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Private Equity Case Study: Tips, Prompt & Presentation

Private equity case studies serve as a pivotal stage in recruitment. They offer firms a window to assess candidates' analytical, investing, and presentation skills. Understanding the nuances of these case studies can significantly enhance your preparation and success rate.

This comprehensive guide provides insights into the types of case studies, preparation strategies, and key aspects of presentation and analysis. Whether you're new to private equity or a seasoned professional, mastering these case studies is essential for succeeding in a competitive industry.

What Should You Expect in a Private Equity Case Study?

Private equity case studies are a critical component of the recruitment process, offering firms a valuable opportunity to assess candidates' analytical, investing, and presentation skills. Understanding what to expect in a private equity case study can significantly enhance your preparation and improve your chances of success.

What are the Types of Private Equity Case Studies?

Private equity case studies can take various forms, each presenting its unique set of challenges. Candidates can anticipate encountering one of the following formats.

• Candidates are provided with company information and tasked with evaluating the feasibility of an investment. This type of case study typically involves preparing a comprehensive presentation or investment memo, supported by a detailed LBO (leveraged buyout) model, within a specified timeframe.
• Candidates are granted several days to a week to research a company, develop a model, and formulate a recommendation for or against an acquisition. This type of case study necessitates critical thinking and external research.
• Similar to the take-home assignment, but completed on-site at the firm's office within a few hours. Candidates must construct a financial model and make an investment decision based on the provided information.
• A 1-3-hour test, either conducted on-site or remotely, where candidates must swiftly build an LBO model. Proficiency in Excel shortcuts and familiarity with modelling tests are crucial for success.
• A condensed version of an LBO model completed either on paper or verbally. This type of case study focuses on the fundamental aspects of the model and requires candidates to demonstrate their understanding without the use of Excel.
• Candidates construct a simple leveraged buyout model using pen-and-paper or mental calculations, estimating the internal rate of return (IRR) using rounded figures.

Preparation Strategies

To prepare effectively for a private equity case study, focus on developing your investment thesis, honing your presentation skills, and enhancing your ability to respond to questions thoughtfully. Remember, the complexity of your model is secondary to your capacity to construct a compelling argument for or against the investment.

How to Present a Private Equity Case Study?

Presenting a private equity case study requires a strategic and thorough approach to effectively convey your analysis and recommendations. Whether you're preparing for a take-home assignment or an in-person presentation, mastering the art of presentation is crucial for success in the private equity recruitment process.

The core question you'll encounter in any private equity case study is whether you would invest in the company under consideration. To answer this, you'll need to analyze the provided materials and construct a leveraged buyout (LBO) model to assess the potential return on investment. Typically, a return of 20% or higher is sought.

The case study prompt often includes specific assumptions to guide your LBO model construction, such as the pro forma capital structure, financial assumptions, and acquisition and exit multiples. Some firms may provide an Excel template for the LBO model, while others may expect you to create one from scratch.

Presentation

In a take-home assignment scenario, you'll likely be required to present your investment memo during the interview. This presentation is typically conducted in front of one or two representatives from the private equity firm.

The presentation format may vary among firms, with some expecting you to present first and then field questions, while others may prefer the reverse. Regardless of the format, be prepared to articulate your findings and respond to inquiries.

While technical proficiency is important in private equity recruitment, communication skills and attention to detail are equally critical. Interviewers will assess your ability to convey complex ideas clearly and concisely, as well as your meticulousness in addressing all aspects of the case study.

In the private equity interview process, every detail matters. Therefore, strive to provide a comprehensive and well-structured presentation, demonstrating your analytical rigour and ability to communicate effectively.

How to Do a Private Equity Case Study?

When tackling a private equity case study, a structured approach is crucial to deliver a comprehensive analysis and recommendations.

Step 1: Read and Understand the Material

Begin by thoroughly reading and understanding the provided materials. Gain insights into the company's background, industry dynamics, and financials.

Step 2: Construct a Basic LBO Model

Build a fundamental leveraged buyout (LBO) model using the ASBICIR method (Assumptions, Sources & Uses, Balance Sheet, Income Statement, Cash Flow Statement, Interest Expense, and Returns). This foundational model will underpin your analysis.

Step 3: Enhance Your LBO Model

Incorporate advanced features into your LBO model as required by the case study prompts. While it's essential to cover all aspects, prioritize completing the core financial model to ensure thoroughness.

Step 4: Develop Your Investment Thesis

Step back and formulate your investment view based on your analysis. Consider critical assumptions, conditions for proceeding with the investment, key risks, and primary drivers of returns.

Step 5: Craft Your Presentation

Organize your insights and analysis into a structured presentation. Clearly articulate your investment thesis, supporting analysis, and key findings.

Step 6: Practice Your Presentation

Rehearse your presentation to ensure clarity and confidence. Be prepared to engage in a discussion and defend your investment thesis.

Approaching a private equity case study with this methodical approach demonstrates your analytical prowess and strategic thinking.

How to Succeed in a Private Equity Case Study?

Succeeding in a private equity case study demands a strategic blend of analytical prowess, strategic acumen, and effective communication.

• Master the Fundamentals: Start by focusing on the foundational aspects of the case study before delving into the complexities. Build a solid understanding of financial modelling principles and investment analysis basics. This will provide you with a strong grounding to tackle more intricate tasks with confidence.
• Demonstrate Nuanced Investment Judgment: Avoid simplistic yes or no answers when presenting your investment recommendation. Instead, offer a nuanced analysis that considers the price point at which you would consider investing and the key assumptions driving your decision. Highlight potential avenues for value creation in the deal and discuss the primary risks and uncertainties involved.
• Engage in Meaningful Dialogue: While the ability to build complex financial models is important, what truly sets you apart is your capacity to think critically and engage in intelligent discussion about the investment. Focus on presenting a well-considered recommendation supported by solid reasoning and analysis. Be prepared to discuss your model and elaborate on your investment thesis clearly and concisely.
• Prioritize Substance Over Complexity: While showcasing your proficiency in financial modelling is essential, the goal is not to build the most intricate model. Concentrate on constructing a model that is accurate, logical, and well-structured. The true measure of success lies in your ability to derive meaningful insights from the model and utilize them to make informed investment decisions.
• Highlight Value-Creation Opportunities: In addition to identifying risks, emphasize the potential opportunities for value creation in the deal. Discuss how you would leverage these opportunities to enhance the company's performance and generate returns for investors.

By following these strategies, you can significantly enhance your prospects of success in a private equity case study. Demonstrating your ability to think critically, analyze investments, and communicate effectively will showcase your thought leadership and analytical prowess.

How Do I Prepare for a Private Equity Case Study?

Preparing for a private equity case study requires a structured approach and a solid understanding of the fundamentals of financial analysis and investment evaluation.

• Understand the Case Study Objective: Begin by understanding the objective of the case study, which is typically to evaluate the investment potential of a company. Familiarize yourself with the key concepts and methodologies used in private equity investing.
• Review Financial Modeling Basics: Brush up on your financial modelling skills, focusing on key concepts such as revenue forecasting, expense modelling, and valuation techniques. Practice building and analyzing financial models to prepare for the case study.
• Familiarize Yourself with LBO Modeling: Since leveraged buyout (LBO) modelling is a common aspect of private equity case studies, make sure you are comfortable with building LBO models. Understand the key components of an LBO model, such as debt structure, cash flow projections, and exit strategies.
• Practice Case Studies: Practice solving case studies to hone your analytical skills and improve your ability to think critically. Look for case studies online or create your own based on real-world scenarios to simulate the interview experience.
• Stay Updated on Industry Trends: Keep yourself informed about the latest trends and developments in the industries you are interested in. This will help you make informed assumptions and recommendations during the case study.
• Develop a Structured Approach: Develop a structured approach to solving case studies, including how you will analyze the company's financials, identify key risks and opportunities, and formulate your investment thesis.
• Seek Feedback: Seek feedback from mentors, peers, or professionals in the field to improve your case study skills. Consider participating in case study competitions or workshops to gain practical experience.

FAQs (Frequently Asked Questions)

1. How do you approach a private equity case study? Approach a private equity case study by understanding the objective, reviewing financial basics, practicing LBO modelling, staying updated on industry trends, and developing a structured analysis approach.

2. How can I stand out from other candidates? Stand out by demonstrating nuanced investment judgment, engaging in meaningful dialogue, prioritizing substance over complexity in modelling, and highlighting value-creation opportunities.

3. What is the role of modelling in a private equity case study? Modelling plays a crucial role in a private equity case study as it helps evaluate investment potential, assess risks, and determine the feasibility of an acquisition.

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MASTERING PRIVATE EQUITY CASE STUDIES: A COMPREHENSIVE GUIDE

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​ Having progressed through the initial stages outlined in our preparation guide , you are now about to enter the case study phase of the interview process. This stage closely mirrors the tasks you'll perform on the job, testing your analytical skills, strategic thinking, and investment rationale. 

Regardless of the level you enter the fund at, the case study is a generally accepted practice and forms one of the three key pillars of any successful interview process: structured interviews, work–based tests, and psychometric assessments based on empirical evidence.

To help you succeed, this guide delves into the nuances of PE case studies, offering insights from industry experts and best practices.

The Essence of the PE Case Study

A private equity case study typically requires evaluating a potential investment opportunity. You’ll receive an Information Memorandum (IM) for a company the PE firm could consider investing in, potentially some supporting information (industry news/benchmarking), and possibly a part-completed model (though often you are asked to prepare this from scratch). Your task is to value the company and formulate an investment proposal, including whether or not to invest. Keep in mind that this task may not be exclusive. The key lies not only in your final decision but also in the depth and logic of your analysis.

Types of PE Case Studies:

1. paper lbo/dcf.

A Paper LBO/DCF involves a simplified leveraged buyout or discounted cashflow model performed on paper or verbally, focusing on core concepts without the aid of a computer.

Preparation Strategy

Understand Core Concepts: Be well-versed in the fundamentals of LBO and DCF models.

Practice-Without Tools: Get comfortable performing calculations manually or explaining your thought process clearly without visual aids.

2. Timed LBO Modelling Test

A Timed LBO Modelling Test is a fast-paced, 1-3 hour on-site or remote test focused on speed and accuracy. These are often designed to understand the gaps in your skill-set, so it is not about achieving the perfect result, but creating a well thought-through working model. It is therefore important to pace yourself and breakdown what to focus on and when before you start.

Speed and Accuracy: Hone your Excel skills and practice building LBO models quickly.

Simulate Test Conditions: Replicate the pressure of a timed test to build your endurance and efficiency.

3. Take-home LBO Model and Presentation

The Take-home LBO Model and Presentation involves a comprehensive analysis where you might have a weekend or a week to build a full LBO model and prepare a detailed investment recommendation. Typically, you will then be asked to submit your findings and return to present 

Detailed Analysis: Conduct thorough research and develop a comprehensive model. Ensure the numbers balance and that you are not making assumptions based on incorrect data.

Effective Presentation: Focus on creating a clear, concise, and compelling presentation of your findings and recommendations.

4. Commercial Case Studies

Commercial case studies are less frequently used but typically deployed when you come from a non-financial background, such as commercial consulting or industry. In this scenario, you are either presented with a CIM or some high-level information about a business and then asked to think through aspects like business model, unit economics, market dynamics, growth opportunities, investment risks, KPIs, and areas of additional diligence.

Develop a Structured Approach: Create a framework for methodically analysing businesses. Practice with a few random CIMs you can find online. Example framework:

Revenue Generation: How does the business generate revenue? What does it sell, and how does it sell these products or services?

Revenue Evolution: How is the company’s ability to generate revenue likely to evolve? What are its growth prospects?

Direct Costs: What are the direct costs associated with its revenue streams? Is it a people-oriented cost structure, a SaaS business, or a materials-based cost structure?

Indirect Costs: What indirect costs are required to drive revenue? Consider factors like sales intensity and capital intensity.

Financial Understanding: Understand growth rates, margin profiles, operating leverage, unit economics, and cash flow profiles.

Market Positioning and Dynamics: Where is the business positioned in the value chain? What external factors, such as changing market dynamics and competition, will impact the business model

Dissecting the Case Study

To effectively analyse a potential investment in a private equity case study, it is crucial to break down the company and its environment into several key areas. Each aspect provides insight into different facets of the business and its viability as an investment. This section outlines the essential components you should examine, from industry dynamics to the specifics of the transaction, ensuring a comprehensive analysis.

Industry Analysis

Key Products and Markets: Understand the company’s primary products and markets and the main demand drivers.

Market Participants and Competition: Analyse the competitive landscape and the intensity of competition.

Industry Cyclicality: Determine the cyclical nature of the industry and external factors influencing it, such as regulatory changes or economic cycles.

Company Analysis

Position in Industry: Assess the company’s market position and growth trajectory.

Operational Leverage and Margins: Evaluate the cost structure and sustainability of margins.

Management and Cash Needs: Consider the effectiveness of the management team and the company’s working capital requirements.

Financial Analysis

Revenue Drivers and Stability: Identify revenue drivers, growth potential, and stability.

Cost Structure: Examine supplier diversity, fixed versus variable costs, and capex requirements.

Competitive Analysis: Assess industry concentration, buyer and supplier power, brand strength, and potential substitutes.

Growth Prospects

Scalability and Efficiency: Evaluate scalability and potential efficiency improvements.

Due Diligence: Consider environmental, legal, and operational risks.

Transaction Analysis

LBO Model: Build a leveraged buyout model to project financial performance and returns.

Valuation and Debt Capacity: Justify your valuation and the company’s ability to raise and service debt.

Exit Opportunities: Assess potential exit strategies and their impact on returns.

Building a Leveraged Buyout Model

Creating a full 3-statement model is crucial, and it's important to ensure it balances. You will typically build this from scratch, and we recommend a buyout overlay (especially for large-cap funds). While formatting isn't a primary concern, the model should lead you to a clear view of the deal's merits and risks, culminating in a definitive recommendation—whether to invest or not.

Key Components of the Model

Income Statement: Shows the company's revenue, expenses, and net income over a specific period.

Balance Sheet: Displays the company's assets, liabilities, and shareholder equity at a specific point in time, providing a financial snapshot.

Cash Flow Statement: This statement illustrates the company's cash inflows and outflows from operating, investing, and financing activities over a specific period.

Ensuring it balances is a core principle because it reflects the fundamental accounting equation: Assets = Liabilities + Shareholders' Equity. In simpler terms, everything a company owns (assets) must be financed by what it owes (liabilities) and the money invested by shareholders (equity). The 3-statement model is designed to be internally consistent, so changes in one statement should automatically flow through and impact the other statements, ensuring the balance sheet remains balanced.

Buyout Overlay

With a buyout overlay to the model, we can determine:

Financial Assumptions:

Buyout Price: Determine the price per share the private equity firm will pay for the company. Techniques for this can include:

Market Valuation Techniques

Market Multiples: Compares the target company's financial metrics to publicly traded companies in the same industry.

Transaction Multiples: Analyses recent M&A deals in the same industry.

Discounted Cash Flow (DCF) Valuation: Considers the target company's future cash flows, discounting them to their present value to arrive at a company valuation.

Financing Structure: Specify the debt and equity financing mix used to fund the buyout, impacting the company's capital structure and future cash flows.

Exit Strategy: Consider the private equity firm's expected exit timeline, influencing future growth assumptions.

Income Statement:

Impact on Revenue: Analyse if the buyout will affect the company's pricing strategy, market access, or growth initiatives.

Impact on Expenses: Consider potential changes in management structure, financing costs (interest on debt), or one-time transaction fees.

Balance Sheet:

Shareholder Equity Elimination: Upon buyout, existing shareholder equity gets replaced by new equity issued to the private equity firm.

Debt Assumption: Account for the new debt used to finance the buyout, increasing the company's liabilities.

Cash Flow Impact: Model the cash outflow for the buyout transaction and the ongoing cash flow implications of the new debt (interest payments).

