Private Equity Interview Questions - A Complete Guide

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

You can expect these types of questions during your private equity interviews:

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

Every one of these types of questions can be prepared for. If you want to land the coveted position in private equity, then you better be ready to grind and prepare for all of these questions.

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?

There 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. These stories are really something you should do for every interview. 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. If you aren't given a particular format, you can run with it in whatever way you think will be most effective.

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.

  • 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?

  • 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? Note that leader doesn't necessarily mean that it has the most dominant market share; it could be a leader in a niche segment of its broader overall industry.

  • 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.

    Building out management allows for a professionalization of an organization, enables it to better handle the rigors of PE ownership and debt management, and gives it the leadership it needs to achieve growth and profitability objectives.

  • 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.

    Is it a business that will likely be sold to another financial investor? Or perhaps the play is to grow the company and then sell it to a larger player in its industry. You won't be expected to tell the future, but you'll certainly want to have an evidence-based rationale for what you believe might happen.

  • 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. Understand everything there is to know about the business models.

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

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Comments (45)

May 25, 2008

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?).

Learn More

9 LBO Modeling Tests, 10+ hours of PE Cases and 2,447+ interview insights across 203 private equity funds. The WSO Private Equity Interview Prep Course has everything you'll ever need to break into the competitive PE industry. Learn more.

May 25, 2008

No one asked me any technicals during PE interviews -- but I am a consultant so YMMV. Typical questions were more around the cases I had worked on. i.e. 'How do companies in X industry make money?'

May 25, 2008

I'm not in the industry, but for guys in groups that have limited to no LBO modeling exposure, can they still interview at PE firms? Do most firms test you on your modeling skills?

Aug 6, 2008

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
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

Case interview questions are what I seemed to come across. They want to see if you can really dig into the operations of a business, and what makes it successful, rather than just reciting formulas.

Mar 2, 2018

You can get technical interview questions at http://freeinterviewquestions.net/technical-suppor... luck in your interview!

Mar 2, 2018

At KKR they don't typically ask you modeling questions until the final round, which is a multi-hour "case study" during which you get a 10K and need to build an LBO model from scratch and present your findings to 2-3 interviewers. However, when I interviewed there I was asked some consulting-style business case questions during both the first and the second round. Good luck.

Mar 2, 2018

spinner,

could you just answer one more question: the LBO model you need to build in the final round, is that a quick-and-dirty valuation model or is it actually a full-blown model including forecasted financial statements? Or in general, how detailed do they test you on modeling skills? The thing is that I've built a few LBOs before but am certainly no modeling whiz, ie, I certainly don't know every remote specialty.

If you could give me some advice on this, that would be very helpful.

Cheers,
A.

Mar 2, 2018

There is no standard answer to this question. The model should be as detailed as it needs to be in order for you to intelligently discuss the pros, cons, and structure of the deal. Depending on how much information they give you to work with it could be a full 3-statement model or a simple income statement forecast. You should most likely expect to need to build a simple 1-page integrated 3 statement model with sources/uses and returns analysis. It's unlikely that you will need to worry about esoteric bells and whistles like capex/depreciation tables, etc. Remember, while the test does seek to weed out those who aren't facile with LBO modeling, the candidates who really distinguish themselves are the ones who speak intelligently about the business logic of the deal and it's biggest risks/upsides. In order to be one of those candidates it helps to know how to build a SIMPLE and CLEAR model FAST so that you can use your spare time to actually THINK about the business. I would advise that you err on the side of keeping your model simple and not worry too much about formatting. Really think about which line items in your model would actually affect the outcome and feel free to leave out the fluff if it's too time consuming. Your interviews will be impressed that you were able to identify what really matters right off the bat and didn't waste your time on trivialities. Too many candidates bite off more than they can chew on the model and fail to complete it, make careless mistakes in it, or don't leave themselves enough time to prepare intelligent talking points.

If you really want to practice then find a 10K for a public company you know well - then build a 5-year LBO model from scratch based on it's latest income statement and balance sheet. Don't make your choice too complex - kkr isn't going to ask you to model GE! Practice building this model over and over from scratch until you can do it in under 2 hours without breaking a sweat.

Good luck. If this ends up being helpful PM me and let me know how it went. We can compare notes.

Mar 2, 2018

1st round was with directors, principals, associates.

sought to weed out those who weren't familiar with their deals, general finance competency, and big emphasis on fit.

Mar 2, 2018

Is KKR still recruiting for summer 2010?

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9 LBO Modeling Tests, 10+ hours of PE Cases and 2,447+ interview insights across 203 private equity funds. The WSO Private Equity Interview Prep Course has everything you'll ever need to break into the competitive PE industry. Learn more.

