Private Equity Interview Questions - 13 Topics to Know

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Private equity jobs are some of the most coveted positions in finance. That’s why less than 1% of applicants end up with the job. This guide's goal is - if you follow its instructions - to drastically improve your odds from 1%, so you can land that private equity dream job.

Guide to Questions in a PE Interview

Private Equity Interview QuestionsYou can expect these types of questions during your private equity interviews:

  • Fit Questions
  • Case Study
  • Deal Experience
  • LBO Modeling
  • Technical Questions
  • Behavioral Questions

You can prepare for every one of these types of questions. If you want to land the coveted position in private equity, then you better be ready to put in the hours to prepare for all of these questions and cases.

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private equity interview preparation for Fit Questions

Here are some examples of fit questions:

  • Why private equity?
  • Tell me about yourself.
  • Walk me through your resume.
  • What makes you a good teammate?
  • What are your strengths and weaknesses?

All of these questions will pop up invariably as you go through your PE interview, so how do you ace them?

private equity interviewsThere are two aspects to answering these questions flawlessly. First, know your story and tell it like a master bard. When they ask you about yourself, they’re judging whether they would want to work with you. These questions hold serious weight; use them to make yourself a desirable coworker.

Second, have a few backup stories in mind. Stories that effectively portray you as a good teammate, a problem-solver, a go-getter. Have these stories and apply them to whatever the interviewer is asking you. Make sure your resume lines up with these, and check out WSO's free Private Equity Resume Template for more. Tell them with confidence, clarity, and relevance, and you’ll be putting yourself in good territory.

Private Equity Case Interview Analysis

This was originally posted by @TheKing". This post has been edited and formatted.

In the large majority of your interviews, you will get asked to walk through a case study. So what is a case study?

While it varies from firm to firm, here's what it generally will look like.

  • You get a copy of a CIM (Confidential Information Memorandum), usually from an old sell-side process.
  • In my interview process, I ended up creating a two-page memo that more or less condensed the important parts of the CIM, analyzed the pros/cons of the business, and included a SWOT analysis.
  • So how do you ace this aspect of the interview? Remember, you're trying to determine whether or not the target company is a good candidate for a leveraged buyout.

Factors to Consider in the PE Case Interview

Below the OP reviews the factors that you should consider when completing your private equity case study in interviews.

    private equity case interview
  • Historical and Projected Growth and Profitability:

    Ensure that the company will be able to handle the additional debt brought on through an LBO while also providing for a strong return on investment through growth in revenue and profitability.

  • Diversity of Customers & Products of Target Company:

    A company might have strong financials at first glance, but you'll want to make sure they aren't overly concentrated in one product area or with one customer. If there is any notable concentration, it had better be able to prove that it's got sticky customer relationships, so to speak.

  • Differentiating Factors of The Business:

    This ties in with profitability and customers/ products. Does the target company have specific technology or processes that will enable them to continue to grow and maintain margins going forward or are they susceptible to margin erosion as competition increases?

  • private equity industry targets

  • Industry Focus for the Target Business

    Is the company in a growing industry? How will it handle potential economic turmoil? How well is the target positioned in its industry? Is it a leader?

  • Strength of Management for Target Company

    What's the management team like? Is it a founder-owned business? Has the team been together a long time? How built out is the team?

    The strength of the management team is very important, and it plays a particularly important role in the middle market. Oftentimes, you'll look at companies with very thin management teams. Or companies with owners who are looking to cash out and take a smaller role in the company going forward. These cases allow a PE firm to potentially add value by placing solid professionals into management roles.

  • Exit Potential and IRR for Target Company

    A company can be an absolute cash cow, but you'll need to be able to exit the investment at some point over a reasonable time frame (generally five years) in order to generate a suitable return on investment for your investors. You'll want to have some ideas as to where suitable buyers might come from.

  • Closing Questions

    Now, reading a CIM will get you pretty far. You'll learn a great deal about the target company, its growth prospects, its industries, and its alleged upside potential. The CIM is a sales document. So, while you can glean a ton of useful information from a careful read-through of a CIM, you'll also want to have something of a skeptical eye. Invariably, you'll have questions and concerns that you'd like to raise with management in the next round of the sell-side process.

    Here are a few examples of questions you might ask.

    • What is the biggest challenge your company faces?
    • Who are the most important members of your team and why?
    • What are your company's pain points, and how can we help to address them?

    This is a great time to come up with specific questions based upon issues you uncovered in your read-through of the CIM.