Cash Flow Statement:

Financing Activities: Reflect the cash inflow from the debt portion of the buyout financing.

Debt Service: Include the cash outflow for ongoing interest payments on the new debt.

Iteration and Sensitivity Analysis:

Refine Assumptions: Based on industry benchmarks and company-specific factors.

Perform Sensitivity Analysis: See how variations in buyout price, financing structure, or growth assumptions impact the model's outputs.

Presenting Back to the Business

Effectively presenting your analysis to the business is a critical part of the private equity case study process. This step involves synthesising your findings into a clear and compelling narrative that highlights the company’s strengths, weaknesses, opportunities, and threats (SWOT analysis). By doing so, you can provide a comprehensive view of the potential investment, showcasing both its merits and risks. Here’s a detailed breakdown of what to consider when presenting your findings to ensure a thorough and persuasive presentation.

Strengths (Internal - Positive)

Financial Performance: Examine profitability (margins, net income), revenue growth, and cash flow generation.

Competitive Advantage: Identify unique selling propositions or strategic advantages.

Management Team: Evaluate the management team's experience, track record, and expertise.

Product/Service: Consider the quality, innovation, and market demand for the company's offerings.

Operational Efficiency: Analyse production processes, inventory management, and cost structure.

Weaknesses (Internal - Negative)

Financial Performance: Identify weaknesses in profitability, cash flow, or high debt levels.

Market Position: Assess the company’s competitive challenges.

Product/Service: Evaluate the relevance and competitiveness of products or services.

Operational Inefficiencies: Identify inefficiencies in production, supply chain, or overhead costs.

Management Team: Assess any gaps in management experience or track record.

Opportunities (External - Positive)

Market Growth: Identify growth potential in the target market.

Industry Trends: Leverage favourable industry trends.

Technology Advancements: Consider new technologiesto enhance the company's products or services.

Acquisitions: Explore potential acquisitions or partnerships.

Economic Conditions: Evaluate positive economic factors that could benefit the company.

Threats (External - Negative)

Market Competition: Assess the impact of increasing competition.

Economic Downturn: Consider the potential impact of economic slowdowns.

Regulatory Changes: Identify new regulations that could increase costs or restrict operations.

Technological Disruption: Evaluate the threat of emerging technologies.

Political Instability: Consider the impact of political or economic instability in the company’s operating regions.

Key Tips for Success

Prioritise depth over breadth.

Concentrate on the most crucial elements of your analysis. It's better to delve deeply into a few critical points than to cover too many topics superficially.

Simulate Realistic Conditions

Practice under time constraints to enhance your speed and accuracy. Replicating the pressure of a real case study will help you perform better during the actual interview.

Utilise Mock Case Studies

Engage with mock case studies and seek feedback from industry professionals. This will help you refine your approach and improve your analytical skills.

Be Honest and Transparent

If you don’t know the answer to a question, admit it. Honesty is valued over attempting to bluff, as interviewers can easily spot insincerity.

Align with the Firm’s Philosophy

Customise your analysis to match the investment strategy of the private equity firm you are interviewing. Understanding and reflecting on the firm’s investment style can distinguish you from other candidates.

Succeeding in a private equity case study requires a blend of analytical rigour, strategic insight, and effective communication. The process tests your technical skills and ability to think like an investor and articulate your ideas clearly. Here are the key takeaways to ensure success:

Analytical Rigour: Dive deep into financial data to uncover meaningful insights. Develop a robust understanding of the company's financial health through detailed analysis of income statements, balance sheets, and cash flow statements.

Strategic Insight: Go beyond numbers. Assess the company's market position, competitive landscape, growth prospects, and potential risks. Identify where value can be created and understand the broader industry dynamics.

Effective Communication: Your ability to present your findings clearly, concisely, and compellingly is crucial. Ensure your presentation is structured logically, highlights the key points, and supports your investment thesis with solid evidence.

Value Creation Focus: Always keep the potential for value creation at the forefront of your analysis. Consider how operational improvements, strategic repositioning, or market expansion can enhance the company's value.

Practice and Preparation: Simulate real case study conditions to build speed and accuracy. Engage with mock case studies and seek feedback from industry professionals to refine your approach.

Customisation: Tailor your analysis to align with the specific investment philosophy of the PE firm you’re interviewing with. Understanding the firm's strategy and past investments can provide valuable context and make your presentation more relevant.

Focusing on these areas can demonstrate your potential as a valuable investment professional. Remember, the case study is not just a test of your analytical abilities but a showcase of how you approach problem-solving and decision-making in a real-world context.

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Private Equity Interviews 101: How to Win Offers

If you're new here, please click here to get my FREE 57-page investment banking recruiting guide - plus, get weekly updates so that you can break into investment banking . Thanks for visiting!

Private equity interviews can be challenging, but for most candidates, winning interviews is much tougher than succeeding in those interviews.

You do not need to be a math genius or a gifted speaker; you just need to understand the recruiting process and basic arithmetic.

Still, there is more to PE interviews than “2 + 2 = 4,” so let’s take a detailed look at the process:

How to Network and Win Private Equity Interviews

The Private Equity recruiting process differs dramatically depending on your current job and location.

Here are the two extremes:

• Investment Banking Analyst at a Bulge Bracket or Elite Boutique in New York: The process will be highly structured, and interviews will finish at warp speed. In some ways, your bank, group, and academic background matter more than your skill set or deal experience. This one is known as the “on-cycle” process.
• Non-Banker in Another Part of the U.S. or World: The process will be far less structured, it may extend over many months, and your skill set and deal/client experience will matter a lot more. This one is known as the “off-cycle” process.

If you’re in between these categories, the process will also be in between these extremes.

For example, if you’re at a smaller bank in NY, you may complete some on-cycle interviews, but you will almost certainly also go through the off-cycle process at smaller firms.

If you’re in London, there will also be a mix of on-cycle and off-cycle processes, but they tend to start later and move more slowly than the ones in NY.

We have covered PE recruiting previously ( overall process and what to expect in the on-cycle process ), so I am not going to repeat everything here.

Interviews in both on-cycle and off-cycle processes test similar topics , but the importance of each topic varies.

The timing of interviews and start dates, assuming you win offers, also differs.

The Overall Private Equity Interview Process

Regardless of whether you recruit in on-cycle or off-cycle processes, or a combination of both, almost all PE interviews have the following characteristics in common:

• Multiple Rounds: You’ll almost always go through at least 2-3 rounds of interviews (and sometimes many more!) where you speak with junior to senior professionals at the firm.
• Topics Tested: You’ll have to answer fit/background questions, technical questions, deal/client experience questions, questions about the firm’s strategies and portfolio, market/industry questions, and complete case studies and modeling tests.

The differences are as follows:

• Timing and Time Frame: If you’re at a BB/EB bank in NY, and you interview with mega-funds, the process starts and finishes within several months of your start date at the bank (!), and it moves up earlier each year. Interviews at the largest firms start and finish in 24-48 hours, with upper-middle-market and middle-market firms beginning after that.

By contrast, interviews start later at smaller PE firms, and the entire process may last for several weeks up to several months.

• Importance of Topics Tested: At large funds and in the on-cycle process, you need to complete modeling tests quickly and accurately and spin your pitches and early-stage deals into sounding like real deals; at smaller funds and in off-cycle interviews, the reasoning behind your case studies/modeling tests and your real experience with clients and deals matter more.

Firm-specific knowledge and fitting your investment recommendations to the firm’s strategies are also more important.

• Start Date: You interview far in advance if you complete the on-cycle process, and if you win an offer, you might start 1.5 – 2.0 years later. With the off-cycle process, you start right away or soon after you win the offer.

Private Equity Interview Topics

There is not necessarily a correlation between the stage of interviews and the topics that will come up.

You could easily get technical questions early on, and you’ll receive fit/background and deal experience questions throughout the process.

Case studies and modeling tests tend to come up later in the process because PE firms don’t want to spend time administering them until you’ve proven yourself in previous rounds.

However, there are exceptions even to that rule: For example, many funds in London start the process with modeling tests because there’s no point interviewing if you can’t model.

Here’s what to expect on each major topic:

Fit/Background Questions: “Why Private Equity?”

The usual questions about “ Why private equity ,” your story , your strengths/weaknesses , and ability to work in a team will come up, and you need answers for them.

We have covered these in previous articles, so I’ve linked to them above rather than repeating the tips here.

Since on-cycle recruiting takes place at warp speed, you’ll have to draw on your internship experience to come up with stories for these questions, and you’ll have to act as if PE was your goal all along.

By contrast, if you’re interviewing for off-cycle roles, you can use more of your current work experience to answer these questions.

While these questions will always come up, they tend to be less important than in IB interviews because:

• In on-cycle processes, it’s tough to differentiate yourself – everyone else also did multiple finance internships and just started their IB roles.
• They care more about your deal experience, whether real or exaggerated, in both types of interviews.

Technical Questions For PE

The topics here are similar to the ones in IB interviews: Accounting, equity value and enterprise value , valuation/DCF, merger models, and LBO models.

If you’re in banking, you should know these topics like the back of your hand.

And if you’re not in banking, you need to learn these topics ASAP because firms will not be forgiving.

There are a few differences compared with banking interviews:

• Technical questions tend to be framed in the context of your deal experience – instead of asking generic questions about the WACC formula , they might ask how you calculated it in one specific deal.
• More critical thinking is required. Instead of asking you to walk through the financial statements when Depreciation changes, they might describe companies with different business models and ask how the financial statements and valuation would differ.
• They focus more on LBO models, quick IRR math , and your ability to judge deals quickly.

Most interviewers use technical questions to weed out candidates , so poor technical knowledge will hurt your chances, but exceptional knowledge won’t necessarily get you an offer.

Talking About Deal/Client Experience

This category is huge, and it presents different challenges depending on your background.

If you’re an Analyst at a large bank in New York, and you’re going through on-cycle recruiting, the key challenge will be spinning your pitches and early-stage deals into sounding like actual deals.

If you’re at a smaller bank, and you’re going through off-cycle recruiting, the key challenge will be demonstrating your ability to lead, manage, and close deals .

And if you’re not in investment banking, the key challenge will be spinning your experience into sounding like IB-style deals.

Regardless of your category, you’ll need to know the numbers for each deal or project you present, and you’ll need a strong “investor’s view” of each one.

That’s quite a bit to memorize, so you should plan to present, at most, 2-3 deals or projects.

You can create an outline for each one with these points:

• The company’s industry, approximate revenue/EBITDA, and multiples (or, for non-deals, estimated costs and benefits).
• Whether or not you would invest in the company’s equity/debt or acquire it (or, for non-deals, whether or not you’d pursue the project).
• The qualitative and quantitative factors that support your view.
• The key risk factors and how you might mitigate them.

If you just started working, pick 1-2 of your pitches and pretend that they have progressed beyond pitches into early-stage deals.

Use Capital IQ or Internet research to generate potential buyers or investors, and use the company-provided pitch materials to come up with your projections for the potential stumbling blocks in the transaction.

For your investment recommendation, imagine that each deal is a potential LBO, and build a quick, simple model to determine the rough numbers, such as the IRR in the baseline and downside cases.

For the risk factors, reverse each model assumption (such as the company’s revenue growth and margins) and explain why your numbers might be wrong.

If you’re in the second or third categories above – you need to show evidence of managing/closing deals or evidence of working on IB-style deals – you should still follow these steps.

But you need to highlight your unique contributions to each deal, such as a mistake you found, a suggestion you made that helped move the financing forward, or a buyer you thought of that ended up making an offer for the seller.

If you’re coming in with non-IB experience, such as internal consulting , still use the same framework but point out how each project you worked on was like a deal.

You had to win buy-in from different parties, get information from groups at the company, and justify your proposals by pointing to the numbers and qualitative factors and addressing the risk factors.

Firm Knowledge

Understanding the firm’s investment strategies, portfolio, and exits is very important at smaller firms and in off-cycle processes, and less important in on-cycle interviews at mega-funds.

If you have Capital IQ access, use it to look up the firm.

If not, go to the firm’s website and do extensive Google searches to find the information.

Finding this information should not be difficult, but the tricky point is that firms won’t necessarily evaluate your knowledge by directly asking about it.

Instead, if they give you a take-home case study, they might judge your responses based on how well your investment thesis lines up with theirs.

For example, if the firm makes offline retailers more efficient via cost cuts and store divestitures, you should not present an investment thesis based on overseas expansion or roll-ups of smaller stores.

If they ask for an investor’s view of one of your deals, they might judge your answer based on your ability to frame the deal from their point of view.

For example, if the firm completes roll-ups in fragmented industries, you should not look at a standard M&A deal you worked on and say that you’d acquire the company because the IRR is between XX% and YY% in all scenarios.

Instead, you should point out that with several roll-ups, the IRR would be between XX% and YY%, and even in a downside case without these roll-ups, the IRR would still be at least ZZ%, so you’d pursue the deal.

Market/Industry

In theory, private equity firms should care about your ability to find promising markets or industries.

In practice, open-ended questions such as “Which industry would you invest in?” are unlikely to come up in traditional PE interviews.

If they do come up, they’ll be in response to your deal discussions, and the interviewer will ask you to explain the upsides and downsides of your company’s industry.

These questions are more likely in growth equity and venture capital interviews, so you shouldn’t spend too much time on them if your goal is traditional PE (for more on these fields, see our coverage of venture capital interview questions and the venture capital case study ).

And even if you are interviewing for growth equity or VC roles, you can save time by linking your industry recommendations to your deal experience.

Case Studies and Modeling Tests

You will almost always have to complete a case study or modeling test in PE interviews, but the types of tests span a wide range.

Here are the six most common ones, ranked by rough frequency:

Type #1: “Mental” Paper LBO

This one is closer to an extended technical question than a traditional case study.

To answer these questions, you need to know how to approximate IRR, and you need practice doing the mental math.

The interviewer might ask something like, “A PE firm acquires a $150 EBITDA company for a 10x multiple using 60% Debt. The company’s EBITDA increases to $200 by Year 3, $225 by Year 4, and $250 by Year 5, and it pays off all its Debt by Year 3.

The PE firm sells its stake evenly over Years 3 – 5 at a 10x EBITDA multiple. What’s the approximate IRR?”

Here, the Purchase Enterprise Value is $1.5 billion, and the PE firm contributes 40% * $1.5 billion = $600 million of Investor Equity.

The “average” amount of proceeds is $225 * 10 = $2,250, and the “average” Exit Year is Year 4 (no need to do the full math – think about the numbers – and all the Debt is gone).

So, the PE firm earns $2,250 / $600 = 3.75x over 4 years. Earning 3x in 3 years is a ~45% IRR, so we’d expect the IRR of a 3.75x multiple in 4 years to be a bit less than that.

To approximate a 4x scenario, we could take 300%, divide by 4 years, and multiply by ~55% to account for compounding.

That’s ~41%, and the actual IRR should be a bit lower because it’s a 3.75x multiple rather than a 4.00x multiple.

In Excel, the IRR is just under 40%.

Type #2: Written Paper LBO

The idea is similar, but the numbers are more involved because you can write them down, and you might have 30 minutes to come up with an answer.

You can get a full example of a paper LBO test, including the detailed solutions, here .

You can also check out our simple LBO model tutorial to understand the ropes.

With these case studies, you need to start with the end in mind (i.e., what multiple do you need for an IRR of XX%) and round heavily so you can do the math.

Type #3: 1-3-Hour On-Site or Emailed LBO Model

These case studies are the most common in on-cycle interviews because PE firms want to finish quickly.

And the best way to do that is to give all the candidates the same partially-completed template and ask them to finish it.

You may have to build the model from scratch, but it’s not that likely because doing so defeats the purpose of this test: efficiency.

You’ll almost always receive several pages of instructions and an Excel file, and you’ll have to answer a few questions at the end.

The complexity varies; if it’s a 1-hour test, you probably won’t even build a full 3-statement model .

They might also ask you to use a cash-free debt-free basis or a working capital adjustment to tweak the Sources & Uses slightly.

