit about that experience, what it was like.
[00:21:30] Guest: Morten Lykke Pedersen: Let me start out with the why. And that is really because we want to be the best of the best. We want to make sure that we deliver stellar work every time we want to take our entire team, not just 1 or 2, to the next level. so, we decided to make the investment, and I'm not talking about cost here. I'm talking about time because it is a time consuming accreditation to achieve and much more demanding than the AFM. We took about that time and pushed through the team. And it was a great learning experience. It was a great team bonding experience across grades because we were all in the same boat. Whether your title was partner or whether it was associate. I mean, we all had to do the same work. We all had to do the same exercise. We all had to prepare in the same way and spend the same amount of time on actually preparing. So we kind of like, aligned in some way, uh, which we, of course, also try to do on a daily basis. But this was just different because it was in the spreadsheet kind of world. And so it was a really, really enjoyable exercise experience for the entire team where we learned quite a lot. I mean, our team is already seasoned modelers, but being able to build on that, and I would say you should probably be a quite experienced modeler before you, you dig into the CFM and um, because it's a lot of time and it's, it's difficult, uh, to be quite honest. It's not for everybody to do this.
[00:23:14] Host: Paul Barnhurst: Are you trying to scare me off from taking it? Just kidding. When you first suggested the idea to the team, were they on board? Was there a lot of reservation? I'm just kind of curious because I know it's a big time commitment. Right? The cost is relatively minimal as far as accreditations go. I'd say it's on the lower end from a cost perspective, but I know CFM is a big time commitment. So how was the kind of when it was suggested, was it hard to get everybody bought in or they all think it was a great idea?
[00:23:45] Guest: Morten Lykke Pedersen: To be honest, I don't think it was a matter of a time commitment from the team side because I made sure that they were books on projects, so it was actually possible to do that. I mean, if you work 100 hours a week, you're not going to put 25 hours on top of that. So, you need to have a manageable workload. And also because it's not something you can prepare for in just a week. And I think we've spent ten weeks or something like that dividing all the work on those ten weeks. So you need to make sure and I need you to make sure that the team had a manageable workload in that time period. Otherwise, it's simply not possible. I think the real concern to the team, and that actually also goes with the AFM, is the fact that people kind of think that they are on a test on whether they are good at that job or not. And thinking back to 2018, when I did the Ave M, I had the same feeling. But it's not about that. It's really not. But I totally understand that. That is the feeling that you as a person would sit with. So I think that was the concern, not the time commitment.
[00:24:58] Host: Paul Barnhurst: Sure. Yeah, I can say my concern about the AFM was I've announced this publicly, I host a podcast for, you know, if I fail, what am I going to look like? You know, so I, I can relate and you know CFM I'm putting that on. So kind of put that on hold till next year as I originally took it in October. But I've pushed it out a little bit. That's the same type of thing. It's like, okay, everybody publicly knows. I said, I'm going to take it. What happens if I fail? But I can definitely relate. I don't think it's the time. It's more than the judgment, the concern. Well, what if I don't do as good as I thought I'm going to do? How are people going to perceive me?
[00:25:35] Guest: Morten Lykke Pedersen: Yeah. And I actually did the exact opposite than you. I didn't announce this to anybody. When I did the, uh, the AFM. Uh, it was a bit more difficult to, uh, to go below the radar when it came to the CFM, because we were a rather large team to do that, but, luckily, we all got there through the accreditation.
[00:25:54] Host: Paul Barnhurst: That's awesome. And I would love to know what benefits have you seen? What comments have you heard from the team now that everybody passed? Like, have they all found it beneficial. And you're seeing improvement in modeling or what's kind of been the results.
[00:26:08] Guest: Morten Lykke Pedersen: First of all, I would say the CFM to me and the team, and that goes for all the team members who did it. It's the best modeling training that we have done in our career. I was a partner, but also the younger guys and girls on the team. We learned so much from that. And I mean, some of it we already knew. Uh, but the level of detail you go through in the different structures, uh, modules you need to build. And there are also some topics that you will use as corporate finance advisers or modeling advisers that we do not do on a daily basis? It is not that often we do very advanced working capital schedules, but that was some of the stuff that we needed to do. And we can actually see already now how we can implement that. The way to do a different kind of schedule, we can apply that in other settings. And we really we can see that already from the week after we did the accreditation, we put the new capabilities to work, and we actually delivered something that pretty sure we couldn't have done that efficiently beforehand.
