List of Interview Q&As

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Private Equity Interview Questions

What are some ways in which private equity

firms create value?
Private equity firms can create value in a number of ways, such as using cash flows to pay
down debt. Since private equity firms typically use a greater percentage of debt to finance
an acquisition, they can use the cash flows of the business to pay down debt over time, thus
increasing value for all equity holders. They can also use dividend recapitalization to extract
value in the form of dividends without having to sell the acquired company, or they can use
revenue growth to increase EBITDA.

What is a leveraged buyout (LBO) and how do

you use an LBO model?
An LBO is the acquisition of a company that involves valuing the company’s equity and
debt. Debt typically contributes more than 50% of an organization’s purchase price, while
equity typically makes up less than 50%. You can use the LBO model to understand the size
of the equity check that financial sponsors contribute to the acquired business. You can
then make assumptions about the investment based on the EBITDA multiple paid.

What qualities do you use to evaluate whether a

company is a good LBO candidate?
When evaluating a company’s suitability for an LBO, I consider several variables, looking for
a company that is well-positioned in the market to be an industry leader and to have a
loyal and effective management team. I also examined a number of aspects, including
whether the company has non-cyclical recurring cash flows and whether it has diversified
revenue streams.

How does add-on acquisition create value?

Private equity firms may use this strategy to create value because add-on acquisition can
increase the value of the acquired firm’s cash flows by aligning them with those of the larger
firm, which in turn increases the value of both parties involved. This strategy may also
provide a competitive advantage to large acquiring firms competing with strategic buyers.

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Private Equity Interview Questions

Is it possible for a company to have a positive net

income yet still go bankrupt?
Yes, it is possible for a company to have a positive net income and still go bankrupt. This
can happen when a business’s demand for accounts receivable increases and the
company is unable to collect payments from customers while accounts payable create
pressure and the company is unable to defer payments to suppliers. These conditions can
result in a deterioration of working capital.

Walk me through the most successful deal you

have handled.
With a question about the most successful deal, you are given the opportunity to choose a
story you want to highlight in the interview. You should use the STAR format to tell of your
accomplishments. S/T (Situation/Task): you can start by providing a brief overview of the
project or situation. You should try to make it short, providing enough context to help your
interviewer appreciate the difficulty and importance of the task. A (Action): In this part, you
can walk the interviewers through your key actions and the competencies involved in
solving the tasks. R (Result): It’s essential that your story should have a “happy ending”. The
last part of your answer should describe the positive and concrete outcome to impress the
interviewers.

If you noticed that a company representing a

potential investment opportunity had a high
employee churn rate, what would you do?
If I notice a company with a high employee churn rate, I’d be very cautious about investing
in them. In general, a high employee churn rate is a sign of underlying problems in a
company’s organizational structure. It also often leads to high customer churn, which can
lead to revenue challenges and make it more difficult for companies to pay interest on time.

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Private Equity Interview Questions

When was the last time you made a change to a

strategy and saw positive results?
In my last role as a private equity analyst, I noticed that our portfolio companies were
struggling with their social media marketing strategies. They weren’t seeing the results they
wanted, so I decided to create a new strategy for them. I created a plan that would allow
these companies to use more effective methods of social media marketing while also
saving money on their overall marketing budget. The companies implemented this
strategy, and it helped them see an increase in sales.

Provide an example of a time when you had to

make a recommendation.
In my previous role as a private equity analyst, I worked with a client who owned several
small businesses. One business was struggling financially, so we decided to sell it off.
However, after selling the business, we realized that our client could have made more
money if they kept the business open. So, we bought back the business at a higher price
than what we sold it for.

Why are you interested in private equity?

I have been fortunate to work at [ bank], where I was able to learn a great deal about [X
industry]. What I’ve realized is that the parts of the job I really enjoy are learning about new
businesses and industries, along with their fundamentals, and truly understanding what
drives their growth/performance over the longer-term. That is why I want to transition to
private equity – because not only are you constantly looking at new industries and potential
businesses to acquire, but you also get to focus on figuring out different ways to create
value longer-term.