If it is a 3-hour test, a 3-statement model is more likely (the other parts of the model will be simpler in this case).

Here’s a free example of a timed LBO modeling test ; we have many other examples in the IB Interview Guide and Core Financial Modeling course .

IB Interview Guide

Land investment banking offers with 578+ pages of detailed tutorials, templates and sample answers, quizzes, and 17 Excel-based case studies.

Type #4: Take-Home LBO Model and Presentation

These case studies are open-ended, and in most cases, you will not get a template to complete.

The most common prompts are:

• Build a model and make an investment recommendation for Portfolio Company X, Former Portfolio Company Y, or Potential Portfolio Company Z.
• Pick any company you’re interested in, build a model, and make an investment recommendation.

With these case studies, you must fit your recommendation to the firm’s strategy rather than building a needlessly complex model.

You might have 3-7 days to complete this type of case study and present your findings.

You might be tempted to use that time to build a complex LBO model, but that’s a mistake for three reasons:

• The smaller firms that give open-ended case studies tend not to use that much financial engineering.
• No one will have time to review or appreciate your work.
• Your time would be better spent on industry research and coming up with a sold investment thesis, risk factors, and mitigants.

If you want an example of an open-ended exam like this, see our private equity case study article and follow the video walkthrough or article text.

Your model could be shorter, and your presentation could certainly be shorter, but this is a good example of what to target if you have more time/resources.

Type #5: 3-Statement/Growth Equity Model

At operationally-focused PE firms, growth equity firms, and PE firms in emerging markets such as Brazil , 3-statement projection modeling tests are more common.

The Atlassian case study is a good example of this one, but I would change a few parts of it (we ignored Equity Value vs. Enterprise Value for simplicity, but that was a poor decision).

Also, you’ll never have to answer as many detailed questions as we did in that example.

If you think about it, a 3-statement model is just an LBO model without debt repayment – and the returns are based on multiple expansion, EBITDA growth, and cash generation rather than debt paydown .

You can easily practice these case studies by picking companies you’re interested in, downloading their statements, projecting them, and calculating the IRR and multiples.

Type #6: Consulting-Style Case Study

Finally, at some operationally-focused PE firms, you could also get management consulting-style case studies, where the goal is to advise a company on an expansion strategy, a cost-cutting initiative, or pricing for a new product.

We do not teach this type of case study, so check out consulting-related sites for examples and exercises.

And keep in mind that this one is only relevant at certain types of firms; you’re highly unlikely to receive a consulting-style case study in standard PE interviews.

A Final Word On Case Studies

I’ve devoted a lot of space to case studies, but they are not as important as you might think.

In on-cycle processes, they tend to be a “check the checkbox” item: Interviewers use them to verify that you can model, but you won’t stand out by using fancy Excel tricks.

Arguably, they matter more in off-cycle interviews since you can present unique ideas more easily and demonstrate your communication skills in the process .

What NOT to Worry About In PE Interviews

The topics above may seem overwhelming, so it’s worth pointing out what you do not need to know for interviews.

First, skip super-complex models.

As a specific example, the LBO models on Macabacus are overkill; they’re way too complicated for interviews or even the job itself.

You should aim for Excel files with 100-300 rows, not 1,000+ rows, and skip points like circular references unless they specifically ask for them (for more, see our tutorial on how to remove circular references in Excel )

Next, skip brain teasers; if an interviewer asks them, you should drop discussions with the firm.

Finally, you don’t need to know about the history of the private equity industry or much about PE fund economics beyond the basics.

Your time is better spent learning about a firm’s specific strategy and portfolio.

PE Interview X-Factor(s)

Besides the topics above, competitive tension can make a huge difference in interviews.

If you tell Firm X that you’ve already received an offer from Firm Y, Firm X will immediately become far more likely to give you an offer as well.

Even at the networking stage, competitive tension helps because you always want to tell recruiters that you’re also speaking with Similar Firms A, B, and C.

Also, leverage your group alumni and the 2 nd and 3 rd -year Analysts.

You can read endless articles online about interview prep, but nothing beats real-life conversations with others who have been through the process.

These alumni and older Analysts will also have example case studies they completed, and they can explain how to spin your deal experience effectively.

PE Interview Preparation

The #1 mistake in PE interviews is to focus excessively on modeling tests and technical questions and neglect your deal discussions.

You can avoid this, or at least resist the temptation, by turning your deals into case studies.

If you follow my advice to create simplified LBO models for your deals, you can combine the two topics and get modeling practice while you’re preparing your “investor’s views.”

If you’re working full-time in banking, use your downtime in between tasks to do this , outline your story , and review technical questions.

If you only have 10-15-minute intervals of downtime, break case studies into smaller chunks and aim to finish a specific part in each period.

Finally, start preparing before your full-time job begins .

You’ll have far more time before you start working, and you should use that time to tip the odds in your favor.

The Ugly Truth About PE Interviews

You can read articles like this one, memorize PE interview guides, and get help from dozens of bank/group alumni, but much of the process is still outside of your control.

For example, if you’re in a group like ECM or DCM , it will be tough to win on-cycle interviews at large firms and convert them into offers no matter what you do.

If the mega-funds decide to kick off recruiting one day after you start your full-time job in August, and you’re not prepared, too bad.

If you went to a non-target school and earned a 3.5 GPA, you’ll be at a disadvantage next to candidates from Princeton with 3.9 GPAs no matter what you do.

So, start early and prepare as much as you can… but if you don’t receive an offer, don’t assume it’s because you made a major mistake.

So You Get An Offer: What Next?

If you do receive an offer, you could accept it on the spot, or, if you’re speaking with other firms, you could shop it around and use it to win offers elsewhere.

If you’re not in active discussions with other firms, you’re crazy if you do not accept the offer right away.

If You Get No Offer: What Next?

If you don’t get an offer, follow up with your interviewers, ask for feedback, and ask for referrals to other firms that might be hiring.

If you did reasonably well but came up short in a few areas, you could easily get referrals elsewhere .

If you did not receive an offer because of something that you cannot fix, such as your undergraduate GPA or your previous work experience, you might have to consider other options, such as a Master’s, MBA, or another job first.

But if it was something fixable, you could take another pass at recruiting or keep networking with smaller firms.

To PE Or Not to PE?

That is the question.

And the answer is that if you have the right background, you understand the process, and you start preparing far in advance, you can get into the industry and win a private equity career .

And if not, there are other options, even if you’re an older candidate .

You may not reach the promised land, but at least you can blame it on someone else.

Additional Reading

You might be interested in:

• The Search Fund Internship: Perfect Pathway into Investment Banking and Private Equity Roles?
• Private Equity Analyst Roles: The Best Way to Skip Investment Banking?
• On-Cycle Private Equity Recruiting : Will PE Firms Start Recruiting 10-Year-Old Children Soon?

Or, learn more about Breaking Into Wall Street here.

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street . In his spare time, he enjoys lifting weights, running, traveling, obsessively watching TV shows, and defeating Sauron.

Free Exclusive Report: 57-page guide with the action plan you need to break into investment banking - how to tell your story, network, craft a winning resume, and dominate your interviews

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49 thoughts on “ Private Equity Interviews 101: How to Win Offers ”

Brian, What about personality tests? What is their importance in the overall hiring process eg if you get them as the last stage?

They’re not that important, and even if you do get them, you can’t really “prepare” in any reasonable way (barring a brain transplant to replace your personality and make it more suitable for the firm). It’s also highly unusual to get one in the final stage – a firm doing that is probably just paranoid that you are secretly a serial killer and they want to rule out that possibility.

Hey- for the Fromageries Bel case study, can’t quite make sense of the Tier 4 management incentive returns, what’s the calculation for each tier? Would think it’s Tier 2 less tier 1 * tier 1 marginal profit

Tier 4 is based on a percentage of all profits *above* a 2.5x equity multiple. Each tier below it is based on a percentage of profits between specific multiples, which correspond to specific EUR proceeds amounts.

I have an accounting background (CPA & several years removed from school) and a small amount of finance experience through internships. I’m interviewing for a PE analyst position and managed to get through the first round of interviews. The firm itself doesnt just hire guys with a few years of banking, their team is very diverse with some backgrounds similar to mine.

The first round interview was a mix of technical questions plus a lot about myself and my experience. No behavioral questions. The first round was with an associate for 30 minutes, the second round is an hour with a partner. I managed to answer a lot of the questions about LBO models and what types of companies are good LBO candidates. Thanks to your website for that.

Any advice for a second round interview for a guy like me who doesnt have deal making experience or much experience in finance? Will the subsequent interviews after the first round be more technical-based questions? Or do they lean more on technical questions in round 1 to weed out candidates?

They will usually become more fit-based if they’ve already asked a lot of technical questions in earlier rounds. I would focus on your story and answers to the Why PE / Why This Firm / Are you sure you want to switch?-type questions.

Is it likely too difficult to access the on-cycle process from the CLT office of an In-Between-a-Bank that it would make more sense to focus one’s energy on the MM/LMM? Is the new era of Zoom making geography/distance less of a factor or is the perceived prestige of NY still an obstacle?

Location is somewhat less of a factor now, but it still matters, and working from home will not continue indefinitely into the future. It will be very difficult to participate in on-cycle recruiting at the mega-funds if you’re working in Charlotte at Wells Fargo if that’s your question, but plenty of MM funds are realistic.

What are some of the larger funds that you would consider realistic?

There are dozens of funds out there (it’s not like bulge bracket banks or mega-fund PE firms where there’s only a defined set of 5-10), so I can’t really give you a specific answer. My recommendation would be to look up people who worked at WF on LinkedIn and see the types of funds they are now working at.

I remember I saw a video of yours (might have been YouTube) where you explained the PE process. You talked about do pe firms really add value and then you went over how when a pe firm buys a company, they do a little “trick” where they create a shell company to acquire the target so the debt isn’t on the pe firms books. I’ve been looking all over for this video. Do you know which video I’m referring to?

Yes, that is no longer in video form. It’s still in the written LBO guide but the video from the old course was removed because it was way too long and boring for a video and was better explained in text.

Hi Brian, can you elaborate more on ‘Understanding the firm’s investment strategies, portfolio, and exits’ when you talk about smaller firm and off-cycle processes, simliar point came up under *Type 5*: you must fit your recommendation to the firm’s strategy rather than building a needlessly complex model. What exactly should I pay attention on? I felt funds I checked their investment strategy descirption are pretty broad, and they invest in various type of deals, say even in one industry, they do different purchase range. Also, when talking about growth equity, you mentioned you can practice case by picking companies you’re interested in, downloading their statements, projecting them. What if they are not public companies, how can I get those information? Are you recommending only those companies with 20F available? Or can you just elaborate more on how can I follow your instruction? Thanks

All you can do is go off their website and possibly a Capital IQ description if you have access. See if they focus on growth, leverage for mature companies, operational improvements, or add-on acquisitions and pick something that fits one of those.

You can pick public companies for growth equity or find a public company that is similar to a private one the firm has.

Hey Brian! I have an interview with a family office for a private equity analyst position. The firm is small and not much about it online. I haven’t had much time to prepare as it was not an interview I was expecting. What would you say the most important elements to focus on are for the interview considering the time constraint? I am an undergrad, third year, second internship. (first internship was for a large construction/developer as project coordinator, not finance based)

Focus on your story, the firm’s portfolio companies and strategies, and a few investment ideas you have for specific sectors. Technical questions are fine, but you probably won’t have much time to prepare at the last minute.

How would PE interviews / Technical questions look like for straight out of undergrad PE role look like

e.g Blackstone internships, Goldman Merchant Banking internships etc

Similar to IB ones, with a focus on LBOs?

Largely the same, but less emphasis on deal experience and deal-related questions at the undergraduate level. They may ask slightly more questions on LBOs, but at the undergrad level, they assume you know very little, so questions will span a wide range of topics.

Have you written or seen similar articles on PE operating partner interviews?

No, sorry. There’s hardly any information on that level of interview online because you can’t really make an interview guide or other product to prepare for it, and most people at that level would need 1-on-1 coaching more than a guide. My guess is that they will focus almost exclusively on your past experience turning around and growing businesses and assess how well you can do it for their portfolio companies. They’re not going to give you LBO modeling tests or case studies.

“Next, skip brain teasers; if an interviewer asks them, you should drop discussions with the firm”

Could you please elaborate on this? Almost every IB interview includes brain teasers so I am wondering why a PE interview shouldn’t?

Brain teasers are not that common in IB interviews in most regions unless you count any math/accounting/finance question as a brain teaser. They are far more common in S&T, quant fund, and prop trading interviews.

The point of this statement is that it’s OK if an occasional brain teaser comes up, but if the interviewer asks you brain teasers for 30 minutes, which have exactly 0% correlation to the real work in PE, you should leave because it’s a sign that the people working at the firm are idiots who don’t know how to conduct proper interviews or test candidates.

This is helpful. I find myself at a fix, I do not think I have had the right exposure, although in a BB I support teams with standard materials in a particular industry group in M&A. However I have interviews with a top global PE next month. Any guidance on how should I prepare for it ?

Thanks in advance

Follow everything in this article… practice spinning/discussing your deals… practice LBO questions and simple case studies.

Brian – thank you for your concise and candid remarks. do you have any insights or advice for someone with 5yrs of BB ECM & DCM experience now at a top full-time MBA program looking to break in?

It’s going to be very difficult if you just have capital markets experience and you’re already in business school. You should probably move to an M&A or strong industry team at a large bank (BB or EB) after business school and then go into private equity from there. It’s tough, but still easier than trying to move into PE directly out of an MBA program with only capital markets experience.

My next interview will highly likely involve a statement/growth equity modeling case. I tried to find the Atlassian Case interview but i am unable to open the link.

Would it be possible to share an example case or more information on that topic?

Many thanks,

The Atlassian case study is all we have. I don’t know why you can’t open the files, but I just tried and they seemed to work. Maybe try again or use a different browser.

Hi M&I team,

I have an opportunity to interview for an Analyst level opening at a boutique PE fund. This is a shop that has just started operations so I am directly communicating with the Partner. I doubt they have any structured recruitment process at this stage of their existence. He asked me to send some written work (memos and spreadsheets) on any public listed co that demonstrates my understanding of investing (basic balance sheet analysis, ratio analysis, valuation multiples).

So I am just wondering what to do? Should I work on projections and prepare a DCF model or do something simpler? I’d really appreciate your guidance on this.

Thanks again for the amazing work you’ll have been doing!

Yes, just create simple projections, a simple valuation/DCF, and maybe a simple LBO model since it is a PE fund that intends to buy and sell companies.

Could you provide some advice for preparing interviews for principal investing role ?

Thank you in advance Laura

We don’t really focus on that, but the articles on private equity and funds of funds on this site might be helpful.

Just wanted to say thank you! After reading everything on this site including all the CV and interview material I have managed to transition from a second year engineering undergrad with no prior experience/spring weeks/insight days, into an intern at Aviva Investors (UK buy side) within the space of one year.

The information you have posted is invaluable and “breaking in” is definitely doable with the right mindset and appetite for rejections!

Thanks again.

Thanks! Congrats on your internship offer.

Hi Brian/Nicole – Im an Economics student from the UK in 3rd year out of a 4 year course at a semi-target college, with 2 finance internships done up until now(not FO). I plan on doing a Msc Finance when I finish and eventually break into IB or Sales/Trading (I know I still haven’t decided which one I really want more). Through a family friend I have an offer to do a short internship this summer in NY in a post-trade regulatory commission. As this isn’t actually sitting at a trading desk experience, or anything related to IB should I decide to go down that road, would this add genuine value to my CV ? How are internships in regulatory commissions looked at for students looking to break into sales/trading? Surely even having any NY Finance experience on the CV will add more substance over here in London when going for internships compared to the majority of UK students who don’t? Appreciate any advice on this matter, Thanks!

I don’t think it would help much because you already have 2 non-FO internships, and a regulatory internship would be yet another non-FO internship. If it’s your best option, you can take it, but you would be better off getting something closer to a real front-office role.