[00:27:13] Host: Paul Barnhurst: That's great to hear. You saw the efficiency and it helped in areas, right. Because there's so many different areas to model. We all have stuff that we haven't done much. I always give the example till I started my own business three and a half years ago, I had never built a three statement model for work. I it was PNL, maybe a couple of balance sheet lines, some operational metrics and KPIs that you're forecasting. And you, you went on your way. So I still remember, you know, doing my first one for work and like, can I do this? But yeah, I build a lot of models, which is so different from your world because three statements are, I'm sure, critical most of the time.
[00:27:51] Guest: Morten Lykke Pedersen: Yeah. It's actually funny when you mentioned the three statements. It's when I started out my career, when you do corporate finance or valuations or modeling in general, in our line of work, the three statements were not the standard. Uh, you did a PNL and approximate cash flow. That was it. But we kind of like, moved into a different direction over the last decade or so, I would say. And now we're building a I wouldn't call it more advanced models, but more detailed models. And the reason why I say it like that is because the key thing you need to be aware of when you build financial models, is not to make it complex. You really need to build the model as simply as possible. And you would, of course, like to be able to account for all kinds of dynamic functions and functionality. But you need to have a model that's fit for purpose, and that means that it needs to only do what it's supposed to do.
[00:28:51] Host: Paul Barnhurst: Great advice there, and I agree with you. So I want to ask one more question on the CFM. Then we're going to get to some of our standard questions. We'll put you on the hot seat here in a minute, as we do with every guest. But any advice you'd offer to someone who might be listening, who's either considering taking the CFM or currently studying for it? What advice would you give them?
[00:29:12] Guest: Morten Lykke Pedersen: The CFM is a comprehensive accreditation to get through, so make sure you have enough time. Make sure that your front end loads your work up, because you cannot really catch up in the end and make sure that you have enough time to review everything. Because as you work through all the cases, all the exercises that are uh, that that you can. What is available to you? I mean, six, seven weeks down the road. I mean, when you have been working with different topics for 4 or 5 weeks, you kind of forgot what you did. Like 6 or 8 weeks ago. So you need to be able to have enough time to kind of recap, uh, what you did.
[00:29:53] Host: Paul Barnhurst: Sure. Because I know they study. They have cases for each of the different sections. So yeah, if you did revenue in week one and now you're doing the other one in week nine and you're taking it in week ten, it might be a challenge. You might want a couple weeks to just kind of be able to kind of put it all together.
[00:30:09] Guest: Morten Lykke Pedersen: And then I guess in my own experience, what surprised me the most, and that was actually on the, uh, the test day. Uh, you need to prepare for the unexpected. What we faced on that accreditation last October, it was not something we had seen before. It is not a standard case like the AFM, but you need to be able to apply the techniques, the tools that you have trained for during your preparation. But then you need to be able to flip it around and use it in a different way. So, uh, so I actually like the, the, the test format that you really need to be prepared for real life situations because that is what it is in reality.
[00:30:57] Host: Paul Barnhurst: And that's the feedback I get. I know somebody the way they prepared is what they were doing, uh, financial modeling, World Cup, all the cases, and they said that really helped them because you get a wide variety and you get thrown stuff that you don't traditionally see when you're just building a standard model per se. And so it helped them, you know, be able to use things in different ways, I guess. All right. What's your favorite Excel shortcut? What's that? What's that one you're going to tell us about?
[00:31:25] Guest: Morten Lykke Pedersen: Yeah. See that's actually a difficult question because I mean for me we use proprietary tools. And I actually like the one where I get the formula walker up and running the fastest. And to me that's control one. But I also know that that differs from every team member because the shortcuts are dynamic. So it's not a standard Excel.
[00:31:45] Host: Paul Barnhurst: You have some kind of a quick access toolbar type thing within the tool, and control one launches the commands. Yeah. Of the standard ones, you have a favorite you can share.
[00:31:55] Guest: Morten Lykke Pedersen: It's probably, um, control page down. It's a really the model quite quickly.
[00:32:02] Host: Paul Barnhurst: Yes. That one. I think any modeler who has a long model has used many times control down control up quickly trying to move between the model.
