LBO modeling test, and how to prepare
An LBO modeling test is a timed exercise where you build a leveraged buyout model in Excel from a short prompt, then report the IRR, the multiple of money and a view on the deal. Private equity firms give them most, often in the second round, and Wharton's 2018 career guide describes about 3 hours in the office or a weekend take-home with a 3-page deck. For the interview after the test, Soreno, an AI voice interview practice app for consulting, investment banking and other finance candidates, runs private equity interview practice with follow-up questions on how you would explain your model.
Updated
- Mostly private equity. Career offices tell PE candidates to expect one. Banks lean on technical questions.
- Four formats. A paper LBO, a timed LBO in Excel, a case with a bid, or a take-home.
- Minutes to a weekend. Wharton's 2018 guide describes about 3 hours in the office, or a weekend with a 3-page deck.
- Often in round two. MBA on-cycle runs in early fall of year one and can be over in days.
- Practice by rebuilding. Build the same LBO from a blank sheet until it takes under an hour.
A sample LBO modeling test, with timings
Our own practice prompt, built like a short in-office test. Set a 90-minute timer, build it from a blank sheet, then check your answer against the last row. Dollar figures are in millions.
The prompt6 inputs
Everything you need is here. Anything missing, assume and say so.
The company
$500M of revenue, 20% EBITDA margin
So EBITDA is $100.0M today. Revenue grows 5% a year for five years and the margin holds.
The deal
Bought at 10.0x EBITDA
A purchase price of $1,000.0M, funded with 6.0x of debt ($600.0M) at 8% and $400.0M of sponsor equity. Ignore fees.
Cash flow
D&A and capex 3% of revenue each
Net working capital is 10% of the change in revenue. Tax is 25% of pre-tax income.
Debt
All free cash flow repays debt
Charge interest on the opening balance each year, so the model has no circular reference.
The exit
Sold after five years at 10.0x
The same multiple as the entry, so none of the return comes from multiple expansion.
The ask
IRR, multiple of money and a view
Give both return figures, say where the return comes from, and whether you would do the deal at this price.
How to spend the 90 minutes6 blocks
Our suggested split. The point is a returns number with time to check it.
0 to 10 min
Inputs on one tab
Every assumption in one block, typed once, so a reviewer can change any of them.
10 to 25 min
Sources and uses, then the income statement
Price and debt from the multiples, equity as the plug. Then revenue to net income for five years.
25 to 50 min
Cash flow and the debt schedule
Net income plus D&A, less capex and the working capital build. That cash repays debt.
50 to 65 min
Returns
Exit value less the debt left is the sponsor's equity. Divide by the equity in for the multiple, then the IRR.
65 to 80 min
Checks and one sensitivity
Check that sources equal uses and debt never goes negative. Then a small table of IRR against exit multiple.
80 to 90 min
The view
Three lines: the returns, what drives them and the one risk that would change your answer.
The answer to check againstWorked
Rounded to one decimal. Small gaps from rounding are fine.
Year 1
$28.4M of free cash flow
EBITDA of $105.0M less $48.0M of interest, tax, capex and the working capital build. Debt falls to $571.6M.
Year 5
EBITDA of $127.6M, $403.8M of debt left
Free cash flow rises each year as EBITDA grows and interest falls, reaching $51.0M in year 5.
Exit
$872.5M to the sponsor
10.0x × $127.6M = $1,276.3M of value, less $403.8M of debt.
Returns
2.2x and about 17% IRR
$872.5M ÷ $400.0M = 2.18x over five years, an IRR of 16.9%.
Where it came from
Growth and debt paydown
$276.3M from EBITDA growth at 10.0x and $196.2M from debt repaid add up to the $472.5M gain. The multiple adds nothing.
The full LBO model, worked
The four formats
Which one you get depends on the firm and the round. Your recruiter or the invitation says which.
Paper LBO
An LBO done by hand in a few minutes, from round numbers to the IRR and multiple of money. Often an early screen, sometimes out loud.
Timed LBO in Excel
You get basic assumptions in Excel and model the returns over a set period. Wharton's career office describes this as the simple version of the PE case.
Case with a bid
You read an information memorandum on a business for sale and say whether you'd bid, and at what valuation. This is the fuller version of the PE case.
Take-home
The same case over a weekend, handed in as a short presentation, for example three pages.
From Wharton MBA Career Management (2018) and Yale SOM Career Development (2026).
When the test comes
What career offices tell their students, from MBA on-cycle to the analyst level.
Show the timeline
MBA, year one
On-cycle starts early
Yale SOM's career office says on-cycle PE recruiting for internships starts in early fall or even late summer of the first year, and often lasts only a few days.
Interviews
Technicals, cases or a full test
The same office tells students to be ready for technical interviews, case studies or full modeling tests.
Round two
The case
Wharton's guide says the PE case usually comes in the second round, either in the office in about 3 hours or over a weekend.
Banks
Skills assessments
JPMorganChase says some roles use virtual skills assessments, and technical tests can be online or live with an interviewer.
No private equity firm publishes how its own test runs, so this page doesn't give firm-by-firm lengths.
9 questions that build the same skills
A test checks whether you can build it. The interview around it checks whether you can explain it. Each has a note on what a strong answer does.