Hey Brian. I am graduating after this semester going into Management consulting (Deliote, AT Kearny, Accenture)but I’m hoping to make a switch into either IB or PE after a couple years. I have one search fund internship which was enough to get me a few 1st and second round ib/pe FT interviews but no offers.My plan is to get into the best online MSF program I can and switch into Finance once I’m done. Do you think, given how close I was to getting in my 1st try, a high GPA from a reputable MSF and good experience in consulting will be enough or should I try to somehow get an IB internship before I apply?

I think you will probably need another internship just before the MSF starts or while it is in progress, not necessarily in IB, but something closer to it. Otherwise you’ll get a lot of questions about why you went from the search fund to consulting.

Thanks. As far as my story is concerned, is it better to do another finance internship before consulting so it’s search fund->ib->consulting->MSF (or MBA not sure)? I only ask because I may be able to get on some m&a projects with the consulting firm and my story could be when exposed to those deals, I realized how big my passion for finance was and that’s when I decided to get my MSF and switch to IB.

No, I think that would make less sense because then you would have to explain why you went from IB to consulting… and are now trying to go back to IB. Saying that you got exposed to M&A deals during the consulting experience would be a better story (and you would still ideally pair it with a transaction-related internship before/during the MSF).

Got it, thanks!

Probably missing something here, but for the first example, where does the 300% and 55% come from?

300% = 4x multiple. If compounding did not exist, we could just say 300% / 4 = 75% annual return. Because of compounding, however, the actual return does not need to be 75% per year in order for us to earn 300% by the end of 4 years. Instead, it can be a fair amount less than that, and we’ll still end up with 300% at the end.

To estimate the impact of compounding, you can multiply this 300% / 4 figure by a “compounding factor,” which varies based on the multiple and time period, but which is around 55% for a 4x return over a standard holding period.

Do you mind explaining how you can estimate a “compounding factor” such as with the 55% here?

There’s no easy-to-calculate-using-mental-math way to get this for all scenarios, but you can memorize quick rules of thumb (based on actual numbers and looking at the ratios) for 3 and 5-year periods and extrapolate from there. I don’t really think it’s worth doing that in-depth, though, because you just have to be roughly correct with these answers.

Do you think you will do a hedge fund interview guide similar to the one you have here?

Potentially, yes, but it’s much harder to give general guidelines for HF interviews because they’re completely dependent on your investment pitches. Also, interest in HFs has declined over the years (we no longer receive as many questions about them).

On that mental paper LBO question, how is the company able to pay off 900 of debt by year 3? It sounds like proceeds from the sale will have to be used in order to fully pay off the debt because EBITDA alone only adds up to 525, and that’s assuming there’s no interest.

Favorable working capital… NOLs… asset sales… the Konami code or other cheat codes. The point is not the numbers but the thought process.

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Best Private Equity Case Study Guide + Excel Model + Example

The most important part of the private equity interview is the case study round. After meeting a few people and going through a number of interviews, you will most likely get hit with a case study where you have to analyze whether a company is a good leveraged buyout target or not.

Your performance during the private equity case study round will determine whether or not you will get an offer. It is the most important part of the interview process, so you need to make sure you are well prepared and create a work product that sets you apart from the other candidates you are competing against.

Private Equity Case Study Example + Full LBO Excel Model

Private Equity Case Study Example + Model

It’s hard to know how to complete a full private equity case study if you don’t actually have experience working in private equity. With just an investment banking background or someone who is straight out of undergrad, you just don’t have the experience to understand how to structure and write a good case study.

Make sure you get access to a full private equity case study that was used in a real interview. You can use this as a reference on how to write your response and build the LBO model with all the key outputs.

Get access here before reading on. It becomes much easier to build a proper LBO model and complete a case study when you can refer to one that is already fully completed.

The case study was written by a private equity professional and includes a:

• Real Private Equity Case Study Example and Response
• Full Detailed LBO Excel Model

How is a Private Equity Case Study Structured

The private equity interview process is a lot more structured relative to hedge fund interviews. Most interviews happen during “on-cycle” recruiting your first six months in investment banking right out of undergrad. This is the best time to land an offer as you have dozens upon dozens of firms that are fighting to get the top talent to work at their firms. People will land offers after a matter of days after answering the basic private equity interview questions because of all this competition.

Unlike hedge fund case studies , private equity case studies are a bit different as it depends on if you are interviewing during the rush of on-cycle recruiting where firms fight for talent. You can expect the case study to be structured in either three ways:

• LBO Modeling Test

If you are going through the crazy all-out blitz of private equity interviews during on-cycle recruiting, you will like get either of the first two types of case studies, the modeling test and/or the paper LBO.

For an interview that is done outside of this period and at most of the smaller middle-market funds, you may get a longer take-home case study that is more comprehensive. It really just depends on the firm and how they conduct interviews.

1. LBO Modeling Test

The LBO modeling test is used in person during on-cycle recruiting very frequently. Usually when on-cycle interviews start, you’ll get invited along with other candidates to do a modeling test over the course of a few hours, then proceed with the usual interviews either before or after.

There is no reason why anyone can’t pass the modeling test. All it takes is practice after practice, just like how you’d get good at anything else. Back when I was an investment banking analyst, the only way I would learn how to do anything was by looking at previous models done by prior analysts saved on the shared drive and recreating those models from scratch over and over again. It’s the best way to learn how to get good at any type of Excel model – looking at precedent then recreating from scratch.

Wall Street Prep was another tool I used back during my investment banking analyst days. There is a course that was specifically created for Private Equity interviews and LBO modeling that teaches you everything you need to know. It was the best resource I was able to find to get prepared for private equity interviews and teaches you how to complete a full LBO model step-by-step from start to finish.

Start preparing today and sign up for the course below if you really want to break into private equity. I promise you will have a very low chance of landing a private equity offer if you do not know the basics of how to build an LBO.

Get 15% off if you use the coupon code in the link below:

Private Equity Masterclass: Step-By-Step Online Course​

A Complete LBO and PE Training Program. Whether you’re preparing for an LBO Modeling test or you want to learn to build an LBO model and become a better PE professional, this course has you covered.

Special Offer: Get 15% Off On Wall Street Prep’s Private Equity Course

2. Paper LBO

The paper LBO is used during interviews to make sure you have spent the time to learn the basics of how an LBO works. Usually, you are given a set of assumptions, a pen/paper and asked to work through a paper LBO live during the interview without the help of a computer or calculator.

 You need to be able to walk through how to:

• Calculate the purchase price
• Calculate sources and uses
• Build a simple income statement and projections
• Build to levered free cash flow
• Calculate the exit value, IRR and multiple on invested capital

The Wall Street Prep course above walks through how to do all this in detail and provides a few paper LBOs that you can use for practice.

3. Private Equity Take-Home Case Study + Written Memo

Now the full-blown take-home case study is the hardest and most in-depth analysis a private equity firm can ask of you during interviews. Outside of on-cycle recruiting, this is the most common type of case study that is given. Most firms will give you a week to work on it independently at home.

This case study round is the most important part of the interview. If you do not have a well-written case study with a good backup model that you can present to the interviewer, you will not get an offer.

The majority of case studies will ask either two questions:

• Look into XYZ company and tell us whether it’s a good LBO target
• Find an attractive LBO target and give us your thoughts

To answer the first question, you need to screen a universe of public companies and find one that could be an attractive target. You need to find a business that has the following characteristics:

• Growing market dynamics – markets that have structural tailwinds is a good place to start
• Strong competitive advantages – study Porter’s Five Forces if you haven’t already
• Stable recurring cash flows – business is going to be levered up in a buyout so it needs to have positive EBITDA and stable cash flows to pay off interest payments
• Low working capital / capex needs

Quickly eliminate all companies in your screen that have:

• Negative EBITDA
• High capex needs (capex is >75% of EBITDA)
• High valuation (EV/EBITDA is > 15x)

You can quickly eliminate companies in your screen that have negative EBITDA or high capex needs. Once you’ve found your target company (or if already given one), then you can start working on the actual meat of the case study.

Steps to Finish a Private Equity Case Study

This guide will walk you through all the steps required to complete a case study, from start to finish. You will learn everything from what documents you need to download, to how to build the LBO/model with all the key outputs, to how to actual write a good memorandum/presentation, to all the common mistakes to avoid.

• Download and organize all documents in one folder
• Research the industry to understand trends and key metrics
• Read the filings and take notes
• Input financials in Excel and build the LBO model
• Work on the presentation / memo

1. Download and organize all documents in one folder

You want to have everything in one folder that you can quickly access. Key websites to use for company filings are:

• www.sec.gov/edgar/searchedgar/companysearch.html – for direct access to filings
• www.Bamsec.com – access to filings in an organized fashion
• You want to save down (at the very least) the latest 10K and the prior four 10Qs, last four transcripts, earnings releases, investor presentations and supplements
• Other sources if you have access to them: Bloomberg, CapIQ, FactSet
• Sell-side research – sell-side research is how you gauge market expectations and quickly understand the business. Most initiating coverage reports will give a good overview of the company, its strengths, weaknesses and competitive landscape. Ask around for others to send you research if you don’t have direct access
• Other write-ups online – read all of the articles on Seeking Alpha and look at ValueInvestorsClub.com. Research on Seeking Alpha is usually very bad, but there may be articles that do a good job summarizing any fundamental pressures / tailwinds

2. Research the industry to understand trends and key metrics

If you have access to sell-side research, then go through the latest industry analysis for your target company or initiating coverage reports. When a sellside research firm initiates coverage, they write up a very in-depth review of the company. These reports provide a very good summary of a company and the industry it’s in with all relevant metrics.

If you don’t have access to sell-side research, then go through prior investor presentations of the company or any of its peers. There should be an industry/market overview and benchmarking metrics vs. peers in these presentations.

If you do not understand what is happening in the industry that the company is in, you will not know if there are any big headwinds or tailwinds that are directly impacting the company. A lot of private equity LBOs focus on growth and consolidation within an industry, so you need a good understanding of the market and what the growth opportunities are.

3. Read the filings and take notes

Create a new word document to copy and paste anything notable that you read. You can create sections in your notes for company overview, revenue / cost drivers, fixed versus variable costs, industry tailwinds/headwinds, key questions for items you don’t understand or need to follow-up with management on, etc.

The most important part of every 10K/10Q is the management’s discussion and analysis section (MD&A). This is where the company talks in detail about how the business has performed over the quarter/year relative to prior year’s performance. You should focus on the sections of the MD&A that talk about the revenue and cost drivers. Make a table in Excel and copy and paste commentary every quarter on what impacted revenue growth and margins (COGS and SG&A). Once you lay it all out in Excel, the fundamental picture of the Company becomes clearer and you can see what has had a major impact on recent results.

The most important thing you should read are the transcripts and investor presentations. Management usually gets into more detail on the overall strategy and key tailwinds / headwinds of the business. Additionally, you can gauge what the sell-side is most focused on in the Q&A section at the end of every transcript.

Lastly, read the risk section of the latest 10K to note what the Company finds to be the biggest risks to its overall performance. Pay close attention to the top few items listed here as you want to see what the structural/secular challenges are to the business.

4. Input financials in Excel and build the LBO model

Since private equity interviews can start very quickly after you start your first job in investment banking, most do not know how to properly build an LBO model. Every single private equity firm builds an LBO when looking at any investment. If you want to work in private equity, you need to make sure you spend time understanding an LBO, how it works and how to build one in your sleep.

Like I mentioned before, sign up for Wall Street Prep if you don’t know how to build an LBO. It’s the best resource available to learn how to build a LBO model and provides step-by-step instructions using a real public company example.

5. Work on a presentation or write a memo

Once you have done all the research and finished the modeling, you need to create outputs in a presentation or word doc format. The interviewer may specify what kind of output they prefer, but if not than do what you most comfortable with.

This presentation/memo will be what your interviewer will focus on, so the outputs need to be nicely formatted just like how you create outputs in investment banking. Formatting may not seem that important to you, but showing that you can present analysis in a clean, formatted manner without errors is what will set you apart from your peers.

Continue reading below to learn everything you need to know on what to include in this presentation or memo.

Private Equity Case Study Presentation / Memo

Background and company overview.

If you had to screen to find a company, briefly summarize the criteria you used to choose your company. List the financial metrics and any other factors you used when making the decision.

Then you need to summarize what that company does in around five sentences. If you were provided the company to analyze, the interviewer already knows what the company does so no need to go that much in depth as you can describe more in person if asked. Make sure to describe how the company makes money (a revenue breakdown), where they make money (what markets drive the most revenue), who their customers are (customer concentration), etc.

This is the easiest section as you can open up the latest 10K and within the first few pages there is a business description section that outlines what the company does. You should also check the latest investor presentations (if available) and sell-side research initiating coverage reports as they usually give good overviews of the company.

You need to make sure you yourself understands what the company does and what the revenue and cost drivers are. Anybody can copy the business descriptions written by the Company and sell-side research. You should make sure you know the company well enough to be able to talk about it without looking at your notes.

Investment Thesis/Highlights

Here you list out the top reasons why a company is a good leverage buyout target or not. The most common investment highlights discussed in a potential target can be:

• Attractive market dynamics due to XYZ reasons – could be due to fragmented market / consolidation opportunities, growing market dynamics, geographic expansion lack of competition, etc.
• Multiple ways to win – private equity firms love businesses that don’t just rely on one avenue of growth, so point out all the different ways value can be created either through revenue growth, expense rationalization, multiple expansion, etc.
• Recurring revenues – leverage buyout targets need to have steady cash flows since the business is going to be levered up in an acquisition and so cash flows need to be steady to support high recurring interest payments on the debt. Revenues need to be stable, recurring and non-cyclical in nature.
• Asset-light business – Also, PE firms like businesses that are asset-light (low capital expenditures or working capital requirements) and have low variable costs (little need to increase the expense base to grow revenues, also known as operating leverage).
• Valuation – if a company is underappreciated in the public markets and trades at a low valuation relative to peers, then returns can be very high if you can somehow grow/fix the business and make it more attractive at exit in the future. High LBO returns come from both growing cash flows and multiple expansion. Usually, you want to assume the same exit multiple (the multiple you sell the business for) in your model compared to your entry multiple (the multiple you purchased the business for). Purchasing a business at a high multiple and selling it at a lower multiple in the future will lead to significantly lower returns and can be a big risky.

Like I mentioned earlier, make sure you understand Porter’s Five Forces to understand the main competitive advantages/disadvantages a business can have.

Recommendation to Investment Committee

Summarize whether or not you think the company you chose to analyze (or were provided) is a good LBO target or not. Everything depends on the purchase price, so if you mention that it is not a good LBO target then make sure to describe why and at what price do you think makes the deal attractive.

Financials/Return Summary

Your LBO model should have summary outputs that describe how attractive the deal looks from a financial perspective. At minimum, you need to show:

• Returns at various prices
• Sources and uses
• Pro forma capitalization
• Sensitivity table on returns, showing IRR/MOIC at various premiums and exit multiples
• 5-year levered free cash flow bridge
• Main model assumptions

The private equity case study example shows you all of these outputs and more, which you can replicate for your model.

Here you talk about the main risk factors and any potential unexpected events that would cause the firm to lose money on its investment. Look in the Risk Factors section of the 10K or sellide research to understand what the main risks are to the business. Analyze the most important risk factors to see if they have any merit and the potential implications to your analysis if the risk factor is realized. Examples of risks include technology disruption, realization of synergies / other cost savings initiatives, commodity price changes, wage or cost inflation in general, cyclicality/seasonality, changes to regulations, etc.

Outstanding Diligence Questions

Depending on the company, there may or may not be very detailed information on the company in public filings. Usually the bigger the market capitalization, the better the disclosures are.

You want to show the interviewer a list of diligence items you would still want to ask from the company to better understand the business. These questions should be around unit economics, profitability by segment/region, strategic plan over the next five years, cost structure plans/initiatives, etc.

