Private equity interview questions
29 questions. In interview order: fit, deals, LBOs, owning a company and the technicals. Each page takes one spoken answer from weak to strong.
Fit and why private equity
Expect "Why private equity?" in every round. The answer has to come from something you have done and say why you want to invest, not advise.
Deals and case studies
Bankers are asked to walk through a deal they worked on: what the company does, why the buyer paid that price and whether they would have invested. A case study hands you a company and asks whether to buy it. Some firms add a modeling test in Excel.
LBOs and paper LBOs
A paper LBO is a small buyout done with pen and paper in a few minutes: price, debt, growth, exit and the return. Say the math out loud until the multiple of money and the IRR come quickly.
Owning a company: add-ons, recaps and exits
What a firm does after it buys: adding smaller companies, paying itself a dividend with new debt, interest paid in kind and selling at the end.
- Why would one company want to acquire another?
- What are synergies, and which kind would you trust more?
- What is a dividend recapitalization, and why would a private equity firm do one?
- What is PIK interest, and how does $10 of it flow through the three statements?
- Walk me through a sell-side M&A process.
Accounting and valuation
The banking technicals still come up. These are the ones closest to a buyout, where cash flow and debt decide the return.
- How do the three financial statements link together?
- How can a company be profitable and still run out of cash?
- What is working capital, and why does it matter for cash flow?
- What is EBITDA, and why do bankers use it?
- How do you get from revenue to unlevered free cash flow?
- What is the difference between enterprise value and equity value?
- How would you value a company?
- When would you use EV/EBITDA instead of P/E?
- Walk me through a DCF.
What these questions test
- Fit: whether you want to own and run investments rather than advise on them, and whether your story shows the judgment for it.
- Deals: whether you can say if a company is worth buying at a given price, what could go wrong and how much debt it can carry.
- LBOs: whether you can do a paper LBO in your head, from purchase price to exit, and name where the return comes from.
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