pio rat sexshrorturi cou a SP watstreetoe tin reoterveces omy scone ES sere «Prt iy Rese Top 20 Pate ay tren Gueston a Top 20 Private Equity Interview Questions and Answers —— 9 Guide to Private Equity Interview Questions Every top: ntch private amity frm dvdes the interview question into two basi ‘ypes. The fst ype of question for evens. ts to understand whether te person is fit forthe firm or not. The second type of question is increcibly tough, These {questions help the interviewer sort out the best from the rst In ths atc we wil take the top 20 Private Equity Interview Questions and Answers (of both types) and guide you to answer those questions rightly It you are new to Private Equity, then do have a look at the following resources — Table of contents ‘+ Guide to Private Equity Interview Questions © 11 = Why ate you interested in Private Equity? Why our firm? © #2 = What do you think this company does, right? What do you think we do wrong? o #a—wh 2 not work fora Hedge Fund / Portfolio Compan © #4 = How did you help your previous company find value? ty associate/researcher/deal- © #5 What makes a great private eq maker 146 - What industry trends will you look at when looking for a potential Investment? © #7 If want to protect my downside, how would | structure the {#8 Did you look at our website? What investment did you ike most? And wy? Join wailstreetmojo Youtube © #9 Ifyou can look into only one financial statement, what would it be and why? BI ok casera #10 = Ifyou can choose two financial statements, what will they be, and why? © #12.= How would you handle situation where you have a question and no-one has an answer?‘much did you begin with in the first place? 1114 = What would you prefer -a lump sum of $1 million right now or $2000 every month for the rest of your life? © #115 = Do you think that the market for mega-cap LEO/ME&A is over? © #16 - What do you think will happen to LBO / MELA in the next ten years? > 17 = MNC Company has been struggling with realestate, What would you do te break it up or try reinvigorating the business? it2 And why? > 19-= If you want to improve IRRs, what different levers can be used? line? If yes, why? If not, why not? © #20 Would you ever invest in an In the final analysis © Video Recommended Articles Private Equity Interview Questions ee ot 8; a i @ Pvstevenine (Drover rata nage on your webapp uth a but Let's get started withthe Questions in the Private Equity Interview. #1- Why are you interested in Private Equity? Why our firm? Thisis a general Private equity Interview Question. The interviewer wants to understand how much passion and interest you have for private equity ata basic level, ‘0 forthe fst question. you need to give a background of your work (or internships) and tell why you have chosen to come into private equity. It wll help to structure the answer beforehand so that you can answer i propery ‘The second part ofthis question is how much you know about the frm and how your {goals and the firm's goals ae in alignment. Again, you need to do your research before the interview to answer this question And it would be best you told them what they already know about the company (the types of funds they are handing, the profit margin, the clientele, the growth plans, and soon). #2- What do you think this company does, right? What do you think we do wrong? It isa trick question ina private equity interview, and you shouldnt fal for it Fist ofall. no company ever does anything wrong. Rather they have areas to improve pon, ‘So your answer would be in similar ines. Tell he interviewers about the company’s strengths and what sorts of deal it has closed, and how it added value to its clientele Jain Wallstreetmoj nstagram © owctsvonejotia Join Wailstraotmojo Linkedin @ enastreetmojoHowever, don't negatively discuss the improvement areas; rather, mention subtly what it can improve upon and afew things about how it can improve #3 - Why not work for a Hedge Fund / Portfolio ‘Company? This is trick question in a Private equity interview. Because through this question, the interviewer i trying to understand whether you have areal interest in private equity ‘or your ultimate goal isto ext private equity and join something else. Here your answer would be short and tothe point. Tell all the pros of private equity (reat wotk environment, great peers, great {fund management, etc.) and all the cons of hedge funds (high ris, huge uncertainty, ‘etc And then tll the interviewer why you are perfect for private equity. ‘Also, lok atthe differences between Private Equity and Hedge Fund #4 - How did you help your previous company find value? [Asa private equity professional, you should be able to havea few solid examples with you where you have helped your previous/current company find value It can be creating operational eficiences, which saved cost on M&A deals, or your esearch that helped the company launch new services/product lines. ‘whatever you mention, make suet is something that you have proof of and where you can use specific numbers to illustrate what you are speaking. #5 - What makes a great private equity associate/ researcher/deal-maker? Private equity firms want three things — ‘To fnd new, recurring & better investment opportunities. + To make more money 8 # To save more money. [Asa private equity employee, your Job would be the same. And you would answer this {question by saying something in the same line, like finding new and regular ‘opportunities to create value, delivering on the things you said you would execute, and saving cost through research and operational efficiencies. #6 - What industry trends will you look at when looking fora potential investment? This is not exactly a technical Private equity interview question. It would be easier fora PE candidate lke you to answer this question. Here's what you should focus on while answering this question — + Market postion & competitive advantage: fore LO its important to know the market postion & competitive advantage ofthe potential investment. The ‘characteristics would include high entry barriers, strong customer relationships & high sitchin cost. + stable & recurring cashflows: No 7 fm would buy an investment without continuous and stable ash flow + Multiple drivers to trigger growth: This ones cuca Only one diver wouldnt propel the company to an expansive stage More divers, bete-dvesfid growth strategies, and better execution would be essential for long-term growth + strong management Most companies inthe industry shoud hae a strong management team so thatthe PE frm can get strategic guidance toward a better future ‘These are the keys that a PE investor would look at before thinking of an LBO. Other Featured Guic What Private Equity? > How to Get Into Private Equity? > What i Venture Capita > What i Growth Equity? > Private Equity Interview Questions >‘than these, he would also look at changing customer habits, enhanced automation, application of disruptive technologies, etc #7- If want to protect my downside, how would | structure the investment? ‘The best way to protect the downside isto go fora structured deal, even at the later stage of the investment. For example, in 2070, Temasek invested in GMR Energy ‘through a structured paper that needs to be compulsory converted into equity. As 3 result, Temasek invested §200 milion in GM through is fully owned subsidiary Claymore Investments #8 - Did you look at our website? What investment did you like most? And why? To answer this question, all you need to dois research the company before you ever {90 forthe interview. Lock at their website. Could you find out about their investments? [And browse through every possible news about the frm, And then analyze what you liked and what you did't tke, [And then make a report which can tell them about your preference, Then, if you can ‘explain little and show them the report, they wll understand that you have already done your homework and are very sincere about this jo. #9 - Ifyou can look into only one financial statement, what would it be and why? This isa basic private equity interview question, butt is often asked, Most people choose the income statement because ofthe accrual accounting method. But the most important statement to analyze before anything isthe cashflow statement because, through the cashflow statement, only you can see the real picture of how much cash is coming in and how much is going out respective of hefty profits and revenues. #10 - If youcan choose two financial statements, what will they be, and why? This isthe variation of the previous question, but the answer to this question would be completely different. ‘The answer would be a balance sheet and income statement, If you have the beginning of the year and the years ending values fr al the ites in the balance sheet and the income statement, you can make a cash flow statement by yours #T1- How would you verify the information in a deal book given by an investment banker? ‘To answer this private equity interview question, you need to have prior experience dealing with investment bankers, or you should ask someone who has dealt with investment bonkers. Usually, it would help if you made a question framework to check the information the investment banker has mentioned inthe deal book. Bill Snow, author of the Mergers & Acquisitions for Dummies has mentioned thet you can begin to ask the following questions to start the reference check, and ater if you need to dig deep, you need to do so as wel ‘+ Did they provide you the value that you pai for? ‘+ Did they maintain integhty (they did what they said they would do)? ‘+ Did they attend all the meetings they sad they would attend? + the buyer has ried tore-trade the deal, how has the investment banker handled‘+ Without them, could you doit? #12 - How would you handle a situation where you have ‘question and no one has an answer? ‘This private equity interview question wll test your emotional agility in an interview. Therefore. your answer willbe brief and to the point when this question is asked, You may say something lke ~ “According to me, everything is figure-out-able. Let's say noone has an answer to the question | have. Now, ifwe talk about ‘no one” the frst ‘thing is who these people are? These people are generally