Model Output/Exhibits

Either in a separate PDF or in the exhibits, you want to have a full output of the entire LBO model. At most private equity firms, associates print out the full model to discuss key assumptions with others on the deal team and to make sure everything is working properly. Make sure your Excel is nicely formatted and is already in print format.

The model should have all the outputs described above as well as full detailed 3-statement financials, revenue build and the levered free cash flow waterfall.I know this seems like a lot of work, but it’s the minimum that you need to do for a take home private equity case study.

General Tips and Common Mistakes to Avoid

Get Access to a Real Private Equity Case Study Example + Excel Model

If you need an example case study used in an real interview, then get instant access to one in the link below. You can use this as a reference as you complete a case study to make sure you are building the LBO model correctly, having all the key outputs, and learning how to put it all together in a written memo.

Check your model for errors

One of the worst things you can do is send a model that has a huge bust that changes all the outputs and return metrics. It’s the quickest way to get axed during the interview process, so make sure you spend time going through each cell of your model after completion to make sure there are no errors.

Spend time properly formatting the case study

Being able to cleanly present your analysis is a very important skill in private equity. Most firms create decks and go to investment committee to present a deal, so you need to show that you can format properly and present financials in a clean manner.

There are a ton of people applying for the same job as you are, so you need to figure out a way to differentiate yourself. If you were previously or currently an investment banker, then you should have no problem properly formatting the Excel model and the memorandum.

Understand the firm’s investment style

Every private equity firm has their own approach to making investments. Make sure that you understand the types of investments the firm likes to make and the key qualities to look for.

Then if given a case study, point out these key qualities. It’s good to show that you can analyze investments in a similar manner as the private equity firm you are interviewing at if possible.

Prepare for the most common private equity interview questions

Private equity is one of the most sought career paths and one of the Best Paying Jobs in Finance and Wall Street . There are so many young, smart, Ivy League educated investment bankers trying to break into private equity, so you must make sure you stand apart from the crowd in both your case study and when answering the most common private equity interview questions .

Don’t lie or try to bullshit if asked a question you do not know the answer to

The problem with a lot of smart people in this industry is that they are reluctant to say “I don’t know” and tend to talk as if they know what they are talking about. Interviewers will easily see through the bull shit as they likely know the company well and have heard others talk about the company.

Be a “straight shooter.” Be honest if you do not know the answer to a question and say you will follow-up with the interviewer. That said, you should know the company and industry inside out before presenting the case study and be confident when you speak about facts that you know are true.

Memorize key metrics

When discussing the case study in person with the interviewer, make sure you are an expert in the company and can answer questions on the spot without having to reference your written case study. Key metrics you should know off the top of your head include EBITDA, capex, interest, margins, market cap, total enterprise value, leverage, valuation metrics, valuation metrics versus peers, IRR/MOIC, etc.

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How to prepare for the case study in a private equity interview

If you're  interviewing for a job in a private equity firm , then you will almost certainly come across a case study. Be warned: recruiters say this is the hardest part of the private equity interview process and how you handle it will decide whether you land the job.

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“The case study is the most decisive part of the interview process because it’s the closest you get to doing the job," says Gail McManus of Private Equity Recruitment. It's purpose is to make you answer one question: 'Would you invest in this company?'

When the case study interview starts, you usually be given a  'Confidential Information Memorandum'  (CIM) relating to a company the private equity fund could invest in. You'll be expected to a) value this company, and b) put together an investment proposal - or not. Often, you'll be allowed to take the CIM away to prepare your proposal at home.

 “The case study is still the most decisive element of the recruitment process because it’s the closest you get to actually doing the job.  Candidates can win or lose based on how they perform on case study. People who are OK in the interview can land the job by showing the quality of their thinking, ” says McManus. “You need to show that you can think, and think like an investor.”

"The end decision [on whether to invest] is not important," says one private equity professional who's been through the process. "The important thing is to show your thinking/logic behind answer."

Preparing for a PE case study has distinctive challenges for consultants and bankers. If you're a consultant, you need to, "make a big effort to mix your strategic toolkit with financial analysis. You need to prove that you can go from a strategic conclusion to a finance conclusion," says one PE professional. Make sure you're totally familiar with the way an  LBO model  works.

If you're a banker, you need to, "make a big effort to develop your strategic thinking," says the same PE associate. The fund you're interviewing with will want to see that you can think like an investor, not just a financier. "Reaching financial conclusions is not enough. You need to argue why certain industry is good, and why you have a competitive advantage or not. Things can look good on paper, but things can change from a day to another. As a PE investor, hence as a case solver, you need to highlight and discuss risks, and whether you are ready or not to underwrite them."

Kadeem Houson, partner at KEA consultants, which specialises in hiring junior to mid-level PE professionals, says: “If you’re a banker you’re expected to have great technical skills so you need to demonstrate you can think commercially about the numbers you plugged in.    Conversely, a consultant who is good at blue sky thinking might be pressed more on their understanding of the model. Neither is better or worse – just be conscious of your blank spots.”

Felix Beuttler, a former Goldman Sachs associate and founder of FinEx Academy, says bankers and consultants have different strengths and weaknesses when it comes to the case study interview. "Consultants are often too focused on the qualitiative elements and bankers are too focused on getting the numbers right," he says. Both need to prepare with a view to overcoming their weaknesses.

A good business or a good investment?

For McManus, one of the most important things to consider when looking at the case study is to understand the difference between a good business and a good investment. The difference between a good business and a good investment is the price. So you might have a great business but if you have to pay hugely for it it might not be a great business. Conversely you can have a so-so business but if you get it a good price it might make a great investment. “

McManus says as well as understanding the difference between a good business and a good investment, it’s important to focus on where the added value lies.  This has become a critical element for private equity firms to consider now that rates are higher, prices are still comparatively high, and adding value is more difficult. "In the case study it’s really important you think about where the value creation opportunity lies in this business and what the exit would be,” says McManus.

She advises candidates to be brave and state a specific price, provided you can demonstrate how you’ve arrived at your answer.

Another private equity professional says you shouldn't go out on a limb, though, and you should appear cautious: "Keep all assumptions conservative at all times so as not to raise difficult questions. Always highlight risks, downsides as well as upsides."

Research the fund – find the angle

One private equity professional says that understanding why an investment might suit a particular firm could prove to be a plus. Prior to the case study, check whether the fund favours a particular industry sector, so that when it comes to the case study, you can add that to the investment thesis. “This enables you to showcase you have read up on the firm’s strategy/unique characteristics Something that would make it more likely for the fund you’re interviewing with winning the deal in what’s a very competitive market, said the PE source, who said this knowledge made him stand out.

However, the primary purpose of the case study is to test the quality of your thinking - it is not to test you on your knowledge of the fund. “Knowing about the fund will tick an extra box, but the case study is about focusing on the three most critical things that will drive the investment decision,” says McManus. 

You need to think through these questions and issues:

Beuttler advises his students to assemble a deck filled with a particular set of slides, including investment highlights, investment risks, a value creation strategy, returns analysis and a clear conclusion. You will also want to include slides outlining the route to deriving a return on the investment.

We spoke to another private equity professional who's helpfully prepared a checklist of points to think about when you're faced with the case study. "It's a cheat sheet for some of my friends," he says.

When you're faced with a case study, he says you need to think in terms of: the industry, the company, the revenues, the costs, the competition, growth prospects, due dliligence, and the transaction itself.

The questions from his checklist are below. There's some overlap, but they're about as thorough as you can get.

When you're considering the industry, you need to think about:

- What the company does. What are its key products and markets? What's the main source of demand for its products?

- What are the key drivers in that industry?

- Who are the market participants? How intense is the competition?

- Is the industry cyclical? Where are we in the cycle?

- Which outside factors might influence the industry (eg. government, climate, terrorism)?

When you're considering the company, you need to think about:  

- Its position in the industry

- Its growth profile

- Its operational leverage (cost structure)

- Its margins (are they sustainable/improvable)?

- Its fixed costs from capex and R&D

- Its working capital requirements

- Its management

- The minimum amount of cash needed to run the business

When you're considering the revenues, you need to think about:

- What's driving them

- Where the growth is coming from

- How diverse the revenues are

- How stable the revenues are (are they cyclical?)

- How much of the revenues are coming from associates and joint ventures

- What's the working capital requirement? - How long before revenues are booked and received?

When you're considering the costs, you need to think about:

- The diversity of suppliers

- The operational gearing (What's the fixed cost vs. the variable cost?)

- The exposure to commodity prices

- The capex/R&D requirements

- The pension funding

- The labour force (is it unionized?)

- The ability of the company to pass on price increases to customers

- The selling, general and administrative expenses (SG&A). - Can they be reduced?

When you're considering the competition, you need to think about:

- Industry concentration

- Buyer power

- Supplier power

- Brand power

- Economies of scale/network economies/minimum efficient scale

- Substitutes

- Input access

When you're considering the growth prospects, you need to think about:

- Scalability

- Change of asset usage (Leasehold vs. freehold, could manufacturing take place in China?)

- Disposals

- How to achieve efficiencies

- Limitations of current management

When you're considering the due diligence, you need to think about: 

- Change of control clauses

- Environmental and legal liabilities

- The power of pension schemes and unions

- The effectiveness of IT and operations systems

When you're considering the transaction, you need to think about:

- Your LBO model

- The basis for your valuation (have you used a Sum of The Parts (SOTP) valuation or another method - why?)

- The company's ability to raise debt

- The exit opportunities from the investment

- The synergies with other companies in the PE fund's portfolio

- The best timing for the transaction

BUT: keep things simple.

While this checklist is important as an input and a way to approach the task, when it comes to presenting the information, quality beats quantity.  McManus says: “The main reason why people aren’t successful in case studies is that they say too much.  What you’ve got to focus on is what’s critical, what makes a difference. It’s not about quantity, it’s about quality of thinking. If you do 30 strengths and weaknesses it might only be three that matter. It’s not the analysis that matters, but what’s important from that analysis. What’s critical to the investment thesis. Most firms tend to use the same case study so they can start to see what a good answer looks like.”

Softer factors such as interpersonal skills are also important because if the case study is the closest thing you’ll get to doing the job, then it’s also a measure of how you might behave in a live situation.  McManus says: “This is what it will be like having a conversation at 11am  with your boss having been given the information memorandum the day before.  Not only are the interviewers looking at how you approach the case study, but they’re also looking at whether they want to have this conversation with you every Tuesday morning at 11am.”

The exercise usually takes around four hours if you include the modelling aspect, so there is time pressure. “Top tips are to practice how to think in a way that is simple, but fit for purpose. Think about how to work quickly. The ability to work under pressure is still important,” says Houson.

But some firms will allow you do complete the CIM over the weekend. In that case on one private equity professional says you should get someone who already works in PE to check it over for you. He also advises getting friends who've been through case study interviews before to put you through some mock questions on your presentation.

Have a confidential story, tip, or comment you’d like to share? Contact: +44 7537 182250 (SMS, WhatsApp or voicemail). Telegram: @SarahButcher.  Click here to fill in our anonymous form , or email [email protected]. Signal also available.

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Private Equity Interview Preparation Guide

Sam hillier.

Private equity interview preparation is a right of passage for first-year investment banking analysts. The launch of private equity associate recruiting begins early in the first year of analyst programs. It’s what can best be described as orderly chaos, with firms aggressively competing to poach the best candidates.

No one knows the exact date that interviews will commence, which makes it all the more important to thoroughly prepare in advance. You’re not going to be able to cram; it’ll be too late. That’s why fresh banking analysts start practicing their LBOs before they’ve even seen their first live deal.

The good news is that while the recruiting process is a mess, interviews do generally adhere to a standard, predictable format. If you cover your bases and have a reasonable baseline of private equity knowledge, there won’t be too many curve balls.

The trick, though, is getting that baseline knowledge before you’ve even had a chance to start your investment banking analyst stint. To help you get ready, in this article we’ll cover the key things you need to know to kick-off your private equity interview preparation .

Back Pocket Items

There are a few things that will get asked in every single interview you have, from initial headhunter meetings to chats with the most senior partners. These questions are low-hanging fruit that you can perfect.

Variants of Walk Me Through Your Resume

Not unique to private equity, the request for a resume walkthrough is pretty standard across most jobs. However, there are a few specific points that private equity interviews do tend to focus on.

• Why did you pick your university?
• Why did you pick your major?
• When and how did you get interested in investment banking?
• Why did you pick your current firm and current group?

For most of these, there’s not necessarily a right or wrong answer. The important thing, though, is that you do have an answer.

Avoid saying that you went to your undergraduate school because it was the only place that accepted you, you majored in finance because it seemed easiest, and that your Dad landed you the role with your current firm because the MD sold his company.

If you can work in traits that the firm you’re interviewing with is known for, all the better. For example, you chose your current group because you really enjoy working with founder-owned midwestern manufacturing businesses because you grew up in Gary, Indiana.

You’re loving the banking experience so far, and are really excited for the current opportunity because everything you’ve heard from your MD and networking efforts says that the private equity firm focuses on building deep founder relationships to preempt processes.

The most important thing is that you spend some time preparing your answers before you start even your headhunter interviews. You should be polished and sharp without sounding overly rehearsed – something that, of course, only comes with a lot of rehearsal.

Current Performance

A fairly frequent ask that you’ll receive is about your performance at your current role. If you’ve had a review cycle, they’ll ask about that. If not, they’ll ask about commentary your senior team members have given you. If you’re too early in the role for that, they’ll ask about your end of summer review during your junior year internship.

In my experience, headhunters will always ask this question. It’s part of their standard screening and seems to be uniform across firms.

Most private equity firms themselves will ask as well, though slightly less often than the headhunters.

The key with the question is to play up to the position you’re recruiting for. It’s more difficult now given the timing of on-cycle recruiting, but the more you can play up associate-level responsibilities, the better.

You should be the only analyst on the deal, hold the model, outline the slides, and start to manage certain parts of processes. Be realistic though, if you’re recruiting on-cycle and are a month into the job, then you probably shouldn’t say you closed the entire deal by yourself.

Frequently you’ll also be asked for criticisms or areas of improvement. I’ve had these framed as an ask on things you’ve been told, as well as an ask on what you think these things would be if you were to ask your VP/MD right now.

Certainly there are a number of strategies here, but I tend to take the approach of reframing to discuss development goals. So, for example, if you’ve spoken with your senior banker about key workstreams or traits related to senior analysts or associates, discuss how you’re focused on working to accomplish these.

It provides a relatively genuine response, while also sidestepping the actual ask on areas of criticism. However, it doesn’t hurt to have a real criticism lined up for support in case you get pressed on it.

Deal Experience Questions

You will with 100% certainty get asked about your prior deal experience. Especially if you have deals listed on your resume (which you should).

Throughout the recruiting process, from initial headhunter meetings to the most senior partners, you’ll have deal discussion questions.

For the first part of your answer, provide a quick overview of the deal and your firm’s role in the transaction. You should prepare introductions/overviews for each of the deals listed on your resume.

Next, offer to go into more detail.

You should be prepared to discuss the investment thesis , general financial information, transaction multiples, deal structure, process timeline, industry and competitive dynamics, and your thoughts on the merit of the transaction.

I’ve seen these conversations get incredibly detailed, so you should make sure you have a good handle on all of the details. It is especially important to thoroughly prepare if you’re early in your banking career and haven’t actually done a whole lot on the deal.

When providing financials, be aware that your interviewer will probably be doing mental math to prepare follow up questions. Deal experiences can frequently turn into mini paper LBOs, or you could dissect the cash flow profile of the business.

If this happens, you need to be absolutely sure that your numbers actually make sense. It’s going to be embarrassing if you do a paper LBO that shows a 0.5x return because you relayed very incorrect numbers five minutes earlier on the target’s capital expenditures and net working capital.

At the same time, you’ll probably have some leeway here. Remember that, chances are, your interviewer will not know the full details of the transaction. As long as your numbers make sense at a high level, it’s not critical that they’re spot-on.

If you get asked about the net working capital trends and can’t remember, just toss out a number that makes sense.