Private Equity Interview - Deal Experience

This was originally posted by @Candor", a private equity associate. This post has been edited and formatted.

  • I will say that the three biggest areas to focus on are, first and foremost, the deals on your resume, secondly understanding everything there is to know about an LBO (on a theoretical and conceptual level), and third, being able to walk through paper lbos/case studies.
  • In some of my interviews, we got REALLY granular into my deal experience, and it was good that I had prepped so thoroughly. So, you have to know everything about them.
  • Since deal experience makes up roughly a third of the interview process, preparation is crucial. Read about your deal and understand every facet of it, in order to best prepare yourself for when the questions inevitably come.
  • Read websites/articles about your deal and take notes. Read initiating coverage reports on the two companies involved in one of your deals. Read comprehensive research reports on the sub-industry that the companies are from.

More PE Interview Questions

For more threads on detailed answers to private equity interview common questions and top-notch answers, check out our Top FAQ page's PE section here.

Interested in Private Equity? Here's What You Need to Break In

Private equity recruiting is ten times more cut-throat than anything you've ever experienced before. If you want to break into private equity, you need to be well-practiced in the technical aspects of the interview.

PE Interview Course Here

Comments (41)

 
May 25, 2008 - 10:29am

I had a recent an interview for a relatively large PE fund (think First Reserve or Hellman Friedman) and I received - for the most part - pretty easy questions. The questions that I kept getting were ones that they used to judge your technical skill; they were "Walk me through a few deals you worked on...your role, how did you model the deal, what were the expected synergies etc..." They also wanted some of the figures(7x EBITDA or 2.5 Price/Book ratio)and the kind of terms you had in the deal (did you use PIK toggles?).

 
Aug 6, 2008 - 6:33pm

I was asked to expand upon the questions I saw as a consultant interviewing at top middle market shops. I would say 90% of the questions were one of the following:

-Why PE?
-Investment-focused cases (a lot like consulting case interviews, but more along the lines of 'How would you think about investing in company X?)
-Walk me through your resume
-Tell me about case X you worked on
-Tell me how companies make money in X industry (where X is an industry I had a lot of experience in)
-Do you think there are any opportunities for investment in industry X? What are they?

-When can you start?
-Are you sure you want to move to city X?

 
Nov 30, 2008 - 6:07am

jmcfadden:
I was asked to expand upon the questions I saw as a consultant interviewing at top middle market shops. I would say 90% of the questions were one of the following:

-Why PE?
-Investment-focused cases (a lot like consulting case interviews, but more along the lines of 'How would you think about investing in company X?)
-Walk me through your resume
-Tell me about case X you worked on
-Tell me how companies make money in X industry (where X is an industry I had a lot of experience in)
-Do you think there are any opportunities for investment in industry X? What are they?

-When can you start?
-Are you sure you want to move to city X?

Well this is an old thread...but I have a couple of questions.

  1. Whats a good response from a consultant ...when asked .."why PE" ? I'm curious to learn how you handled this particular question at the PE interview that you may have had till now.

  2. A lot of threads and folks on WSO seem to suggest 'Operations consulting' as another way to get into PE space.. what are your thoughts on the same. Did you have any such prior exposure...if yes...how did you leverage the same ?

  3. Did you manage to leverage any particular industry focussed experience that you may have had ?

  4. Whats the profile that was offered to you at the PE firm. Did your past as a consultant have any bearing on your workprofile at the PE firm ..was it any different from your peers from finance or consulting background ? Would there be a difference in the nature ofwork offered to folks with different backgrounds at Pre MBA associate level.

Maverick2thecore

 
Mar 2, 2018 - 9:50am

Technical interview questions - Examples? (Originally Posted: 03/29/2010)

I've been told a number of PE shops ask esoteric technical questions - at least ones you don't commonly encounter on the job in banking - and was wondering if anyone has any examples. Anyone have examples of atypical technical questions from PE interviews?

 
Mar 2, 2018 - 9:59am

Finalist at PE job - how to stand out and beat my competition? (Originally Posted: 07/04/2016)

Hey everyone, I have an interview coming up with the founder of an investment firm. Let's say its around a $1 billion. The competition for this job is the standard 2 years IB plus some pe or ib associate level experience type of people....

Knowing that I already made the first few filters filter (1. resume/background 2. excel model example + presentation) - how do I stand out?

