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Private Equity Interview Questions - Guide

Sample Private Equity Interview Questions

Read a few sample questions from our PE Interview Prep Guide for free below! This is just a small sample of the many questions and sample answers we have to help guide you through the interview preparation process. We have thought of every angle of the private equity recruiting process, and pooled the knowledge and experience of private equity professionals in all stages of their careers to compile this robust guide.

Sample Technical Private Equity Interview Questions:

This is one of the most common questions in a private equity interview if you come from a deal-oriented background. The interviewer might let you choose a deal to discuss or pick one at random from your CV. The interviewer might ask you anything from a simple high level overview all the way down to a detailed discussion of the investment thesis, purchase price, operating forecast, and expected returns. This type of question is used to gauge the following:

  • Your investment judgment
  • Your knowledge of the PE investment process
  • Your ability to focus on the most important issues
  • Your knowledge of PE financing, accounting, and modeling
  • Your deal memory for deal facts and context

Before you walk into any PE interview, you should reacquaint yourself with the following facts about every deal on your CV:

  • Purchase price, including the multiples of EBITDA and EBIT it represented
  • Sources and uses of capital
  • The investment thesis and its primary drivers
  • The key diligence issues and findings
  • The base operating case/projection
  • Key risks and upsides

...and at least 4 more facts...

The financial statements do a good job of describing a company's historical performance, but they do not necessarily tell us everything we need to know about a company's future performance. Since the value of a company depends primarily on its expected future performance, the financial statements are insufficient. Some important things financial statements don't tell us include, but are not limited to:

  • The future growth of the company's industry
  • The company's competitive position including share, relationships, patents, etc.

...at least 2 more considerations...

Debt covenants are contractual agreements between lenders and borrowers (such as companies which have been bought via an LBO) that give lenders certain rights to help protect their investment. Maintenance covenants require the borrower to maintain a certain equity cushion or debt service coverage cushion to maintain their ability to repay its debt. Incurrence covenants prevent the borrower from taking certain actions which could be detrimental to existing lenders such as taking on more debt or paying out cash dividends to equity holders. Strict covenants can make an investment much riskier to a PE investor because a default on a covenant can result in the loss of the entire equity investment even if the portfolio company remains solvent. See the section on covenants for details.

There is no right answer to this question, but a good answer demonstrates your passion for investing, understanding of risk vs. reward, and understanding of investment time horizons. I usually answer this question by following these steps:

  1. Discuss a few of the investment options available to you
  2. State what your investment goal, risk appetite, and time horizon is
  3. Compare and contrast the risks, rewards, and time horizons of these options
  4. Pick the investment options which best fits these criteria

A sample answer might sound like this: "The investments options with which I am most familiar are private equity co-invest, bonds, and equities, so I would limit my investments to those areas because I would not invest in something I do not understand well. I have a long way to go before retirement, so my main investment goal is a high rate of return. However, I would also like to purchase a home in about five years, so I will require liquidity around that time. In order to meet my goals, I would invest 10% of my assets in PE co-invest because historically it offers the highest long-run return. I would not invest more than 10% because co-invest is highly illiquid and too correlated with the fortunes of my employer. I would invest 60% of my assets in passive equities funds, split evenly between domestic and international stocks to take advantage of equity’s historically solid returns while increasing diversification. I would then invest the final…[full sample in guide]"

Man Picture

The classic private equity solution to this common problem is called an "Earn-out". Sellers are frequently more optimistic about the future performance of a business than PE investors are willing to underwrite. In such cases either party may propose that the sellers are paid a portion of the total acquisition price up-front, while a portion is held back (frequently in an escrow account) until the business' actual future performance is determined. If the business performs like the seller expects then the seller is paid the remainder of the purchase price some months or years after the close of the deal. If the business under-performs the seller's expectations then the buyer keeps some or all of the Earn-out money. This type of structure is a common way of bridging valuation gaps between buyers and sellers

Sample Behavioral Private Equity Interview Questions:

We recommend following a structure like this:

  • Where you grew up
  • What personal interests led you to choose your undergrad college and major
  • -It’s good if you can already set the scene here for your ultimate interest in business, investing, etc.
  • What I learned in college which made me take my first job out of undergrad
  • What skills I learned on my first job, what I liked about it, and what I didn’t like about it
  • - The what I learned section is a chance to highlight skills and attributes which PE recruiters are looking for
  • - I try to pick my “likes” to be things which are still true in PE
  • - I try to pick my “dislikes” to be things which are less present in PE
  • Why I’ve decided to move on from this job and switch to PE