The caveat to this advice is that you need to recognize situations where this may not be true. If you’re coming from a banking group that runs broad sell-side processes and discuss a deal that you marketed to this specific sponsor, then there’s a non-zero chance that your interviewer knows the real numbers better than you do. If this is the case, and you’ll know beforehand if there’s a chance, then it is critical that you do real work to prepare.

Mentioned previously, you should be prepared to give your thoughts on the deal. Obviously, if you were either buy-side advisory or sell-side on an LBO you should have this ready to go.

But you should also prepare answers for things like capital raises or even restructuring mandates.

If you were a public markets investor evaluating your IPO, would you participate? If you were the creditor of your trouble client, how would you feel about taking the keys of the business?

Whatever the situation is, it’s always best to have an opinion that you can back up with a couple key points. You’re not expected to be Carl Icahn, just to show that you’ve thought about the bigger picture for more than 30 seconds over the course of your work on the deal.

LBO Modeling & Technicals

Every process will have at least some form of a technical interview or LBO model test (or multiples of both). The key here is to demonstrate that you have a reasonable understanding of the fundamental drivers of an LBO, and can actually model them should you get the job.

The most universal ask in this category will be a paper LBO. You’ll be given a set of simple assumptions and be expected to model out an investment using mental math with pen and paper.

No excel allowed, but also highly simplified assumptions. You’ll need to prepare for this, because it’s not the type of thing you can do for the first time in an interview.

As a personal anecdote – I always think back to my days as a first-year analyst trying to make a lateral move. I hopped on the phone with an industrials banker for what was supposed to be an informational interview.

Two minutes into the call he asked me to get out a pen and paper. I’d snuck out of the office last minute to take the call in an empty conference room somewhere in our building, so had nothing on me and no way to quickly get anything.

I stuttered for a few seconds, then figured I could use my phone to write whatever was needed, so answered that I was all set.

The associate proceeded to start rattling off paper LBO assumptions. I was six months into my analyst stint at a biotech-focused group with zero LBO exposure, so had absolutely no idea what was happening.

Needless to say, I did not get to the right answer, or any answer at all. I did not get a call back after that one.

LBO Model Tests

The next step up, in terms of level of complexity, will be a full Excel-based LBO model test. In my experience, these often happen earlier in the process – typically in the second round after you’ve completed an initial screening.

It’s seen as more of a check the box exercise. You won’t get hired for building out the world’s most insane model, but you will get dinged if you can’t pull one together.

In the on-cycle process, with rushed timelines, you’re most likely to get a simpler 30-minute or 60-minute test. There may be one or two nuances thrown in (PIK toggles, preferred note, dividend recap, add-on acquisition), but generally won’t be too complicated.

More complex versions will ask you to build a full three-statement model from scratch, potentially giving you up to three hours to complete.

Occasionally you’ll receive a take home test, but these are typically only given as part of a case study (see below).

Private Equity Technical Interview Questions

Straight technical interview questions are less common in private equity than they are in investment banking. There’s usually more of an emphasis on the next level of thinking – drawing conclusions from numbers, rather than memorizing how to get to the numbers.

That said, they do come up often enough that you should make sure you’re prepared. It would be a shame to ball out on a three-hour case study and then pack your bags because you couldn’t tell someone how $10 of depreciation flows through the three statements.

You should go check out our guide on private equity interview questions. In addition to that, below are a few key themes to think about:

• Price vs. volume questions in revenue builds – would you rather have an increase in price or an increase in volume, etc.
• LBO-related questions – walk me through an LBO, explain the key drivers, etc.
• Accounting questions – you’ll still have to field things like PP&E or depreciation through the three statements
• Operating leverage questions – explanation of fixed vs. variable costs and walkthroughs of specific scenarios
• Debt-related questions – things like PIK notes, covenant types, etc.

You’ll have fewer general M&A or valuation questions than you see in investment banking, so I wouldn’t spend as much time covering those as you prepare.

Case Studies & Investing Questions

The last key item to prepare for private equity interviews is the case study. Formats vary widely by firm, but generally involve synthesizing a piece or pieces of information and providing an investment recommendation.

You might get a company presentation, evaluate it in 30 minutes, and verbally discuss with the interviewer for 30 minutes.

You might get a CIM and set of financials, build a three-statement LBO, and prepare a short investment memo over the course of a few hours.

You may receive a take-home request to analyze a public company, build a detailed LBO model, and prepare a full presentation to discuss with interviewers.

Regardless of the format, you should practice your ability to take in information on a business and prepare an informed opinion on its investment merit.

There are case studies floating around online (including a bunch in our private equity course). You can also grab the financials of any public company (that would be a potential LBO target) and complete your own. Take a look at public filings, earnings transcripts, equity research reports, industry initiation of coverage, available market studies, etc.

Presenting Your Case Study

When you present your findings, the most important thing is to actually take a position. You (or your memo) should clearly state whether you would invest or not invest in the opportunity.

The worst thing you could do is not pick a side and give a discussion with no point to it.

One strategy I’ve found helpful is to focus your argument on the top two-three points. There will be a ton of angles and considerations when you’re evaluating the company, but try to understand and relay the most critical factors influencing your final decision.

Interviewers will want to see that you were able to pick up on what matters most and convey that in your presentation.

Be prepared to defend your position as well. Interviewers will question you and try to poke holes in your thesis. They might even completely agree with everything you’re saying, but will want to understand how confident you are and how well thought out your thesis is.

If you’re just starting out and struggling to understand what to focus on, the Porter’s Five Forces framework is always a good place to start.

Investing Questions

It’s highly likely you’ll get a number of investing-related questions. These can come in a number of different forms, the most common of which are about your prior deals (as mentioned), characteristics of an attractive LBO candidate, diligence red flags, interesting portfolio companies, hypothetical situations, or potential public company targets.

Most people will tell you that you won’t get asked to pitch an investment because private equity interviews are very different than that of hedge funds. They would be right the majority of the time, but not always.

I think it’s pretty important to have something back pocket that you can reference if you’re asked to pitch a potential take private. It doesn’t have to be complex or even complete, but you’ll want to have something .

An easy way to do this is think of a deal you’ve worked on that’s attractive, and pick some of the public comps for your client. Figure out the best one and read the handful of most recent equity research reports on them.

Pull an initiation of coverage report on the industry for some deeper market understanding, and take a quick look at their financials to make sure an LBO makes sense.

It won’t take you too long to pull together an acceptable response and could save you from an embarrassing interview gaffe.

Thinking Like an Investor

The key requirement for private equity firms is that the candidate is able to “think like an investor.” This is opposed to the stereotypical investment banking mindset of blind execution and process-oriented labor.

It sounds ridiculous, but it can actually be a pretty difficult shift for a lot of investment banking analysts. After two years of filling out data rooms and updating trading comps, a lot of people have the tendency to crank out the work with as little thought as possible and pray that they don’t get very many comments.

The big step in private equity is that you’ll have to both crank out the deliverables and take the time to understand what they mean. Then you’ll need to summarize that information and convey it to your deal team or investment committee.

It’s not always going to be critical, but occasionally your work product could mean the difference between doing a deal or passing on an opportunity.

In the interview process, private equity firms want to do what they can to suss out if you’re able to make this transition.

Like we talked about earlier, this will mean things like asking your opinion on your deal experience or interrogating you in the case study readout.

It’s harder to sit down and specifically prepare for this one, but you can start to do things to help build this skill. Try to be conscious of broader considerations in your banking deals. Take a look at strategy-focused articles in the Financial Times and Bloomberg, thinking through whether or not you agree with a certain company’s approach.

Eventually it will become second nature. You’ll be able to immediately recognize areas of risk and areas of opportunity, as well as understand the key questions you’d need to ask to diligence something. But, that’s not going to happen overnight (and may not happen until well into your time in private equity).

How to Actually Prepare

We’ve talked a lot about what to prepare for, but how do you actually do it?

This tip isn’t some secret, super nuanced piece of information, but I promise it will make you significantly better.

Do mock interviews. Take the time to practice giving your answers out loud. Keep working until your polished, sharp, and sound like you know what you’re talking about.

Get a friend in your analyst class to prepare with and take turns swapping roles between interviewer and interviewee. It might be embarrassing or uncomfortable at first, but you will become such a stronger candidate with not much additional effort.

If you absolutely don’t have anyone else to prepare with, just sit in your bedroom and talk out loud. Write out a list of common questions, write out your deal experiences and financials, talk think through your resume and background – then start saying them out loud until they’re essentially memorized (while still maintaining a conversational delivery).

At a certain point, memorizing more technicals will not help you. In terms of return for your time invested, this is one of the best things you can do.

Private Equity Interview & Process Structure

Following the initial headhunter meeting, most private equity interview processes will be an additional four to five rounds.

Usually you’ll have an initial screening round focused on deal discussions and background, potentially with some technicals. This will likely be with a more junior investment professional (probably senior associate or VP).

Next, you’ll transition to a model test or case study. As part of this step, you may have a presentation or discussion. Occasionally you’ll have a group interview, with multiple people evaluating your presentation and asking you questions.

After that, you’ll probably start to move up the ladder and have discussions with principals, junior MDs, or junior partners. Terminology will be different across firms, but just think about the next rung up the ladder from VP. You may speak to a few different people in this step (multiple interviews or group interview).

Nearing the end, you’ll probably talk to one of the more senior members of the investment team. Maybe group head or industry lead at a megafund, or a managing partner at a middle market firm.

At this point you’ll either shortly receive an offer, or not hear back. Some of the more helpful headhunters will give you the heads up if you didn’t get the offer, but most will probably ghost you.

If you don’t hear back, there may be a small chance you’re on a waitlist to see if the top choice doesn’t accept their offer. However, I probably wouldn’t hold my breath if it’s been more than a few days.

Keep in mind, this timeline is a broad generalization. An on-cycle process will tend to move much faster, while an off-cycle process could add additional steps and stretch out over the course of a few weeks.

Closing Thoughts on Private Equity Interview Preparation

Given it’s a rushed timeline and there’s a lot to prepare, be sure to focus your efforts where you’ll get the highest return. Knock out the paper LBO and model test prep, know your deals, rehearse the background, and then hit the case studies and technicals.

At the end of the day it’s a competitive recruiting process and you won’t land everything. But don’t worry, because there will always be more interviews in the pipeline.

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Hacking the Case Interview

If you have an upcoming private equity case interview and are feeling stressed, overwhelmed, or unsure of what to do, we have you covered.

Private equity case interviews are a common type of case given in consulting interviews in addition to market entry case interviews , growth strategy case interviews , M&A case interviews , pricing case interviews , operations case interviews , and marketing case interviews .

Fortunately, private equity case interviews are fairly straight forward. They are very predictable and all cases generally follow the same steps to solve.

In this comprehensive article we’ll cover:

• What is a private equity case interview?
• Why do consulting firms give private equity case interviews?
• How to solve a private equity case interview
• Private equity case interview framework
• Private equity case interview examples
• Private equity case interview vs. M&A case interview
• Recommended private equity case interview resources

If you’re looking for a step-by-step shortcut to learn case interviews quickly, enroll in our case interview course . These insider strategies from a former Bain interviewer helped 30,000+ land consulting offers while saving hundreds of hours of prep time.

What is a Private Equity Case Interview?

A private equity case interview situates you in a business situation where you are helping a private equity firm decide whether or not to acquire a company to add to their portfolio.

For those that are unfamiliar with what private equity is, private equity firms are investment management companies that specialize in making investments in privately held companies or in public companies that they plan to take private.

This type of investment is called private equity because it involves investments made in privately held companies in contrast to publicly traded companies, which have shares that can be traded on public stock exchanges. However, private equity firms can also buy out a public company and take that company private.

Private equity firms raise capital from investors, including pension funds, endowments, and high-net worth individuals.

These private equity firms then identify potential companies to acquire or invest in, performing a thorough due diligence to ensure that the investments they make are attractive and will generate a high return on investment for their investors.

In a private equity case interview, you will be conducting a due diligence on a company that has been identified as a potential acquisition target.

The value that private equity firms provide include:

• Providing capital to companies that need funding for growth and expansion
• Bringing expertise and resources to help improve operational efficiency
• Providing strategic guidance and advice for business strategy and market positioning
• Providing access to an extensive network of industry contacts, potential customers, suppliers, distributers, retailers, and other stakeholders
• Using financial engineering techniques to optimize capital structure, including restructuring debt, recapitalizing the company, or implementing tax-efficient strategies

Why do Consulting Firms Give Private Equity Case Interviews?

Consulting firms give private equity case interviews because they closely simulate what private equity work at the firm looks like. If candidates can do well on a private equity case interview, they’ll likely succeed doing private equity due diligences for actual clients.

Case interviews in general are a way for consulting firms to assess whether candidates have the skills and capabilities to succeed in consulting.

In just a 30 to 45-minute case interview, interviewers can assess a variety of different skills that are critical to management consulting. Skills assessed in a case interview include:

Logical and structured thinking : Consultants need to be organized and methodical in order to work efficiently.

• Can you structure complex problems in a clear, simple way?
• Can you take tremendous amounts of information and data and identify the most important points?
• Can you use logic and reason to make appropriate conclusions?

Analytical problem solving : Consultants work with a tremendous amount of data and information in order to develop recommendations to complex problems.

• Can you read and interpret data well?
• Can you perform math computations smoothly and accurately?
• Can you conduct the right analyses to draw the right conclusions?

Business acumen : A strong business instinct helps consultants make the right decisions and develop the right recommendations.

• Do you have a basic understanding of fundamental business concepts?
• Do your conclusions and recommendations make sense from a business perspective?

Communication skills : Consultants need strong communication skills to collaborate with teammates and clients effectively.

• Can you communicate in a clear, concise way?
• Are you articulate in what you are saying?

Personality and cultural fit : Consultants spend a lot of time working closely in small teams. Having a personality and attitude that fits with the team makes the whole team work better together.

• Are you coachable and easy to work with?
• Are you pleasant to be around?

Consulting firms typically charge anywhere from 20-50% higher rates for private equity work compared to other types of consulting work. Therefore, consulting firms are always trying to sell more private equity work and really value candidates that show the potential to do private equity diligences.

Showing competency during a private equity case interview will make you a highly attractive candidate.

How to Solve a Private Equity Case interview

Although the exact industry or company that you will do a due diligence on during a private equity case interview will vary, all private equity cases typically follow the same five steps.

Once you have done a few private equity cases, you’ll quickly notice this pattern and be able to take your learnings from your previous cases and apply them to future private equity case interviews.

1. Understand the goal of the acquisition

The first step of any private equity case interview is to understand what is the goal of the acquisition. Only once you understand the goal or objective can you start to evaluate whether the acquisition or investment makes sense.

There are a number of different reasons why a private equity firm may want to acquire or invest in a company:

• Potential for growth : Private equity firms may target companies that have strong growth potential, including the potential to expand into new markets, introduce new products or services, or for increasing market share in existing markets
• Operational improvement : Private equity firms often specialize in operational optimization and efficiency. They may target companies with underperforming operations or inefficient processes to implement changes to improve profitability and performance
• Strategic fit : Private equity firms may pursue investments that align with their overall investment thesis or strategic objectives. This includes investing in companies that complement their existing portfolio holdings or fill a gap in industry coverage
• Turnaround opportunities : Private equity firms may also specialize in turning around distressed companies that are facing significant financial challenges or difficulties. They may see an opportunity to acquire a distressed company at a heavily discounted price
• Market timing : Private equity firms may also opportunistically invest in companies based on market conditions, lower than average valuation multiples, or industry trends. They may see attractive opportunities during periods of economic downturns or industry consolidation

2. Create a framework

The next step to solving a private equity case interview is to create a framework to guide your due diligence.

A case interview framework is a tool that helps you structure and break down complex problems into smaller, simpler components. You can think of a framework as brainstorming different ideas and organizing them into different, neat categories.