How do I present myself to this investor/entrepreneur that I'm better than the competition? I'm finding it hard to understand what decision or actions in the interview separate the finalist from the #2 or #3 choice. The interviewer already knows that I have an offer outstanding and has decided (somewhat) to accelerate the process - at first the HR told me no beans, but then came back and said that the main guy still wanted to interview me - so there is definite interest.

A little more background about me: 2.5 years BB, 1.5 years relatively well known boutique, 10 completed M&A deals from banking experience.
Thanks for your advice - much appreciated.

 
Mar 2, 2018 - 10:07am

BB PE Interview questions? (Originally Posted: 01/20/2011)

I wonder what to expect at the PE group interview at BB... any hints?

I've gone through past deals, biographies of management, etc, but don't know what to expect exactly in an interview. I would appreciate any help .

"Make 'Nanas, not war! "
 
Mar 2, 2018 - 10:10am

Help With Boutique PE Firm Interview Prep (Originally Posted: 06/15/2014)

Hello WSO,

What Advice would you give me to better prepare me for my interview on Wednesday?

Background
Non-Target rising Junior
Economics Major
Math Minor
3.6/4.0 GPA

Job Description,
Responsibilities:
This is a demanding role, and as such we ask you to carefully read through the daily responsibilities -- we have tried to be as honest as possible so there is no confusion as to what this job entails.

Proprietary deal sourcing (70% of intern time)

Industry research - finding and reading industry reports, news articles, etc. to understand how firms make money in an industry and what the most important trends are. The skill we want you to develop is to quickly synthesize a large amount of information and be able to identify the 3-4 most important factors that make a business successful in a given industry.

Company research -- many small business have a limited online presence. We want you to be able to dig deep and find out what makes a small business successful -- what is their product? Who are their competitors? What differentiates them? Form a judgment and be able to tell us in 2-3 sentences why we would/would not want to invest in them.

Creating databases (of company contact information). There are thousands upon thousands of small businesses in the US. Before we can start asking whether to invest in them we need a systematic way of contacting them and keeping track of communication. An unglamorous, but essential task. Computer and programming skills are helpful, but there is no substitute for hard work and grit.

Cold calling business owners -- an experience many of the best business school students have never had, but one of the most important skills for any businessperson. We need people who can pick up the phone to a business owner, make a convincing pitch, and quickly ascertain if they are interested in a sale.

Drafting letters to business owners -- use industry and company research to draft letters of approach to business owners.

Deal evaluation (30% of intern time)

Financial modeling and benchmarking -- a skill sought by many leading finance companies but one we can teach you in 30 minutes. Interns will be expected to learn how to build basic spreadsheets to help analyze potential investments.

Drafting offer letters -- writing non-binding and binding letters of interest, gaining familiarity with legal terminology and deal structuring.

Preparing deal summaries for investors -- synthesize industry, company, and financial modelling work into a 4-5 page document to brief lenders and equity investors. This is a bread and butter skill for anyone wanting to work in finance.

Thank you WSO in advance and see you guys/gals at the WSO conference.

 
Mar 2, 2018 - 10:14am

GS PE Group interview (Originally Posted: 03/13/2007)

Hi everyone,

I have an interview with Goldman's private equity group coming up. Since I am not only new to this city but also this country, I do not have a lot of experience with interviewing in the US. Currently work for a Big4 in audit and am applying for an analyst position. Could anybody please share some thoughts what questions I may have to expect and what Goldman puts specific emphasize on?

Thanks a lot, really appreciate your replies!

 
Mar 2, 2018 - 10:17am

How to Interview for PE in other areas post-IB (Originally Posted: 11/23/2009)

During your first year as an IB analyst, how do you go about interviewing for PE positions in other states? It seems like a lot of major firms are pretty spread out (e.g. Bain Cap in Boston, TPG in Texas, Providence Equity Partners, Silver Lake in SF, Carlyle in DC, etc).

Especially with multiple rounds at all of these places, it seems like it could take days. How do you go about doing this - take vacation days at work? phone interviews and just 1 superday?

Do the same headhunters fill positions in all locations, or do you have to reach out to a headhunter in a different location for TPG in texas for example?

 
Mar 2, 2018 - 10:22am

Upcoming PE Interview Questions (Originally Posted: 01/05/2015)

Hi all, I am new to posting but read the forums now and again. PM me if you like to know more about my interview or my background (3rd yr analyst at MM bank). Anyways, I have an upcoming PE interview with a firm I admire greatly and I wanted to get the forum's opinions on the following questions. These were not asked by the PE shop but I want to be prepared in advanced.