Sample Answer:

“I was born and raised in XXX until my family moved to XXX at age XX. When I was in high school I took a class in XXX which got me interested in studying XXX in college. I chose to go to XXX University because I discovered that they have a particularly strong XXX program. While at school I discovered that I have a real passion for XXX, which led me to pursue a career in [INDUSTRY]. I chose to work at [OLD FIRM] because I knew I would learn XXX and gain exposure to XXX. I spent XXX years at [OLD FIRM] and learned a lot while I was there. I think the most valuable skills I learned at [OLD FIRM] are XXX, XXX, and XXX. I enjoyed my time at [OLD FIRM] very much because I really liked XXX. However, as time passed I began to recognize that there are additional thing that I want to do and learn in my career. Specifically, I’ve decided that I would really enjoy XXX, which is why I have decided to make the switch to PE. I was really excited to have the chance to interview with [New FIRM] in particular because I know it has a great reputation for XXX, so I’m glad to be here. I realize that was a pretty brief summary. Is there anything I could tell you a bit more about?”

Interviewers ask this question to get a sense for what drives you and to understand the path which led you to PE. The goal of your answer should be to give clear and concise reasons that highlight your personal attributes which PE firms like. Here are some sample answers that accomplish your mission:

  • “I’ve been interested in business and investing since [high school / college / etc.] because I believe smart investors allocate capital where it is needed and help grow our economy. I went into investment banking in order to learn to be an investor and learn the skills I need to eventually transition to the buy side.”
  • “I’m the type of person who really enjoys working on teams to solve interesting problems. I went into [Industry] because it offered the chance to work with really smart people and create a lot of value by solving XXX.”

...2 more samples in guide...

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Private Equity Interview
Prep Pack

  • 9 LBO Tests - $300 Value
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  • 300+ PE interview Questions - Company DB
  • 200+ Page PDF on PE Industry & Recruiting
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$1,298

PE Prep Pack + Resume Review + 5 Hrs Mock

  • 9 LBO Tests - $300 Value
  • 5 Hrs Mock Interviews - $1,000 value
  • WSO Video Lib + Company DB - 1 Yr - $760 Value
  • 300+ PE interview Questions - Company DB
  • 200+ Page PDF on PE Industry & Recruiting
Get Started!

Since 2005, Wall Street Oasis has been the place the most trusted resource applicants turn to when preparing for difficult private equity interview questions.
It is no surprise that we have sold thousands of copies when we have the strongest community (over 1 million comments) and most data to pull from (12,000+ interview insights in the WSO Company Database) compared to any other resource in the world.

Our team of experts works hard every single year to generate the most comprehensive, accurate and helpful guide on the market to help you ace your tough private equity interviews. We pull from thousands of interview insights each year in our company database to make sure that our guides are up to date and provide an accurate reflection of current trends, whether you're aiming to land at a small private equity fund or at one of the large mega PE funds.

100% Money Back Guarantee

We are very confident that the Private Equity Interview Prep Pack will help you ace your private equity interviews if you put in the time to study. We are so confident that if for any reason these materials do not meet your expectations, we would be happy to provide you a full, no questions asked, 100% refund within 30 days of purchase. Just e-mail [email protected] and she will process the refund within 24 hours.

Practice with ACTUAL Private Equity Interview Questions
from REAL Interviews with 100s of Sample Answers

How much more confidence would you have if you knew the questions BEFORE you step into the interview room? With over 12,000 interview insights to date across thousands of firms, we have an unprecedented look on the inside to help you get ready.

Several years ago, with the power of the WSO community, we started using the thousands of interview insights in our database to make our guides the most accurate and current in the world. We filter through all this valuable data so that you have a significant advantage on interview day.

Ready to Ace Your PE Interview?

