Private Equity Interview Questions - 13 Topics to Know
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
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.
Free LBO Modeling Test (Email Form Below Video)
See if you're ready for the real deal. Video solution + modeling file included so you can get realistic practice. Just enter your email in the field below.
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. 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.
- 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?
- Strength of Management for Target CompanyWhat'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 CompanyA 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 QuestionsNow, 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.
- Answering Why Private Equity?
- WSO's Private Equity Resume Template
- Private Equity vs. Venture Capital
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.
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?).
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?'
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?
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.
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.
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 ?
Did you manage to leverage any particular industry focussed experience that you may have had ?
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
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?
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.
Top 3 PE fund - first round (Originally Posted: 09/02/2009)
Guys,
I am really excited as I got a first-round interview invitation at a global top 3 PE fund! Do you know how the first round looks like at KKR - do you have to build a model in the first round already? Any info greatly appreciated!!
Thanks, A.
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.
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.
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.
Is KKR still recruiting for summer 2010?
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.
also if there are any book recommendation that I can read over the holiday weekend to prepare please let me know !!!
bump. Also interested. Good luck though!
anyone?
huh
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,
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.
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 .
Prob won't be too far off from any PE interviews... LBO questions, walk through an investment thesis, case studies, and fit questions...
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.
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.
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
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.
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.
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!
how the heck did u get a GS PE interview from the Big 4 audit side?
its not buyside analyst if that makes u sleep better. sounded more like analyst for current investments with less exposure to actual modeling.
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?
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.
Thanks for the info
aranaxon,
what do you mean tpg is actually in SF?
tpg doesn't hire in fort worth, texas?
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=/chronicle/archive/2002/…
(not being snarky, just substantiating from public sources)
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!
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.
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
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.
Aut porro iste explicabo veniam. Libero vitae non quo exercitationem odit iusto debitis vero. Eveniet in corrupti atque quod maxime blanditiis. Dolore tempora dolorum deserunt iste eveniet.
Ut dignissimos et et hic. Ullam dolorem et pariatur dolores iure.
Fuga autem illum et. Aut odit sit distinctio sit aut. Consectetur dolorem recusandae asperiores rerum.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Velit dignissimos quam et. Sequi consequatur tempore id magnam alias. Asperiores consequatur cupiditate dolorum dolorem. Rem laboriosam quisquam quia corrupti. Laboriosam debitis sed et commodi sit dolore. Et dignissimos sapiente iste enim fugit. Accusantium eos voluptas qui quia.
Et odit ducimus dolorem ex laborum. Enim at adipisci voluptas eaque dolores. Inventore ea nisi unde sint iusto. Doloribus veniam quos architecto ipsam quia iure ut ab. Earum id sit autem tempore eaque. Laborum ipsum omnis et id et iure veniam.