relatives, peer-groups, ‘tiends, of family members. But what if can manage ta aska stranger or an expert? In ‘this age of massive connectivity, not getting an answer to a question i the rarest thing.” #13 - If your investment increased by 25% and now you have $100, how much did you begin with in the first place? Itis a simple private equity interview question, and the interviewer want to see how fast you can answer it For example, a 25% increase on the principal means a 20% increase on the principal + interest. ‘That means you have started with = [100 ~ (100 * 20560} = $80, #14 - What would you prefer - a lump sum of $1 million right now or $2000 every month for the rest of your life? Thisis a private equity interview question based on the time value of money. From the approach of the time value of money, $2000 this month wouldn't be similar in value next year. othe value of money wll educe with time. So, i's aMays beter to receive a milion dollars right now than getting $2000 per month forthe est of your life #15 - Do you think that the market for mega-cap LBO/M&A is over? To answer this private equity interview question, you need to be thorough with the current events in your industry, Read up everything you can. And ask your connections what's new inthe market” and soak up knowiedge as much as possible. For ‘example, there was atime when the industry was ready fora $100 billion LBO deal. But recently these have been very infrequent events. You can pick something you have worked on betore [if you ever worked on a mega-cap func) and explain wy that isnt a possibilty. #16 - What do you think will happen to LBO / M&A inthe next ten years? Thisis another private equity interview question that requires you to know about cureent events Learning must be your bestfriend if you want to get into a top-notch firm. And if you ‘ate browsing through the materials related to private equity LBO & M & MBA, mega «ap funds, acquisitions, financial analysis etc, you would know what to say to this, question. ‘You need to give your point of view. And ifyou can cite an example of why you are saying what you ate saying, t would separate you from the crowd. #17 - MNC Company has been struggling with real estate. What would you do - to break it up or try reinvigorating the business? You can expect typical hypothetical private equity interview questions ike this. All you need to know for answering this question i to be informed about any important.recent event ina similar industry. Pick that up and explain how you would handle this particular situation. #18 - If youhavea chance to go after acompany s, would you go after it? And why? Thisis another typical hypothetical private equity interview question. For example, if the interviewer talks about company, maybe this company isin the news, Suppose you see that this company has a lt of debt and no possible advantages. You should say “no,” and ifthe company has decent financial statements but there are a few operational issues, ou need to explain how you would take up the challenge. #19 - If you want to improve IRRs, what different levers can be used? This is a technical private equity interview question, and you need to know the exact Here are some possible levers you can use + You cam increase the amount of debt in the deal. It wil increase leverage. + You can recuce the purchase price thatthe private equity company has to pay to buy out + You canals increase the company’s growth rate to enhance the operating income / EBITDA. Also, have 2 look at a detaled article on NPV vs. IRR #20 - Would you ever invest in an airlin not, why not? if yes, why? If The an ler may vay from person to person, but sitines arent very proftable on the surface level To mention a statistical point of view, US domestic anes have reported negative net income in 23 out of 31 yers since deregulation. However, passenger airlines have made some consistent growth over the years, around! 49% per yearn aircraft and 2.696 in aircraft seats, But even afterall ofthis an aitine sa very risky investment, and it’s better not to get into it In the final analysis To crack the interview ata top-notch private equity fm ia big thing And you need to have a wide variety of knowledge in the financial industry, economics, mathemati, statistics, business management, current affais, and various other subjects to answer questions. So the idea i to be a know-it-all. The above top 20 questions will help you prepare the types of Private Equty Interview Questions you can expect to be asked in an interview Prepare hard. All the best for you interview VideoRecommended Articles hope you enjoy re some of the other articles on Private Equity thet you may find useful ed these top 20 Private Equty Interview questions and answers. Her + How to Break into Venture Capital? * Private Equity Salaries in Germany Comments Extremely helpful thank you for posting this resource, sharing these insights. ‘thanks Paul i Splashfash says Company Resources Follow Us aut sieg Bente = ivestrent Banking Ferures © Festo0k sl Resour W iterCoram £202. tte oe Eons, omc Waar The Aaya Of Waseca CE An rte Firat he eps emt One yer