  • 9 LBO modeling tests for realistic practice - $300 value (Learn more)
  • 15+ hrs of video solutions for all 9 LBO modeling tests (Learn more)
  • 10+ hr webinars & cases from PE professionals - $200 value (Learn more)
  • 200+ pg guide: Recruiting + PE interviews - $200 value (Learn more)
  • 4 Sample private equity resumes from Successful Candidates
  • 1 Yr Access to the WSO Company Database - $360 value (Learn more)
  • 1 Yr Access to the WSO Video Library - $400 value (Learn more)
  • Much much more (see detailed Table of Contents below)
IMPRESS YOUR INTERVIEWER
Impress your Interviewer
LAND MULTIPLE OFFERS
Land Multiple Offers
GAIN AN EDGE
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1. PE Interview Prep Pack Guide (200+ pages)
Part 1 of 4

As always, we never stop improving our products and services and no matter what version you buy, you always get the updated versions free of charge, so even if you think you may not be recruiting for private equity in a year or two, you can ensure you get the lowest price by purchasing today. Version 1.0 released in 2014 had a lot of placeholders for fresh video content that has now been incorporated into the current version 2.0. Version 3.0 will have more real world PE case studies and webinars from private equity professionals. We will continually incorporate new content into the guide to make this an even more interactive and valuable resource.

How to Prepare for Your Private Equity Interview

Besides studying with the WSO PE Interview Prep package, here are 9 general tips to help you prepare for this rigorous recruiting process:

  • First off, make sure your resume is polished and ready to go. Use the PE professionals in our WSO Resume Review if you need help.
  • Get in touch with recruiters within 3-6 months of your first job out of undergrad if you aren't going directly into PE to get you on their radar. Detailed list in the WSO Company Database, just filter by "Recruiter - headhunter" under industry.
  • Read up the PE industry, deal process and due diligence stages
  • Study your deals in excruciating detail as mentioned above
  • Work on your story and fit questions. Why private equity? why this fund? why now? What is an example of a time you exceeded expectations? A time you disagreed with your boss? what did you do?
  • Practice LBO Modeling tests & quick IRR math to be ready for the final round gauntlet
  • Polish up on other technical concepts - 3 statements, valuation methods, modeling, etc
  • What makes a good deal? a Bad deal? Do you have the investor mind set?
  • Practice the case interview method. Are you ready to walk through a case as if you were interviewing for McKinsey? More and more private equity firms are adopting this in their interviews, so be ready!

Private Equity Interview Questions are NOT the Same as Investment Banking Interview Questions

Many candidates make the mistake of thinking if they know the technical aspects of an investment banking interview down cold, that they will survive the technical aspect of the private equity interview. This could not be further from the truth. The goal of the PE interviewer is typically to test and see if you can think as an investor. They don't just want to see that you understand various valuation methodologies and can build an LBO from scratch, but they want to make sure you can communicate clearly the rationale for a specific deal.

These interviews take a combination of technical and behavioral savvy that makes investment banking interviews look like a cake-walk!

This doesn't mean you can't prepare, it just means that while you're working 80-100 hour weeks in investment banking or management consulting, you have to use your time to prepare for the right questions. This private equity interview guide will make sure to give you that focus on the right topics so that you can use your limited time wisely.

Types of questions that are included in this guide:

  • What makes a good investment?
  • Why do LBOs work?
  • When do they go wrong?
  • Can you estimate IRR quickly in your head?
  • Do you have a good understanding of risk/reward and the general investment mandate at a specific fund?
  • Are you able to communicate this clearly and succinctly?

Table of Contents and Page Previews Below:

Testimonials

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I wish I had a guide like this when I was trying to get into PE. The WSO PE Industry & Interview Guide covers everything you need to make the move from banking or consulting and land a job in private equity.
-- John Fossum - Vice President @ Energy Private Equity Fund

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I come from a non-target background and managed to make it into banking, but only after close to a year of networking and hustle. I knew that the odds were against me again for PE recruiting so I started networking and trying to land as many interviews as possible only after 1 year at a boutique investment bank. I had made it to 2nd and final rounds at a few funds but no offer. The first interview after reading this package I made it to the final rounds and got an offer! I think this package made the difference - in fact, one of the LBO modeling tests I got in the 2nd round was almost identical to one of the 1 hour LBO ones in the package. Having that modeling practice and the confidence going into the interview is priceless.
-- Matt D. (non-target PE Success story)

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Excellent guide for anyone hoping to break into the PE industry. I only wish it was available earlier, when I was interviewing!
-- Andrew Eggert - Senior Associate @ The Carlyle Group