Instead of answering the overall question of whether the acquisition should be made, a framework can break up this large question into a few smaller, more manageable ones:

• Is the market that the acquisition target in attractive?
• How does the company perform relative to its competitors?
• Does the private equity firm have the skills or expertise to improve or turn around this company?
• Are there synergies that can be realized from this acquisition with other companies in the private equity firm’s portfolio?
• What are the major risks of this investment?
• What is the expected return on investment?

As you can see, using a framework helps you break down an ambiguous and daunting due diligence task into several more manageable steps.

3. Develop a hypothesis

Once you have developed a great framework to help you solve the private equity case, the next step is to develop a case interview hypothesis .

Based on the limited information that you have, what is your preliminary hypothesis on whether the company should be acquired?

Hypotheses are used in case interviews, as well as in consulting, because they are a very efficient way to solve problems. A hypothesis helps you focus your attention on the issues that matter most in developing a recommendation.

Many candidates find it challenging and intimidating to develop an initial hypothesis with very limited information. However, don’t be discouraged from this.

Know that it is completely acceptable for your initial hypothesis to be wrong.

Remember, the goal of coming up with an initial hypothesis is to help guide your analysis and discussion towards the right direction. You can think of your hypothesis as a strawman that you will either build support for or reject.

Your hypothesis will help you decide on an area of your framework to tackle first.

4. Build support for a recommendation

Now that you have a hypothesis for your private equity case interview, it is time to start building support for it or rejecting it.

As with any other type of case interview, you’ll likely need to do both case math as well as have qualitative discussions with the interviewer to discover more information and uncover key insights.

It is important that throughout the case, you are keeping track of all of the new information presented to you. It will be especially important to keep track of the major insights or key takeaways from each question that the interviewer asks you.

Keeping track of the major insights or key takeaways will make it significantly easier to develop a final recommendation at the end of the private equity case interview.

5. Deliver a recommendation

The last step in a private equity case interview is to develop a recommendation and present it to the interviewer.

Developing an ultimate recommendation is difficult because it requires you to review all of the work that you have done so far in the case interview and synthesize and distill all of it into just the most important points or takeaways.

You’ll also likely need to exercise business judgment to determine whether you should recommend acquiring the company or passing on the investment opportunity.

It is completely acceptable to ask the interviewer for a few minutes of silence so that you can collect your thoughts and deliver your recommendation in a clear, concise, and confident way.

When delivering your recommendation, make sure that you start with your recommendation first. Then, present the reasons or evidence that supports your recommendation. Finally, end by discussing potential next steps that you would look into if you had more time.

You don’t want to start your recommendation by summarizing all of your work and then stating a recommendation at the very end of your presentation.

This makes your recommendation excessively long and potentially unclear and confusing because the interviewer won’t know which way you are leaning towards until the very end.

Private Equity Case Interview Framework

The framework that you develop for your private equity case interview is the most important step of solving a private equity case interview.

Having a comprehensive and robust framework will make solving any private equity case interview easier. On the other hand, having an incomplete and poorly thought out framework will make solving the case significantly more challenging.

While you should not resort to purely memorizing frameworks for case interviews, there is a single framework that we recommend all candidates become familiar with. Many of the components of this private equity case interview framework can be applied to nearly any private equity case interview.

The major components of a private equity framework could include: market attractiveness, company attractiveness, private equity firm capabilities, synergies, financial implications, and risks.

• Market attractiveness : What is the market size of the market that the acquisition target is in? What is the growth rate of that market? How competitive is the market?
• Company attractiveness : What is the financial performance of the acquisition target? What are their key strengths or competitive advantages? What are their weaknesses?
• Private equity firm capabilities : Does the private equity firm have expertise in the industry or market that the acquisition target is in? Does the private equity firm have the capabilities or resources to improve the company’s performance?
• Synergies : Are there potential revenue synergies that can be realized with other companies in the private equity firm’s portfolio? Are there potential cost synergies that can be realized?
• Financial implications : Is the acquisition price fair? What is the potential return on investment? How long will it take the private equity firm to recoup their initial investment?
• Risks : What are the major risks of this investment? Can these risks be mitigated? What is the likelihood of these risks materializing?

An outstanding private equity case interview framework should include at least a few of these components, if not all of them.

However, make sure that you are customizing your private equity case interview framework based on the specific pieces of information and nuances of the case that you receive.

Private Equity Case Interview Examples

Below, we’ve provided examples of several different types of private equity case interviews you could see on interview day.

You can find more case interview examples in our articles on case interview examples and practice and MBA casebooks .

Private Equity Case Interview Example #1 : A private equity firm is interested in acquiring a technology startup with innovative products and a strong customer base. The firm sees significant growth potential in expanding the company's offerings to new markets and leveraging its technology to capture market share. Should they make this acquisition?

Private Equity Case Interview Example #2 : A private equity firm is considering acquiring a manufacturing company with inefficient operations and high production costs. The firm believes it can implement operational improvements, streamline processes, and reduce costs to enhance profitability and competitiveness. Should they acquire this manufacturing company?

Private Equity Case Interview Example #3 : A private equity firm that specializes in the healthcare sector is evaluating the acquisition of a pharmaceutical company with a promising drug pipeline. The firm's industry expertise and network could help accelerate the development and commercialization of the company's products. Should they make this acquisition?

Private Equity Case Interview Example #4 : A private equity firm wants to expand its presence in the consumer goods industry and is looking to acquire a well-established retail brand with a loyal customer base. The acquisition would complement the firm's existing portfolio and provide synergies in distribution, marketing, and brand positioning. Should they acquire this retail brand?

Private Equity Case Interview Example #5 : A private equity firm has identified a target company with substantial real estate assets and a strong cash flow from its core business. Should they make this acquisition?

Private Equity Case Interview Example #6 : A private equity firm that specializes in distressed investing is interested in acquiring a struggling automotive supplier facing liquidity challenges. The firm sees an opportunity to stabilize the business, renegotiate contracts, and implement cost-saving measures to return the company to profitability. What price should they bid for this potential acquisition?

Private Equity Case Interview Example #7 : A private equity firm has recognized a favorable market opportunity in the renewable energy sector and is considering the acquisition of a solar power company with a competitive cost structure and strong growth prospects. The firm aims to capitalize on increasing demand for clean energy solutions and government incentives. What is the most the private equity firm should bid on this solar company?

Private Equity Case Interview Example #8 : A private equity firm is evaluating the acquisition of a software company with a differentiated product offering and a growing customer base. The firm plans to invest in scaling the business and increasing market penetration, with the ultimate goal of exiting through a strategic sale or IPO to realize significant returns for its investors. How much should the private equity firm acquire this software company for?

Private Equity Case Interview vs. M&A Case Interview

Although private equity case interviews and M&A case interviews share many similarities, specifically that both are case interviews that involve deciding on whether to make an acquisition, there are some notable differences.

1. Long-term vs. short-term perspective

Private equity case interviews typically have a longer-term investment horizon since private equity firms may hold onto an investment for 5 to 10 or more years before selling. They are not heavily concerned with exactly how well the investment will perform in the first few years because they have a longer time horizon.

In contrast, for M&A case interviews, there is generally an expectation that a merger or acquisition will provide immediate tangible benefits to the company and shareholders.

2. Reasons for the acquisition

For private equity case interviews, candidates are often asked to develop an investment thesis for a potential acquisition. They will need to articulate why the target company represents an attractive investment opportunity and how the private equity firm can create value from the investment.

This may include identifying growth drivers, operational improvement opportunities, and synergies that can be realized with the existing portfolio.

In contrast, for M&A case interviews, candidates mainly focus on understanding the rationale behind a potential acquisition, including strategic fit, synergies, and market dynamics.

3. Different risk factors

In both private equity and M&A case interviews, candidates will need to give thought behind the potential risks of the acquisition. However, the major risks for a private equity firm making an acquisition vs. a company making an acquisition differ slightly.

For private equity acquisitions, major risks include: market risks, competitive threats, and execution risks. In contrast, for a merger or acquisition, major risks include company integration risks, legal risks, and regulatory compliance.

4. Exit strategies

Private equity case interviews often emphasize the importance of exit strategies since private equity firms typically aim to realize returns for their investors within a specific timeframe.

Therefore, for private equity case interviews, candidates may be asked to evaluate potential exit options, such as strategic sales, IPOs, and secondary buyouts. They may be asked to assess the timing and feasibility of each option.

For M&A case interviews, candidates may need to consider potential exit scenarios, such as divestiture or spin-offs, but the focus may be less on maximizing financial returns and more on strategic objectives.

Land Your Dream Consulting Job

Here are the resources we recommend to land your dream consulting job:

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Preparing a Stock Pitch for Investing Interviews

Pitching a stock is crucial for hedge fund interviews, but it can also be an important part of private equity, growth equity , and even venture capital interviews. I know this firsthand from my own interview process with General Atlantic and other top private equity and growth equity firms I interviewed with.

Because it’s such a common and important part of interviews with so many types of investment firms, it’s an aspect of interviews for which candidates should definitely prepare. Below is the definitive, step-by-step guide to understand and to prepare to pitch a stock in an interview.

What is a stock pitch?

A stock pitch can take multiple forms, but usually, it is a short memo or presentation that makes the case to invest in a public company’s stock. The pitch uses data and analysis to support the recommendation to invest in the stock. Usually, this includes valuation metrics, “why now” investment catalysts, and an analysis of risk factors.

Stock pitches can be used in buyside interviews, which I describe in more detail in the sections to come. However, stock pitches can also be used in networking, investment clubs, investment competitions, personal investing, and of course on-the-job responsibilities as a professional investor.

How to do a stock pitch

Stock pitches are important elements of many types of buyside interviews. They are most commonly seen in  hedge fund interviews , which makes sense given many hedge funds actually invest in public market equities.

Hedge fund candidates should plan on preparing 2-3 stock pitch ideas to have at their disposal during interview Q&A, but it’s also very likely that the hedge fund will assign a formal take-home case study for interview candidates too. The candidate will prepare the pitch ahead of time, and will present it during an interview session.

It may be surprising, but stock pitches are also very common in  interviews with private equity, growth equity, and even later stage venture capital firms , even though they usually invest in private companies. The reason why is that stock pitches provide an easy vehicle to assess one’s investment judgment and communication ability by discussing companies that are prominent and about which much information is publicly accessible.

Further, growth equity and venture capital firms LOVE finding candidates with a  strong passion for investing . That is, they want people who are “addicted” to following markets and who invest on the side for fun. Usually, the best way to test for this is whether the candidate can demonstrate he or she “has a view” on the markets and on a particular stock, in this case.

How to present a stock pitch in an interview

Generally, there are two kinds of stock pitches in buyside interviews:

#1: Stock pitch as formal presentation or case study

First, there’s the formal stock pitch presentation. This is when the stock pitch is a  take-home case study  where you prepare slides or a memo in advance of formally presenting the case to an audience during an interview. Usually, the presentation lasts ~15-30 minutes with lots of Q&A to follow. As discussed above, this type of stock pitch is most common in hedge fund interviews.

• Usually, your interviewers will  not  assign you a specific company to pitch; it’s up to you to do the research and find one.
• If they do give you a specific company, then it’s likely a time-limited case study where you get a prescribed amount of time (e.g. 2-4 hours) to learn about the company by reading its filings, to build a quick model, and make basic pitch materials. This will usually occur in the firm’s offices to ensure an equal playing field.

#2: Stock pitch as casual interview questions

Second, there’s the casual  interview question  stock pitch. In my experience, this is the most common way stock pitches are conducted during interviews in general, but as I said above, this is the usual way for  private equity, growth equity, and venture capital firms to ask for a stock pitch during interviews .

These stock pitches tend to be more conversational with lots of back-and-forth. Rather than being a formal case study presentation, the ‘pitch’ in these cases is more like a component or line of questioning within an ordinary interview.

Usually, your interviewer will ask you something like “tell me about a stock (or industry) that you like,” and then they will ask several follow up questions. While there is  not  a formal presentation with slides or a memo that you need to prepare in advance, the content of the discussion should cover many of the same topics, just in a more casual setting.

What makes a good stock pitch?

No matter which type of stock pitch you face in your interviews, there are a few key things your interviewers are assessing:

• Investment judgment  – while you don’t need to have the best investment pick ever, you do need to show you understand investment fundamentals by finding something that makes sense, that you’ve thought through, and that is defensible
• Communication  – it’s critical that when you are discussing your stock pitch you can articulate the key points clearly and succinctly; you want to show that you could discuss investments with teammates and larger audiences while on the job
• Poise & debate skills  – whether it’s a “formal” stock pitch presentation that you’re delivering or it’s a casual interview question, expect that your interviewers will challenge your points and ask lots of questions; they want to see that you can defend your arguments forcefully, but also concede when it makes sense too
• Love for investing  – the dream for all growth equity, private equity, and venture capital firms is to find candidates who are  passionate about investing  and would authentically do it in their free time if they couldn’t do it professionally. If you can show desire and energy for investing in your pitch, that’d be very positive
• Understand the firm’s strategy  – make sure your stock pitch doesn’t contradict the firm’s strategy; it’s not always possible or realistic to prepare new stock pitch ideas for every new firm you interview with, but still, you want to make sure you aren’t pitching something totally disconnected from what the firm focuses on (e.g. pitch a bank stock to oil & gas investors). Note, you can also soften the blow of any mismatch by at least showing in your answers an awareness of where your pick may or may not overlap (e.g. “I know you don’t invest in real estate technology, but I found an interesting stock in the sector that I’d be excited to discuss”)

My personal experience

This is going to sound like an exaggeration, but it’s not: this article could be the single thing that  makes the difference  in landing your dream job. It was for me – let me explain.

When I was preparing for my own interviews (focusing on growth equity, private equity mega funds , and late stage venture capital firms), I was an investment banking analyst at Deutsche Bank. The growth equity fund General Atlantic was  my top choice , and through  diligent networking , I was able to get an interview with the firm!

A few days before my interviews, one of my mentors, a wise third-year analyst, gave me some unsolicited advice that would change my life. He said, “You know, not all funds do this, but for your General Atlantic interviews, I’d really prepare a stock pitch if I were you, just in case.”

The comment rocked my world! I thought stock pitches were only for hedge fund interviews, not growth equity and private equity interviews! But I trusted the analyst. So I decided to use my remaining time before the interview – just a day or two – to prepare a stock pitch, just in case. I chose to pitch for American Tower Corporation, the leading cellular tower company at the time.

Fast forward to my superday interviews at General Atlantic a few days later. Guess what happened? In my 5 interviews, I was asked to talk about a  stock that I liked in every… single… interview !

The interviews went well enough, and I ended up getting (and accepting) an offer from General Atlantic!

Without my friend’s advice, I would’ve fallen flat on my face. It literally was the difference in me landing an offer at my dream fund. Without General Atlantic, my whole career might’ve been different …

Consider this your own intervention! Prepare a stock pitch, it could change your life in interviews too 🙂

How many stock pitches should I prepare for an interview?

If a firm wants you to prepare a formal stock presentation for your interviews, they will designate how many stocks you should include. Typically, it’s only one. However, as explained above, the stock pitch often comes up in interviews through more “casual”  interview questions  (e.g. “Tell me about a stock or sector that you like”).

That’s why, even if the firm with which you are interviewing doesn’t specifically ask for a formal stock pitch presentation, I still HIGHLY recommend candidates be prepared with AT LEAST one stock pitch for your interviews. You don’t need to prepare a polished powerpoint or memo, but you should more or less follow the rest of the steps below to prepare. The goal is for each stock pitch, you are equipped to talk about it easily and from memory, even though you aren’t submitting any formal materials.

If you have the time and want to be even more prepared for growth equity, private equity, and late stage venture capital interviews, I recommend candidates prepare a total of three stock pitches (two stocks you like, one stock you don’t like).

If you go the extra mile in this way, you should still spend  most  of your time preparing for discussion on the primary stock you like, but it can be really helpful to have the extra stock pitches in your back pocket, just in case.