Mar 2, 2018

also if there are any book recommendation that I can read over the holiday weekend to prepare please let me know !!!

Mar 2, 2018

bump. Also interested. Good luck though!

Mar 2, 2018

anyone?

Mar 2, 2018

huh

Mar 2, 2018

https://www.youtube.com/watch?v=k540vOiipUM

Relevant?

*Can't post links ... remove space between youtube .com/watch

    • 1
Mar 2, 2018

I feel like at this point, the interview process comes full circle and boils down to the softer skills that are typically associated with early interviews: fit/personality/passion.

Explain why you fit the culture of the firm, what about them jives with your personality? Why this firm from a work standpoint? Is it the type of deals? The small/large teams? etc etc. I'd have a couple reasons and make sure you're passionate on both points, You wan't the boss convinced that this is 100% the place you want to be.

In terms of making yourself likable- reading a cliff notes version of How to Win Friends and Influence People might be useful reading before the big day,

Mar 2, 2018

Not sure if it's too late, but you're already doing yourself a disservice by having so little faith in yourself.

If you're the finalist and have passed the prerequisite technical tests then your personality, confidence, and fervent desire for the position will secure you that job.

You need to enter that room like you're dragging a 12 inch rod, but do it humbly. Make sure the guy interviewing you knows that you, the guy in front of him, will outwork, out sweat, out bleed every single candidate who is also interviewing. Let your passion for the position shine and be known, all while having a soft encounter and inviting presence, as to not intimidate the interviewer, but welcome him.

There's no WSJ article you're going to spit out that's going to swoon him to your side over someone else. It's about charisma. Now go get em tiger.

    • 1
Mar 2, 2018

Prob won't be too far off from any PE interviews... LBO questions, walk through an investment thesis, case studies, and fit questions...

Mar 2, 2018

I so far only found case studies for consulting companies. Is it similar and then related more to M&A related issues ?

Nevermind. I found it here. So it is about LBO models and doing a presentation on a target company.

So thanks for the help.

"Make 'Nanas, not war! "

Mar 2, 2018

Not sure I follow - are you an undergrad who is interviewing for a PE position at a small firm?

In general / for most interviews, be prepared to succinctly answer the following (**these are simple questions, but key is to know answers inside and out, and to be able to tell your story in a clear fashion):
(1) Walk me through your resume - **KEY is to tell a cogent, logical story in 2 min or so

(2) Why PE? - **KEY is to understand why are want to work in the industry. common answers include working w/mgt teams to make long-term investment to improves business etc, then tie back to what you've done in past in #1 above

(3) Why X firm? --** KEY is understand firm (e.g., look at past deals, industry, office location, target size, etc.) + how your interest and experience (e.g., #1-2 above) make you an excellent fit

Mar 2, 2018

Sorry Generals2 i for got to mention that this is for a deal analysis & research internship with a 2 person PE shop. and hanks for the advice.

Mar 2, 2018

Understand the PE role. Have a pitch ready, was asked before. Know a specific industry if this PE shop being as small as it is, more than likely has a speciality id likes to advise on. Might want to know some deal structure as well. One of the main roles it seems you will be doing is databasing and cold-calling. Explain a situation where you needed to network, and know how to use sort facitilities within excel very well.

Mar 2, 2018

how the heck did u get a GS PE interview from the Big 4 audit side?

Mar 2, 2018

its not buyside analyst if that makes u sleep better. sounded more like analyst for current investments with less exposure to actual modeling.

Mar 2, 2018

TPG is actually in SF.

typically, phone screen and then 1 superday, although it could be several rounds. If you're more local, the firm will be more likely to take its time with you. If you're on the edge after 1 superday, they might give you another chance, but there's a good chance they'll just fill the slot. Several non-NY funds also goto NY to do superdays, since not everyone can bail from work on a business day.

Mar 2, 2018

Thanks for the info

Mar 2, 2018

aranaxon,

what do you mean tpg is actually in SF?

tpg doesn't hire in fort worth, texas?

Mar 2, 2018

Unless i'm mistaken, Ft. Worth has an office, a partner sits there, as well as some backoffice functions. The corporation is based on TX, for tax purposes.

Everything for North America is run out of SF., the P (pacific) part of TPG.

This is publicly disclosed in this article: http://www.sfgate.com/cgi-bin/article.cgi?file=/ch...
(not being snarky, just substantiating from public sources)

Mar 2, 2018

I'm not the one to give you the best answers, and I know you touched on this, but I would not say E&P unless you know the industry very well/have done E&P deals. E&P valuation is very different than manufacturing valuation, for example.

Best Response
Mar 2, 2018

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.

    • 4
Mar 2, 2018
TheKing:

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.

This was awesome... +1

Mar 2, 2018
Mar 2, 2018