[00:32:11] Guest: Morten Lykke Pedersen: Exactly. Yeah.
[00:32:12] Host: Paul Barnhurst: Okay. What is the number one lesson over your career that you've learned that's helped you the most?
[00:32:20] Guest: Morten Lykke Pedersen: The number one lesson that being nice to people I know is not an Excel answer, but that is the most important one.
[00:32:27] Host: Paul Barnhurst: I love the answer. I've had other people say empathy before, right? The world could use more kindness. It's good. It's good for business. It's good in life.
[00:32:35] Guest: Morten Lykke Pedersen: Exactly.
[00:32:36] Host: Paul Barnhurst: Exactly right. I love the answer myself. All right, so one more. One more Excel question. What's the most kind of unique or fun thing you've done with Excel in your personal life? Build a model for or do something crazy? Does anything come to mind?
[00:32:56] Guest: Morten Lykke Pedersen: Yeah, but, um, I'm probably going to give you a slightly boring answer here. I think it goes back to my, uh, my own personal, uh, budget file. I would say it's a very fancy one. Uh, but it's very important and very dear to me, uh, where I used all my tips and tricks to, uh, to make sure that everything runs like, uh, like I like to have.
[00:33:14] Host: Paul Barnhurst: And I have to ask, how good are you at following it? Because I did budgeting and forecasting for a living, but I was terrible at doing my own budgeting.
[00:33:22] Guest: Morten Lykke Pedersen: Yeah. Uh, someone once told me that, uh, uh, money does not have any real value until you actually use it.
[00:33:32] Host: Paul Barnhurst: There are some people that never use it and just hoard it, but that's another story. I like it. All right, so rapid fire. Here's how this works. We're looking for yes or no. You can't say. It depends. I will add one little caveat on one of them. You can plead the fifth if you really don't want to answer. And we'll just move on. You get one of those. But that's it. And so it's yes or no on all of them. And then at the end, we'll let you elaborate on 1 or 2, because I recognize every single one of these has nuance. But if you say it depends on all of them, it doesn't make for very good listening. So you ready?
[00:34:10] Guest: Morten Lykke Pedersen: Understood.
[00:34:11] Host: Paul Barnhurst: Circular references. Yes or no?
[00:34:14] Guest: Morten Lykke Pedersen: No. Thank you. Vba yes. Simple VBA.
[00:34:19] Host: Paul Barnhurst: Okay. Do you prefer a horizontal model? All in one sheet. Vertical all in one sheet are horizontal like lots of sheets for your schedules.
[00:34:26] Guest: Morten Lykke Pedersen: I'm not sure how to address that with a yes or no, but it depends. It's usually a combination depending on the case.
[00:34:33] Host: Paul Barnhurst: Yeah. So you go with a hybrid mix. That's if I'm doing a mix. If I'm doing a simple three statement it's a vertical I get it. Um Excel dynamic arrays. Should we be using it in a moment? Models. Yes or no.
[00:34:46] Guest: Morten Lykke Pedersen: Yes.
[00:34:47] Host: Paul Barnhurst: What about fully dynamic models?
[00:34:50] Guest: Morten Lykke Pedersen: No. Not yet.
[00:34:52] Host: Paul Barnhurst: I would tend to agree. External workbook links.
[00:34:55] Guest: Morten Lykke Pedersen: No.
[00:34:56] Host: Paul Barnhurst: Thank you. Yeah, that's usually a pretty easy one for most people named ranges. Yes or no?
[00:35:03] Guest: Morten Lykke Pedersen: Uh, no.
[00:35:04] Host: Paul Barnhurst: All right. Do you follow a formal standards board like smart or fast? Maybe Deloitte has one that you use for your modeling.
[00:35:12] Guest: Morten Lykke Pedersen: We apply the fast principles.
[00:35:14] Host: Paul Barnhurst: Should financial modelers learn Python in Excel?
[00:35:17] Guest: Morten Lykke Pedersen: Yes.
[00:35:18] Host: Paul Barnhurst: What about Power Query?
[00:35:20] Guest: Morten Lykke Pedersen: Uh, yes. I think they should.
[00:35:22] Host: Paul Barnhurst: Power by.
[00:35:24] Guest: Morten Lykke Pedersen: Some should.
