LBO interview questions
9 questions. How a leveraged buyout works, where the returns come from, how the debt is built and what makes a good target. Each page takes one spoken answer from weak to strong.
- Walk me through a basic LBO.
- What makes a company a good LBO candidate?
- Why private equity?
- What is the difference between IRR and MOIC?
- Where do the returns in an LBO come from?
- Walk me through the sources and uses in an LBO.
- What is a dividend recapitalization, and why would a private equity firm do one?
- What kinds of debt are used in an LBO?
- How do you decide how much debt a company can support?
What these questions test
- Whether you can walk through a buyout from purchase price to exit and name the three sources of return.
- Whether you can do the returns math in your head: a multiple of money over a number of years into an approximate IRR.
- Whether you think like an investor: what could go wrong, and what the debt can survive.
Paper LBO example: 3 worked problemsPaper LBO practiceAll private equity interview questionsAll interview questions
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