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Daniel's Sheyner's private equity interview guide is an essential competitive advantage for anyone trying to break into PE. It provides candidates with both the quantitative and the qualitative skills they need to stand out from the crowd. This is the one resource serious candidates shouldn't risk being without
-- Aaron Aiken - Principal @ Hanover Partners

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The guide has been extremely valuable to me. It got me from zero to sixty in PE knowledge to help me get a job in PE as a consultant who knew very little about the industry. Furthermore, I keep referring to it as a PE professional all to date when I want to see how some items get modeled out. Thanks for the guide and the great help. I'm an ambassador for the guide to all my friends and if I can ever help out let me know. Thanks
-- Jason A. - Investor @ Growth Private Equity Firm in California

About the Author: Daniel Sheyner has worked as a Private Equity investment professional for four years, the most recent three years at Bain Capital Partners in Boston, MA. Before Bain Capital he spent one year at Fidelity Equity Partners, a middle market growth-LBO fund. Prior to private equity, Daniel worked for three years as a management consultant with Oliver Wyman in Chicago. He is a graduate of the Math Methods in Social Sciences (MMSS) program at Northwestern University as well as Harvard Business School with high distinction as a George F. Baker Scholar.

In the Media: The WSO Private Equity Interview Prep Pack as taken the industry by storm. The author and the interview preparation and been mentioned and/or featured in numerous top publications. These include:

-- Dealbook: Private Equity Firms in a Frenzied Race to Hire Investment Bankers

-- Wall Street Journal: Nailing the Private Equity Interview

-- NY Times: Wall Street Banks and Private Equity Firms Compete for Young Talent

Watch the WSO PE Interview Prep Pack Author on Bloomberg:

2. Nine LBO Modeling Tests - Realistic Practice
Part 2 of 4

The 9 LBO modeling tests included in the WSO PE Interview Prep Pack will make sure that you are ready no matter what type of LBO modeling test you face during your private equity recruiting process. As part of the package, the tests are broken into three levels of depth: 1. Three quick "paper" LBOs that should be completed within 20-40 minutes each, 2. Three basic LBOs with a bit more complexity and depth that should take 45 - 90 minutes each and 3. Three full blown LBO modeling tests with a lot of complexity that should each take 3+ hours to complete each. As part of the package you will also get access to all 9 video solutions that have step by step guidance of how to work through the modeling tests successfully (15+ hours total).

Surviving the modeling test is not just about calculating the right IRR and MOIC, or being able to structure your source & uses. It's important to practice enough to make sure you are a whiz at setting up leveraged buyout models, building the 3 statements financial model and delivering a clean results page in as little time as possible. Speed matters on these LBO tests since we can assume that the numbers will be right for multiple candidates.

Free Preview to 3 of the 9 LBO Modeling Tests:

Preview: Paper/Quick LBO Modeling Test
Webinar Image Preview
Preview: Basic LBO Modeling Test
Webinar Image Preview
Preview: Advanced LBO Modeling Test
Webinar Image Preview

Get Private Equity Interview Prep Help
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$478

PE Prep Pack + Resume Review

  • 9 LBO Tests + Resume Review - $500+ Value
  • WSO Video Library 1 Yr Access - $400 Value
  • WSO Company Database - 1 Yr Access - $360 Value
  • 300+ PE interview Questions - Company DB
  • 200+ Page PDF on PE Industry & Recruiting
Get Started!

$299

Private Equity Interview
Prep Pack

  • 9 LBO Tests - $300 Value
  • WSO Video Library - 1 Yr Access - $400 Value
  • WSO Company Database - 1 Yr Access - $360 Value
  • 300+ PE interview Questions - Company DB
  • 200+ Page PDF on PE Industry & Recruiting
Get Started!

$1,298

PE Prep Pack + Resume Review + 5 Hrs Mock

  • 9 LBO Tests - $300 Value
  • 5 Hrs Mock Interviews - $1,000 value
  • WSO Video Lib + Company DB - 1 Yr - $760 Value
  • 300+ PE interview Questions - Company DB
  • 200+ Page PDF on PE Industry & Recruiting
Get Started!

