35 Interview Questions About Private Equity (With Sample Answers)
Taking the time to look over the most common questions employers in your field ask job applicants can help you come up with confident answers and increase your chances of getting hired. Hiring managers may ask you about a few key terms and topics in private equity to see how well you know them and how much experience you have with them. If you’re getting ready for an interview for a job in private equity, you might want to look over some of these important points.
In this article, we list 35 of the most common private equity interview questions, talk about what hiring managers look for in candidates, and give you some examples of professional answers to help you think of your own.
10 general private equity questions
Here are some general questions an interviewer for a job in private equity might ask you:
- What do you know about our business and the other companies we own?
- What makes you want to work in the field of private equity?
- In the next five years, what do you want to do with your job?
- How do you handle work stress?
- What kinds of private equity do you like to invest in the most?
- What makes you want to do your best work?
- Do you have any questions about us or this job?
- How much money do you want?
- Why are you the best candidate for this job?
- How do you think our private equity firm is different from the ones we’re competing with?
10 background and experience questions
Potential employers may ask you about your work history and background to see if you have the skills and qualifications needed to do well in a private equity role. Here are some common questions you might be asked during your interview:
- Can you tell me about the biggest business deal you’ve ever worked on?
- Tell me about the most difficult leveraged buyout (LBO) model you worked on. What did you do to make it happen?
- What kinds of consulting projects did you work on at your old jobs?
- How many different types of investment banking transactions have you done before?
- How would your former bosses describe you?
- Can you tell me about your daily job duties in your most recent private equity position?
- How would you rate your skills at making financial models?
- What do you think will be the hardest parts of this job, based on what you’ve done before?
- What do you like most about working in private equity?
- What do you think is the most important thing you’ve done in your career so far?
10 in-depth questions
Hiring managers may ask you about specific terms and procedures related to working in a private equity role to see if you’re a good fit for their company. Here are some examples of the kinds of detailed questions you might be asked at your interview:
- Can you explain what an LBO is?
- What steps would you take to make an LBO model?
- In this situation, how would you increase EBITDA?
- How do you know if a business is a good fit for an LBO?
- Can you explain what you mean by “cyclicality”?
- How would you use the number of customers to decide if an investment is a good idea?
- Can you name the tools a private equity investor needs to increase the IRR on one of their investments?
- Can you explain what rollover equity is and tell me if you like it or not?
- When is it a good idea for a private equity firm to pay back dividends with new money?
- What do you think of interest that is paid in kind (PIK)?
5 questions from the interview and some sample answers
Here are five questions a hiring manager might ask you about a private equity job, along with examples of how to answer them well:
1. What are three things you do well that will help our private equity firm?
The person in charge of hiring may ask you this question to see if you understand what the job entails. Think about the skills the employer listed in the job description, and then pick three relevant strengths that can help you do well in this job role.
Here’s what I mean: “My best skills are being able to work with others, being able to think critically, and modeling data. At my current job, I use my collaboration skills to work closely with the CFO and other team members to make accurate revenue forecasts. I can think critically about situations and make accurate data models, which helps me analyze information and come up with good business ideas.”
2. What would you do if you learned that a company you were thinking of investing in had a high rate of employees leaving?
Potential employers may ask you this question to see how comfortable you are with taking risks. Focus on explaining what a high rate of employee turnover could mean and why it’s important to know what could happen in the long run.
Here’s what I mean: “If I saw that a lot of people were leaving a company, I would be very hesitant to invest in it. Most of the time, a high employee turnover rate means that something is wrong with how a company is set up. It also usually means that the company loses a lot of customers, which can hurt its income and make it harder for it to pay its interest bills on time.”
3.What kinds of credit ratios do you look for when you look at a borrower’s finances?
The person in charge of hiring you might ask you this question to find out more about how you handle money and investments. Tell me about the specific metrics you use and how you use them to make important decisions.
Here’s what I mean: “I pay a lot of attention to both the leverage ratio and the interest coverage ratio. The leverage ratio compares the amount of debt a company has to the amount of cash it brings in. By looking at interest coverage ratios, I can also figure out if a company has enough cash flow to pay its interest bills.”
4.How do you keep up with changes in the business of private equity?
This is a question that interviewers might ask to see how interested you are in working in private equity and how willing you are to learn new things. List a few reliable sources that you use to keep up with changes in your field.
Here’s what I mean: “Each week, I listen to a number of podcasts about private equity, like Future Finance 360 and Private Equity Today. I’ve also signed up for a number of industry newsletters, which I like to read first thing in the morning. At a networking event, I meet up with other people in my field at least once a month. This gives me more information about the investments they’re making and the upcoming trends.”
5. If our private equity firm needed to get out of an investment, what strategies would you look into?
Hiring managers might ask you this question to see how well you can think critically and how much you know about private equity. As you list each possible plan, explain how you thought of it.
Here’s what I mean: “We could help your company get a return on its investment in a number of ways. The first option is to sell directly to a strategic buyer. From what I’ve seen, these kinds of sales are usually the easiest and can help us get the best evaluation. The next thing I would look into is a secondary buyout, which is when another financial buyer buys our synergies. Lastly, your company is pretty big, so I’d suggest you think about doing an initial public offering (IPO) to sell shares on the public market.”