1 How do you best (or how would you) value a company with 3 years of historical negative cash flow with revenue of ~$500M number but in industry facing secular decline. Assume shrinking revenue growth as well.

2 Can you describe a next financial buyer analysis?

3 What industries would you invest in and are there specific LBO candidates you have in mind? (I want to say E&P but right now cash flow is a little light due to pricing and it opens a can of worms in terms of industry idiosyncrasies. Automotive Manufacturing is what I will most likely go with, with Delphi and Visteon being potential candidates)

Interested to hear your thoughts and appreciate any help!

 
Mar 2, 2018 - 10:24am

Thoughts on the following PE interview questions? (Originally Posted: 02/20/2013)

1) If you were given a CIM and had to write an investment memo within a day, what 4 items would you focus on?
2) Rank the following in order of importance for an LBO candidate: Management, profitability, exit, market share, growth
3) How do you think about returns (generally)
4) If you could ask the CEO 3 questions to determine whether you wanted to invest, which 3 questions would you ask?
5) What do you look for in a good management team?

These are obviously very subjective and I don't think there's necessarily a right/wrong answer

 
Best Response
Mar 2, 2018 - 10:25am

This is something you'll almost certainly see if you move along in a process at a middle market PE firm. I know I had to do it with the firm I ended up working at. You get a CIM and are asked to throw together a basic LBO and to write up an investment memo. The fun of my process was that the end product was very much in my hands. I ended up going with a two pager that more or less condensed the important parts of the CIM, analyzed the pros / cons of the business, and included a SWOT analysis.

As to your questions, here are my thoughts:

1.) Assuming I'm industry agnostic here, I'd try and focus on:

--Historical and projected growth and profitability
--Diversity of customers / products (i.e. make sure they aren't overly concentrated in one product or with one customer)
--Differentiating factors of the business (i.e. do they have specific technology or processes that will enable them to continue to grow and maintain margins going forward, or are they susceptible to margin erosion as competition increases)
--Industry focus. Is the company in a growing industry? How will it handle economic turmoil? How well is it positioned in its industry?

2.) For a generic LBO candidate, I'd rank as follows:

--Profitability (because they need to be able to handle a substantial debt load)
--Growth (since you need to make a return on your investment)
--Management (since you won't get solid profitability or growth without good management at the company)
--Exit (since you'll need to be able to find buyers willing to pay a reasonable price for the company to achieve your IRR hurdles)
--Market Share (this is less relevant, a company can be a small player that's poised to take share from its competitors or a growing company with dominant market share)

3.) I'm not entirely sure what you are asking here. But, I suppose you could simply discuss the makings of a good LBO and how you achieve good returns. To which I would say something along the lines of:

--It is important to look for companies with growth trajectories and strong margins that will either be sustainable or expand. Companies that can weather strong or weak economic times and that aren't at risk of being made obsolete by new technology or processes. If you can find a company with a strong and reality-based growth case and solid sustainable margins, you have a good LBO candidate that should be able to deliver solid returns. Ideally, when you invest, you'll want to guarantee a base level of returns. Perhaps through a preferred equity investment (using some sort of preferred / common split will enable the sponsor to lock in a base IRR, say 8%.) However, any serious LBO candidate will deliver returns beyond that over a 5 year time frame. If you can exit the investment early, that's fantastic. But, assume you'll be in for five years or so before you can fully realize all of management's plans for growth and what not. You can go on and on here, but you get the point.

4.) This is essentially a "what are your top questions for management" question. It's tough to boil it down to three questions, but let's give it a shot anyway (from an industry agnostic POV, obviously). These assume that you've spent time with the company's CIM and financials and this is the icing on the cake, so to speak:

--What is the biggest challenge your company faces?
--Who are the most important members of your team and why?
--What are your company's pain points and how can we help to address them?

5.) I generally look for the following things in a management team:

--Extensive relevant industry experience
--Cohesion (i.e. they work well together and have been working together to deliver measurable results for some time)
--Hunger for more (not satisfied with where they are at, clear desire to take the company to the next level)
--A desire to re-invest in the business as part of the transaction (to get management aligned with the sponsor)
--Sophistication to handle PE ownership and increased financial demands (because of the debt load and demands for growth and profitability from the company's new financial investors)

___________________

Hope that helps. Would be interested to see what other people have to say.

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