[00:35:25] Host: Paul Barnhurst: Okay, this is the million dollar question. We'll excel. Ever die?
[00:35:29] Guest: Morten Lykke Pedersen: Not before I retire.
[00:35:32] Host: Paul Barnhurst: I had someone say yes. They just hope it's not their lifetime. So similar.
[00:35:38] Guest: Morten Lykke Pedersen: Simply added.
[00:35:40] Host: Paul Barnhurst: Will I build the models for us in the future?
[00:35:43] Guest: Morten Lykke Pedersen: Not fully, but it would help us.
[00:35:45] Host: Paul Barnhurst: Okay. Do you believe financial models are the number one corporate decision making tool?
[00:35:52] Guest: Morten Lykke Pedersen: Yes I do.
[00:35:53] Host: Paul Barnhurst: Okay. And then what's your lookup function of choice? Which formula do you like?
[00:35:59] Guest: Morten Lykke Pedersen: I'm up at the old school, I would say. So I'm stuck with index match. That works for me.
[00:36:04] Host: Paul Barnhurst: I figured you're going to say next match. What about index X match?
[00:36:07] Guest: Morten Lykke Pedersen: That also works. But if I had to do it myself, I would probably do the index match.
[00:36:13] Host: Paul Barnhurst: I finally started switching to X match and I'm trying to get to use it more. I usually do X lookup, but it's been tough to switch to X match. I mean.
[00:36:22] Guest: Morten Lykke Pedersen: It goes back to the same fact that we spoke about earlier on that every model has his or her own style, and it's difficult to get a new style.
[00:36:30] Host: Paul Barnhurst: Agreed. Like I had a I don't know if you know Jeff Robinson. He's in the UK, he's a modeler, runs a, you know, investment business now. And he said, I've trained thousands of people and over my career I've reviewed models. Every so often I'll see a model where I could tell I've trained the person because they kind of have that footprint, like everybody has a style. And that's why we started the show by saying it's art and science. If you don't follow the science, it's just messy painting, you know, it's the modern stuff that you look at, have no idea what they're doing. But once you add that science, there's always still an art component to it.
[00:37:05] Guest: Morten Lykke Pedersen: For sure, for sure. And every time we get a model into the team, it's even though we don't know who actually built it, we can see who trained it, whether it was someone from Deloitte, or whether it was someone from an investment bank or someone from one of the other, because it's an art and we have different styles.
[00:37:23] Host: Paul Barnhurst: Yeah, sure. I mean, all of them differ, have little things they emphasize in the training, and you can kind of pick up, okay, they learn from here or they learn from there. Or I've started to see that more and more as I get to dive more and more into the modeling world with the podcast. Any advice, kind of final advice you would offer to our audience to help them be a better modeler?
[00:37:44] Guest: Morten Lykke Pedersen: For sure. Look into the more formal training that you can do. It's available. It's out there. We already spoke about some of it, and if you don't have any experience, that's a great place to start. And it also shows commitment. If you want to go into financial modeling that you have actually done some of these training sessions, it could also be other than the ones we spoke about, but that do show commitment to that training. I mean, it's out there and it's not that difficult to get started.
[00:38:12] Host: Paul Barnhurst: If our audience wants to learn more about you or get in touch with you, what is the best way to do that?
[00:38:17] Guest: Morten Lykke Pedersen: I'll feel free to connect with me for LinkedIn. I'm happy to get those invitations. Awesome.
[00:38:22] Host: Paul Barnhurst: Well, thank you so much for joining me, Morten. It's been a real pleasure to have you on the show. I've enjoyed it and thanks for sharing. You know what you're doing with your team. I think it's great that you've invested that time for each of them to do the training and to level up their skills, because it's not something you always get, you know, from companies. And so I think that's fabulous. You're doing that and I really enjoyed chat with you today.
[00:38:46] Guest: Morten Lykke Pedersen: Thank you for having me on, Paul. I also enjoyed it very much. Thank you.
[00:38:50] Host: Paul Barnhurst: Financial Modeler's Corner was brought to you by the Financial Modeling Institute. This year, I completed the Advanced Financial Modeler certification and it made me a better financial modeler. What are you waiting for? Visit FMI at www.FMInstitute.com/podcast and use Code Podcast to save 15% when you enroll in one of the accreditations today.