3. WSO Video Library
Part 3 of 4

The Wall Street Oasis video library offers more than 100 exclusive videos, including private equity interview questions, webinars and detailed Q&A videos with our experienced Private Equity WSO Mentors. Once you have signed up, you can watch unlimited videos from the industry and position of your choice. We are excited to offer this innovative Wall Street video library to help you prepare for your own private equity interviews. Below are a few short previews and a list of some of the private equity webinars you'll have access to when you sign up. We are adding over 150+ webinars and hours of content every year! More webinars are added weekly.

Free Preview to a Few PE Webinars in the WSO Video Library Below:

Building a "Why Private Equity" Story
Webinar Image Preview
Difference Between Entering Private Equity Second Year Instead of First Year
Webinar Image Preview
How To Prepare for Private Equity Recruiting While Working
Webinar Image Preview

Here is a partial list of the Private Equity webinars, exclusive to the WSO Video Library:

  • Healthcare PE Careers and Trends
  • Private Equity Case: Utility Services
  • PE Investment Case + Deal Process
  • Mid Market PE in Toronto/Canada
  • Growth Equity PE Recruiting
  • How to Prep for a PE Megafund Interview
  • Private Equity Recruiting Best Practices
  • Co-investments and Fund of Funds Overview
  • Your IB deals in a PE interview setting
  • Transitioning from IB to Private Equity
  • Growth Equity Investing Webinar
  • CFA is it Right for You?
  • TMT Investing - Everything you need to know
  • Leveraged Loans Market Overview
  • Linkedin, Cold-Emailing & Networking Tactics
  • Networking in Europe
  • Recruiting Strategies for Internationals
  • Consulting to MM Private Equity
  • Private Equity Recruiting Process
  • PE Success Story from a Non-Target School
  • Week in the Life of a Private Equity Analyst
  • MBA and Your IB & PE Career
  • PE Investment Director: Week in the Life
  • Sources of Value Creation in Private Equity
  • And Many More...

The most comprehensive, trusted and best preparation for Private Equity interviews in the world.

4. WSO Company Database
Part 4 of 4

Exclusive Data on Compensation, Interviews and Employee Reviews

1. Salary & Bonus Detail

We make it easy to know how much mula you can expect to make at thousands of firms and positions. Quickly scan 100s of companies for the minimum, maximum, median and average base salary and cash bonus by position.

2. Unique Company Insight

We make it easy for you to compare companies across a variety of metrics, including overall rating, interview experience, relative compensation, diversity in recruiting, the percentage of interns getting full time offers as well as what the top schools, top degrees and majors targeted by each firm. We even go so far as to quantify the firms relative position to others using percentile rankings in each category.

3. Never Feel Naked in an Interview Again

Ready for that tough interview? Get the inside scoop and see what candidates interviewing for the same position were asked in prior interviews at the same firm to see if you're ready. Interview insights focus on the toughest questions to make sure you are ready to land an offer. Don't go in without doing your homework...which starts right here in the WSO Company Database.

100% Money Back Guarantee

We are very confident that the Private Equity Interview Prep Pack will help you ace your PE interviews if you put in the time to study. We are so confident that if for any reason these materials do not meet your expectations, we would be happy to provide you a full, no questions asked, 100% refund within 30 days of purchase. Just e-mail [email protected] and she will process the refund within 24 hours.

Get Private Equity Interview Prep Help
From the #1 Most Trusted Source

$478

PE Prep Pack + Resume Review

  • 9 LBO Tests + Resume Review - $500+ Value
  • WSO Video Library 1 Yr Access - $400 Value
  • WSO Company Database - 1 Yr Access - $360 Value
  • 300+ PE interview Questions - Company DB
  • 200+ Page PDF on PE Industry & Recruiting
Get Started!

$299

Private Equity Interview
Prep Pack

  • 9 LBO Tests - $300 Value
  • WSO Video Library - 1 Yr Access - $400 Value
  • WSO Company Database - 1 Yr Access - $360 Value
  • 300+ PE interview Questions - Company DB
  • 200+ Page PDF on PE Industry & Recruiting
Get Started!

$1,298

PE Prep Pack + Resume Review + 5 Hrs Mock

  • 9 LBO Tests - $300 Value
  • 5 Hrs Mock Interviews - $1,000 value
  • WSO Video Lib + Company DB - 1 Yr - $760 Value
  • 300+ PE interview Questions - Company DB
  • 200+ Page PDF on PE Industry & Recruiting
Get Started!

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