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Private Equity Interview Questions

What do you know about us and why do you want

to work at our firm?
[X Firm] is one of the only private equity firms out there that has been extremely successful
in adapting to changes in the consumer environment. Looking at your portfolio, I see that
you’ve been able to pivot away from heavy exposure to retail toward service-based
businesses that benefit from changes we’ve seen in consumer spending habits over the
last decade, i.e more spending on experiences. Overall, I think your firm is one of the few
that have been able to adapt to changing trends. It also seems that your firm is open to
growing talent from within: as I look at the investment team, I see many partners who
started out as associates at the firm – and that is not something you usually see at many
private equity firms.

Have you checked out our website? If so, what

investment did you like the most, and why?
Your answer to this question will tell the interviewer a lot about your dedication to the
company and your investing knowledge and philosophy. To answer this question correctly,
make sure that you have studied the company’s website thoroughly. You should be able to
identify one investment that you like and explain to them why it was a great investment.

What is our firm’s investment strategy?

To answer this question well, you’ll have to do a lot of research. You can probably find an
official statement on their website, but a more insightful answer would come from having
read any interviews with founders or partners that talk about their approach, as well as from
understanding the investment themes that span their portfolio companies.

How do you stay informed about changes in the

private equity industry?
I listen to several private equity podcasts each week, including Future Finance 360 and
Private Equity Today. I’m also subscribed to multiple industry newsletters that I enjoy
reading in the morning as I start my day. At least once a month I attend a networking event
with other industry professionals, which helps me learn more about the investments they’re
making as well as upcoming trends.

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Private Equity Interview Questions

Walk me through your resume.

This is self-explanatory; you should be prepared to answer this question in any interview.
Don’t memorize what you are going to say because you will bore the interviewer. Sound
excited to be there, walk through all the important parts of your background, the experience
you are getting in your current role, and end with why you want to transition into private
equity.

What are three strengths you can bring to our

firm?
Three of my biggest strengths are collaboration, critical thinking, and data modeling. In my
current role, I collaborate closely with the CFO and other team members to develop
accurate revenue forecasts. My ability to think through situations critically and to model
data meaningfully also helps me analyze information and develop smart business
suggestions.

What makes you stand out as compared to other

candidates?
I have five years of experience as an analyst in private equity, which has given me valuable
skills like data analysis and financial modeling. I am also highly organized and detail-
oriented, which helps me stay on top of my work. In addition, I am passionate about finance
and investing, so I enjoy learning new things and working with others who are interested in
these topics.

How do you handle conflict in the workplace?

I haven’t experienced a huge amount of conflict with co-workers. However, when it does
happen, I always try to resolve it straightaway, because I am a strong believer that conflict
can have a negative impact on a team. I will try to resolve the conflict myself by first
assessing if I did anything to contribute to it. I would then speak to my co-worker in private
to get to the bottom of the problem. I would be calm, respectful, and professional while
speaking to them, and I would seek a resolution that we were both comfortable with, so we
could move forward quickly for the sake of the team.

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Private Equity Interview Questions

What are your personal strengths and

weaknesses?
These types of questions are typical, but it is not easy to meet the interviewers’ needs. Using
this question, they seek to assess what you think your strengths and weaknesses are, and
they want to observe how you respond to challenges. Employers also look for the skills,
experience and attitude needed to get the job done. So, you need to focus on what
strengths you have that are good for the job, answer questions in a positive manner, be
honest and sincere, and avoid mentioning weaknesses that would make you a bad fit for
the job.

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 Private Equity Interview
Prep Checklist

Know your audience:

Size of transactions, geographic focus, investment strategy, etc.

Firm’s bias in relation to pre-MBA PE background/i-bankers/consultants/operators.

Understand firm size and number of employees.

Why PE vs other roles, such as ECM/advisory?

Be able to explain what makes a good investment.

Technical skills:

Demonstrate your knowledge of accounting and LBO return drivers.

Practice presenting your background and experience:

If asked to go through your CV, make sure you take no more than two minutes.

Prepare examples that illustrate your skills:

Specifically relationship skills, business judgement, and analytical skills.

If you have transaction experience:

Prepare examples of transactions in which you played an important role,

explaining how your previous experience prepared you for a deal-centric
environment.

Be prepared for unpredictable questions,

which normally fall into the following categories:

CV walk through

Deal experience

Quantitative

Buyout case study

Investment ideas

Cultural/personality fit