The model, step by step4 questions
The parts every LBO test asks for.
Walk me through the sources and uses in an LBO.
Show what a strong answer does
Start from uses, because the price sets them, and make equity the plug that balances the table. Practice it, see a model answer
How much debt can this company support?
Show what a strong answer does
Size it on cash flow and interest cover, not on what the price needs. Practice it, see a model answer
Walk me through how the three financial statements link.
Show what a strong answer does
Follow net income from the income statement into cash and equity, so the balance sheet balances. Practice it, see a model answer
Take me from revenue to unlevered free cash flow.
Show what a strong answer does
Go line by line and say why each item is added back or taken off. Practice it, see a model answer
Returns and judgment5 questions
What the reviewer asks once the model works.
Walk me through a basic LBO.
Show what a strong answer does
Price and funding, cash that repays debt, then exit and returns, in under two minutes. Practice it, see a model answer
Where do the returns in an LBO come from?
Show what a strong answer does
Split the gain into EBITDA growth, multiple change and debt paydown, and check that they add up. Practice it, see a model answer
What is the difference between IRR and MOIC?
Show what a strong answer does
Time. Show two deals where the two measures disagree. Practice it, see a model answer
What makes a good LBO candidate?
Show what a strong answer does
Steady cash flow, low capex needs and a price that leaves room. Tie each point to the model. Practice it, see a model answer
What types of debt are used in an LBO?
Show what a strong answer does
Senior to junior, with what each costs and when it is repaid. Practice it, see a model answer
Mistakes and prep
Mistakes that cost candidates
No checks
Sources must equal uses and the balance sheet must balance. Build both checks first, so a broken link shows at once.
Typed-in numbers
A hard-coded figure in a formula breaks when the reviewer changes an assumption. Keep inputs in one place.
A circular reference you can't control
Interest on average debt makes a loop. Use the opening balance, or add a switch to turn the loop off.
Time on formatting
Get to a returns number first, then tidy. An unfinished model with nice colors still fails.
No view at the end
A case test asks whether you would invest. End with a yes or no, the price and the two risks that matter.
A four-week prep plan
For an LBO test. Adjust if your recruiter names another format.
Week 1
Rebuild one model
Take a worked LBO, such as the one on our LBO model page, and rebuild it from a blank sheet, checking each line.
Week 2
Do it against the clock
Build it again with new numbers in 90 minutes, then 60. Penn's career office has a basic practice model to work from.
Week 3
Add the case
Take a company you know, write the assumptions yourself and finish with a one-page recommendation.
Week 4
Paper LBOs and the story
Do a paper LBO a day and practice explaining your model out loud, the way the interview after the test will ask.
What career offices and banks say
From each office's or firm's own page, read on October 15, 2026.
Wharton MBARound two, about 3 hours
Wharton's 2018 guide says the PE case usually comes in the second round. It is either a simple LBO in Excel or a bid on a business from an information memorandum, done in about 3 hours in the office or over a weekend with a short deck.
Wharton: case interviews by industryYale SOMEarly fall of year one
Yale's career office says MBA on-cycle PE recruiting begins in early fall or late summer, often lasts only a few days, and can include full modeling tests.
Yale SOM: exploring private equityChicago BoothSample test training
Booth's Private Equity Group runs a session that walks through a sample model test and how to complete the exam.
Booth PE Group: model test trainingHarvard GSDTimed, real estate PE
Harvard's design school runs a workshop for the real estate PE modeling tests used in full-time recruiting, building a model under time limits.
Harvard GSD: J-TermJPMorganChaseOnline or live
JPMorganChase lists virtual skills assessments among its assessments, and says technical tests can be online or live with an interviewer.
JPMorganChase: how we hire, FAQsThe test gets you in the room, then you explain it
Soreno's AI interviewer asks the LBO and valuation questions that come with a modeling test, follows up on your numbers and scores you. Free for 7 days.
Questions people ask
What is an LBO modeling test?
A timed test in which you build a leveraged buyout model in Excel from a short prompt, then report the IRR, the multiple of money and whether you would invest. The sample above is one you can time yourself on.
What is a modeling test?
A timed exercise in which you build a financial model, most often an LBO, from a set of assumptions or a company's materials. It shows a firm you can do the analyst or associate work before it hires you.
Do investment banks give modeling tests?
Less often than private equity. Wharton's guide says banking interviews are technical and behavioral questions, without cases. Some banks, such as JPMorganChase, use online skills assessments for some roles.
How long is a modeling test?
From a few minutes for a paper LBO to a weekend for a take-home. Wharton describes about 3 hours in the office for the in-person case. Your invitation gives the time for yours.
Is it open book? Can I use templates?
Ask the recruiter. In-office tests usually give you a blank or partly built file. For a take-home, build from your own work, because the interview that follows will ask you to explain every line.
What do I hand in for a case test?
The model and a short recommendation: whether to invest, at what price, and the main risks. Wharton's example is a three-page presentation.
How is a modeling test different from a paper LBO?
A paper LBO is done by hand in minutes with round numbers. A modeling test is built in Excel and runs each year's cash and debt. Our paper LBO page and LBO model page show one of each.