How to prepare for PE technical interviews?

Hey guys, I'm a first year ibanking analyst at a BB, and it's about that time of year when everyone is starting to think about recruiting for PE/HF. My main concern is that I haven't really had much modeling experience so far (deal flow has been kind of slow), so I was wondering what I could do over the next few months to bolster my modeling/LBO skills. Are there any good resources I can use to teach myself how to build an LBO? I just want to make sure I don't get caught out during interviews because my staffings haven't been that great so far.

Thanks!

 

speak to your friends in sponsors or M&A and have them drop you a simple LBO template. then speak to your friends in levfin and have them send you recent term sheets so you can learn a bit about typical buyout financing. read LCD news to keep up with the latest activity in high yield land. learn the deals you worked on inside and out, not just thinking from a credit/banking perspective, but from the equity side.

all that being said, the technicals are only part of the picture -- don't neglect the easy stuff, like having your resume walkthrough down pat, and having a decent answer for "why private equity?"

 
Best Response
zsurf:
speak to your friends in sponsors or M&A and have them drop you a simple LBO template. then speak to your friends in levfin and have them send you recent term sheets so you can learn a bit about typical buyout financing. read LCD news to keep up with the latest activity in high yield land. learn the deals you worked on inside and out, not just thinking from a credit/banking perspective, but from the equity side.

all that being said, the technicals are only part of the picture -- don't neglect the easy stuff, like having your resume walkthrough down pat, and having a decent answer for "why private equity?"

I will second what zsurf said, follow those things and look into getting Breaking Into Wall Street...I think it's a great resource. Additionally, conduct a search (if you haven't already) and see what comes up. The topic has been discussed previously and there are options, other than BIWS, and some people have posted what they've like about the different programs so maybe you will decide you prefer one over the other. Good luck.

Regards

"The trouble with our liberal friends is not that they're ignorant, it's just that they know so much that isn't so." - Ronald Reagan
 

What you will get will also be very dependent on what type of PE firm you are interviewing with. Not all PE shops will expect you to know how to build an LBO model (Ex. Growth Equity shops). From my talks with recruiters so far, about 95% of PE interviews are fit, although walking into an interview with being able to build and talk through a standard operating model would not be good. If you haven't had a lot of modeling experience, first start by learning how to build an operating model from scratch and take it from there. Everything else after that are just outputs.

 
SchruteFarms:
What you will get will also be very dependent on what type of PE firm you are interviewing with. Not all PE shops will expect you to know how to build an LBO model (Ex. Growth Equity shops). From my talks with recruiters so far, about 95% of PE interviews are fit, although walking into an interview with being able to build and talk through a standard operating model would not be good. If you haven't had a lot of modeling experience, first start by learning how to build an operating model from scratch and take it from there. Everything else after that are just outputs.

Disagree to an extent. Many recruiters say that the "model test" is being phased out but this was not my experience. I think it's a safe bet that you'll be expected to understand LBO modeling, and in my opinion, the best way to understand it is to learn how to do it.

 

Go through the BIWS modeling course and start building your own LBO model. Try practicing the simple version of it until you know what you are doing. PE shops is not going to ask you for a 2000 line model most of the time so learning to do a 30-40 minute one and a 1.5 hour one by heart.

In addition, echoing what zsurf said, learn your deals inside and out, especially M&A. I wouldn't worry too much about reading up the financing news but you need to understand the current debt appetite for deals and different tranches of debt that are generally available to the market now.

 
Ricqles:
Go through the BIWS modeling course and start building your own LBO model. Try practicing the simple version of it until you know what you are doing. PE shops is not going to ask you for a 2000 line model most of the time so learning to do a 30-40 minute one and a 1.5 hour one by heart.

In addition, echoing what zsurf said, learn your deals inside and out, especially M&A. I wouldn't worry too much about reading up the financing news but you need to understand the current debt appetite for deals and different tranches of debt that are generally available to the market now.

Where do you read up on the current debt appetite for deals and different tranches of debt that are generally available to the market?

If I'm understanding this correctly, you should be able to say:

"For an [insert industry] deal, you'll likely be able to get X%-X% financing from [revolver / senior debt / subordinated debt / PIK / mezzaanine / equity]. For [type of financing] interest rates would be around X%, and the debt provider would likely provide up to #.#X EBITDA."

I would imagine that a lot of the debt appetite would be different from industry to industry and from deal to deal - where would you typically find this information (deals you've worked on, announced deals if possible, website that tracks this info...)?

Sorry for the long-winded response, I'm basically just wondering where the best place is to keep an eye on the current market trends.

 
IUHoosier08:
Ricqles:
Go through the BIWS modeling course and start building your own LBO model. Try practicing the simple version of it until you know what you are doing. PE shops is not going to ask you for a 2000 line model most of the time so learning to do a 30-40 minute one and a 1.5 hour one by heart.

In addition, echoing what zsurf said, learn your deals inside and out, especially M&A. I wouldn't worry too much about reading up the financing news but you need to understand the current debt appetite for deals and different tranches of debt that are generally available to the market now.

Where do you read up on the current debt appetite for deals and different tranches of debt that are generally available to the market?

If I'm understanding this correctly, you should be able to say:

"For an [insert industry] deal, you'll likely be able to get X%-X% financing from [revolver / senior debt / subordinated debt / PIK / mezzaanine / equity]. For [type of financing] interest rates would be around X%, and the debt provider would likely provide up to #.#X EBITDA."

I would imagine that a lot of the debt appetite would be different from industry to industry and from deal to deal - where would you typically find this information (deals you've worked on, announced deals if possible, website that tracks this info...)?

Sorry for the long-winded response, I'm basically just wondering where the best place is to keep an eye on the current market trends.

Simple - market is so hot right now issuers can practically do whatever they want

 

My personal experience was that if you take out the modeling test, for the most part, PE interviews were less technical than ib interviews. The assumption is that if you can build a working model and come from a reputable bank/group, you should be good to go after at least 2 years in IB. I'm sure there are exceptions to what I'm saying, but most of my PE interviews were about fit, walking through what I did on a deal, and talking about investment ideas/trends/general landscape (and the modeling test of course).

 

I worked at a PE shop my sophomore year and junior summer. Because it was a small shop and I was a sophomore, I was not expected to know a ton. I do remember being asked what I think they do on a day to day basis, the only technical I received was an accounting question (running CapEx through the statements). I had to defend my resume also, which had some technical experience that I was asked about also. If it is a small shop, fit and maturity are very important b/c you are going to be working with older people who have tons of experience.

fdba Emory Blaine and BBA or otherwise trying to find the perfect pseudonym.
 
ayoayo:
R&P?

rosenbaum & pearl - banking and lbo textbook, easily found online in pdf format

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."
 
consultingboi:
Great, thanks! Quick question - does R&P or BIWS assume any prior knowledge - or do they start from the very basics? Considering buying the BIWS bundle package, so just want to make sure. Thanks again!

BIWS will walk you through rudimentary accounting in the intro package, but still might be a bit confusing if you don't have any background. I don't think you'll have any difficulties though.

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."
 

I'd recommend dropping the money on either BIWS or the WSO PE pack with lbo models. both a few hundred dollars.

Also, maybe the vault guides for PE and PE/HF's. Each around 30 bucks

"If you want to succeed in this life, you need to understand that duty comes before rights and that responsibility precedes opportunity."
 

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