Stock pitch structure & template

If you’re assigned a  formal stock pitch presentation  for your interviews, I typically recommend structuring your memo or powerpoint using the tried-and-true sections below.

• Recommendation
• Company overview
• Investment thesis
• Valuation & returns
• Risks & mitigants

Note, these sections should largely be followed regardless of whether the firm has asked you to prepare slides or a written memo.

Also, even if you haven’t been assigned a formal stock pitch presentation, the form above is still a helpful way to structure your preparation and learning.

How long should a stock pitch be?

If you’re asked to formally prepare and present your stock pitch in an interview, typically the firm will give you guidance on how long the stock pitch should be (either number of slides or memo pages).

Usually, a memo document will be 3-5 pages, and slide presentations will be no longer than 10 slides (1-2 per section above). Keep in mind you will likely only get 15-30 minutes to “present” your pitch, so it will need to be succinct.

Of course, if you’re asked about a stock pitch in a more casual  interview question  format, rather than a formal presentation, there will be no written component of the stock pitch and the length of the conversation will depend on the direction of your conversation.

In this format, there is usually no prescribed length of time the stock pitch questions will last; it will depend on how your conversation is going and where your interviewer wants to take things. The conversation could last anywhere between 5 minutes and 20 minutes, taking up a large chunk of a typical 30 minute interview conversation.

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Let’s be real. To  really  understand an investment you’re pitching, you’d need to read thousands of pages and do countless hours of research. That’s what you’d do on the job, before making an actual investment.

You obviously won’t have that kind of time to throw at every stock pitch you prepare for your interviews – you have a day job after all! Obviously a full case study or take home assignment will demand more preparation time, but still you need to be smart about how much time you allocate to preparing the stock pitch.

That’s why I recommend streamlining the prep process by taking the following research steps to harden and prepare your pitch:

Step 1: Pick a company

Step 2: do supporting research & analysis, step 3: prepare presentation materials.

I will discuss each step in detail in the coming sections.

There are many ways investors source investment ideas – from firsthand research with industry participants, to reading industry news, etc.

Given my training and experience as a growth investor, my first inclination is to always look for investment ideas by first looking for  attractive markets and trends . Once you find an attractive market, then you find public market companies that are well-positioned to become leaders in this market over the long-term.

To find attractive industries, I recommend getting smart on large economic or technology trends through news articles, podcasts, and any other media you come across. A few places I’d recommend to look for find great markets and emerging trends are:

• Startup funding newsletters (e.g. Axios, Forbes, and Techcrunch)
• Media outlets with strong technology reporting (e.g. NYT Tech, Vox, Buzzfeed)
• Sell-side equity research, if you have access

Alternatively, you can also come up with ideas by screening bottom’s up for  companies themselves . To do this, you pick a market or industry (ideally, one that you have some expertise in), and then filter for companies based on your investment criteria (see next subsection).

If you don’t have Capital IQ access, the best screening tool is  https://finviz.com/ . Here’s an example  technology screen ; you can sort by sector, industry, country, market cap, and other criteria.

Filter companies based on these criteria

When screening for companies to pitch, I generally recommend using the following high-level guidelines to narrow down which stock you should select:

• Related to the firm’s strategy – If you’re interviewing for a fund that specializes in growth technology investments, you should pick something that’s growing quickly, rather than, say, a merger-arbitrage or special situations investment
• Clear “why now” catalyst  – You’ll want to pick a stock that’s benefitting from new trends or tailwinds; this could mean the market they sell to has started to accelerate or it could mean the company’s stock just had a correction that was not based on fundamentals
• “Pure-Play” businesses  – Especially if you’re interviewing for growth or venture funds, I like picking a business that is a “pure play” so then the discussion about the company can easily become a proxy for a discussion about the company’s market (and vice-versa)
• Avoid highly technical businesses  – Picking companies in complicated industries like Oil & Gas or certain areas of financial services is very treacherous unless you already have expertise and the firm you’re interviewing for specializes in such investments; it’s always best to pick a business that’s easy to describe in interviews
• Avoid messy or complicated businesses  – Again, to give yourself the best chances, do not pick anything that’s messy (e.g. legal trouble) or complicated (e.g. operates 100 different business units); you want to be able to describe the business and its market quickly given the limited time available in your interviews
• Avoid the “crowded” or obvious trade – When I was interviewing for investment banking out of undergrad, I remember an interviewers once asked me, “Tell me about a stock you like; you can pick any stock, just don’t pick Apple.” He was tired of undergrads pitching him on the same obvious thesis. Follow the same advice, and avoid anything super obvious like Apple, Amazon, or Tesla (any FAANG really), unless you have a unique angle
• Avoid companies that are massive already  – If you are interviewing with growth-oriented firms (i.e. growth equity or venture capital), I’d generally avoid any stock that already has a massive market cap ($50 billion or more), since it could be challenging to make the case about how much bigger these companies can become

Criteria for growth equity and venture capital

In growth-oriented investing, the goal is to find high-quality companies in the fastest-growing markets. In your stock pitches, unless your interviewer gives you specific instructions, you should select companies that fit similar criteria. It would fall a bit flat if in your growth interviews you started discussing a distressed restructuring investment.

You can use my favorite growth investing framework of all time to find and vet high quality growth companies. The framework is called the 3M’s:

• Market  – Does the company operate in a fast-growing end market that will see sustainable growth over the next decade? Is it a leader within this market, or is it on a trajectory to become one?
• Model  – Does the company have a durable or defensible business model, so that it can remain valuable over the long-run?
• Management  – Does the company have an ambitious and capable management team that can execute on its grand vision?

Of course, this framework doesn’t take into account other factors that can matter in an investment (e.g. valuation, exit assumptions, etc.). However, if you get the 3Ms right, typically a growth investment will be very successful.

In  growth equity and venture capital interviews , you can also get the interview question “tell me about an industry or market that you like.” One advantage of following the 3M framework above is that the company you select will have a large and growing market it sells to, which means your research for the stock pitch can potentially be recycled into the question about markets you like as well.

Criteria for private equity

When interviewing with private equity firms , there’s a slight nuance you may want to consider when picking a stock to pitch. That is, you might be tempted to pick a company that would be an attractive LBO target since this would comport with the investment strategy of the fund you’re interviewing for.

However, there can be a difference between a good  LBO target  and a good  public market investment . This might be the case if the company meets all the criteria for an LBO (steady cash flow, defensible business model, etc.), but is too poorly managed or under-leveraged to make a solid return as a public company. Therefore, it might be a good company to take private as an LBO, but not necessarily a good public company stock.

For your private equity interviews , ideally, the stock you pitch would be both a good LBO target and a good public market investment. That way your preparation is as efficient as possible since you’re getting a double-whammy.

However, if you’re struggling to find such a company, I’d first prioritize finding a good public market investment. Then, if you have more time, you should separately pick a second company that would be a good LBO target that you can also talk about if asked.

Alright, so now you’ve got a company whose stock you’d like to pitch. Now, it’s time to do some supporting research and analysis to harden your pitch.

In this step, it can be very challenging to know just how much time and effort to spend on this research before interviews. How much is enough? How much is too much? It can be very tough to know.

Especially as overachievers, our tendency can be to either go overboard and spend too much time preparing (or feel guilty and underprepared since you haven’t gone overboard).

Below is a list of research steps I recommend to harden and prepare your pitch in the most time-efficient way possible:

• Research the company  – After selecting your company, you should read its latest annual report, quarterly reports, and its most recent investor presentations. You should also check out the company’s latest press releases, and generally know what’s going on with its product releases and main business efforts.
• Research the industry landscape  – You should also research the industry by skimming the latest fillings from the company’s main competitors. From the research, you should determine how fast the market is growing, who the main players are, who is gaining share, and how their respective strategies could impact your company.
• Build a  very  simple valuation model  – Aim for a lightweight 3-statement financial model to understand the company’s trajectory, with a DCF and returns calculations included. Whatever you do, do NOT build a complicated model. It won’t be helpful. Instead, shoot for a simple model ~200 rows in Excel, so you can understand the company and sensitize with its key drivers.
• Do quick industry comps  – To get a sense of relative valuation, you’ll need to do a quick trading comparable company analysis. This means pulling trading prices and multiples for its competitors or similar companies. Don’t scrub the data manually; that’s overboard. Just use Capital IQ or FactSet if you have them, or Finviz and Yahoo Finance if you don’t.

Now that you have picked your stock, and you’ve done the key research and analysis to support your pick, now you need to organize your recommendation into a formal stock pitch presentation.

Note, this is only relevant if you are assigned a formal stock pitch presentation (take home assignment). If you are simply preparing stocks to talk about in your interviews in case you’re asked, I still recommend you arrange your thoughts according to this framework (it will help them stick in your mind for interviews), but no need to prepare formal materials of course.

The formal stock pitch interview presentation will either be done in written memo format (~3-5 pages) or powerpoint slides (~5-10 slides max). The desired format should be dictated to you by your interviewer. If they didn’t tell you whether to do a written memo or powerpoint slides, you should ask them what they prefer.

Formatting your pitch

In arranging your stock pitch, you should follow this classic structure. There’s no need to try to innovate on this standard format which has worked for many years:

• Recommendation  – Summarize your stock pitch by stating the company, it’s current price, and your buy/sell recommendation
• Company overview  – Give a brief background on the company, including what its main products/services are, how the company makes money, what it’s high level financial metrics are, and what it’s relevant valuation metrics are
• Investment thesis  – Explain the 2-3 key reasons you believe the market is wrong and that this investment will create outsized value in the future; while every thesis will be unique, ultimately the thesis should ladder up to either an increase in valuation metrics or company growth
• Catalyst  – Explain why now is the right time to invest in the company’s stock, and why the rest of the market will appreciate the stock more in 6-18 months; for example, this could be a temporary valuation discount, new product launches, faster market growth, an upcoming earnings release, expected divestitures, clinical trial results, etc.
• Valuation & returns  – Show the company’s current valuation metrics (e.g. P/E, EV/Revenue, EV/EBITDA, DCF) are lower than comparables and/or intrinsic value; show how returns might change with different entry or exit assumptions
• Risks & mitigants  – list the 3-4 most critical risks that could sabotage the investment, and give brief rationale for why these risks are either unlikely to come to fruition or, if they do, their impact will be limited

Note, these same sections should largely be followed regardless of whether the firm has asked you to prepare slides or a written memo.

What should I memorize for a stock pitch?

During your stock pitch presentation, you will of course have access to the slides or memo you prepared for the take-home assignment. Hopefully during the course of your research you’ve internalized the key facts, though, so you can do most of it from memory.

Just in case you didn’t internalize them though, here’s are the key things you should be sure to commit to memory before your stock pitch:

• Current and prior year financials (i.e. revenue, EBITDA, EBITDA margin, cash flow, growth rate)
• Projected financials in 5-years (i.e. revenue, EBITDA, EBITDA margin cash flow, projected revenue CAGR)
• Approximate stock price, market cap, and enterprise value
• Approximate capital structure (i.e. debt as % of enterprise value, debt to EBITDA)
• Recent large price changes, if any
• Name and background of CEO
• Names of 3-5 competitor companies

For each of these numbers, what matters is the big picture, so do not worry about committing the exact number with decimal points to memory. Just round to the nearest million (or 5 million), as appropriate. It will sound more authentic anyway to say “They did around $110 million of EBTIDA this year” rather than “They did $107.8 million of EBITDA this year.”

Stock pitch example

To show you really understand the company, one framework I love to use during stock pitch Q&A and  interview questions  is the “ Top line / Bottom line ” framework.

There are many pieces of information that one must understand in order to understand a company’s stock pitch. There are current trends, industry dynamics, recent financials, regulation etc.

I’ve found the “Top line / Bottom line” framework can be really helpful in getting your audience (and yourself) to streamline and organize this information in a digestible way.

Here’s how it works: When telling the company’s “story,” break things down into two narrative points – the first point is what’s the overall “top line” (revenue) story, and the second is what’s the overall “bottom line” (expenses and cash outflows) story. By roughly aligning the story of the company with the structure of the financial statement, you give your audience (and yourself) an easy way to internalize the pertinent details and what the implications are for the pitch.

Here’s how to do it, step-by-step:

• Start by describing what’s happening with revenue (“top line”)  – give the pertinent highlights for the company’s market size, market share, and growth opportunities. Here you give a sense of what the company’s overall revenue opportunity is, and how it will evolve over the investment period.
• Now, describe dynamics related to how much of that revenue it will ultimately keep (“bottom line”)  – for a company to create enduring value, it must not only have revenue, but it must have sustainable margins. That’s why next you will tell a narrative around what’s going on with its margins and cash outflows (e.g. capex), and how you anticipate these will evolve over the course of the investment.

Here’s an example of what this could sound like:

I believe Airbnb continues to be an exciting investment prospect. (Part 1: Top Line) Airbnb is the market share leader in its core home sharing category – which continues to grow at double digits every year. Meanwhile, there is significant revenue upside for the company if it can take greater share in the hotels category, which is massive. This is why I believe Airbnb will continue to grow quickly – currently, over 30% per year – even while at a massive scale. (Part 2: Bottom Line) There are indeed risks that cost pressures from marketing and customer acquisition will become a concern – and this is something I want to watch closely – however, I believe Airbnb will develop and maintain strong defensible margins over the long-term given its strong brand, global network effects, and first-move advantage.

As you can see, this framework is a great way to organize your thoughts and then share with others what’s going on with the company, in a succinct way. It is especially effective for growth-oriented investments – where the crux of the investment hypothesis relates to the company’s topline performance, rather than, say, near-term valuation considerations – but it can also be helpful to describe other investments too.

Practice, practice, practice

If your stock pitch is a formal take-home assignment and presentation, I’d strongly recommend you practice out loud several times. Go through the pitch, and then ask yourself (and answer) several challenges you expect to get. It’s the age-old saying, but practice is truly critical to success in these.

Even if you don’t have a formal stock pitch take-home assignment, it’s still highly recommended that you practice talking about the stock you will talk about, if asked. Give a high level summary of the investment and describe the company’s growth prospects, key risks, and mitigants. Be prepared to go deep if pressed.

Stock pitch mistakes to avoid

I’ve mentioned several pitfalls to avoid throughout; however, I’ll add few more important ones here:

• Don’t create an overly complex model  – This is usually a recipe for disaster in any case, but especially for an interview. Just make sure the basics are working, and don’t over complicate it
• Don’t get worried if you face intense questioning  – This is a good sign, as it means they are trying to challenge you. Interviewers tend not to challenge candidates who they’ve already ruled out.
• If you don’t know something, just admit it  – There’s no way you’ll know everything about this company. Interviewers largely understand that. If you’re asked something you don’t know, just be frank, admit it, and talk a bit about why you agree (or politely disagree) about why that data point might be helpful. Offer to follow up with the requested information after the interview.
• Don’t pretend like you’re stock pitch is riskless  – This is a classic newbie mistake. Every investment opportunity has risks; don’t pretend like yours doesn’t. Talk about the stock and its risks in a  balanced  way, acknowledging the possibility things could go badly, but calmly discussing how or why you think they won’t. The best way to “sell” people on your recommendation is to go through the thesis and risks in a balanced, sober, and calculated way.

Alright, that’s it for now. Also, if you want to go deeper, check out  my other articles  or  my complete guide to growth equity interviews . Feel free to email me any questions, and I’ll get back to you as soon as I can.

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Case Study Walkthrough Script (VP Interviews)

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Hi everyone - two years post- MBA and looking to move from current VP role at a later-stage fund. Targeting a mid-level role at growth-oriented shops, which more directly aligns with my pre-MBA experience (COVID-impacted + election-impacted 2021 class = super weird year for recruiting).

My question: does anyone here have a template script/outline/guide for case study walkthroughs/debriefs? In case that was vague, I'm referring to the part of the interview process that comes directly after submitting your case study ppt/ excel model , where you (at the very least) present an executive summary-level overview of the potential investment, the company's business model, investment thesis /risks, and overall recommendation to a few folks on the team you're interviewing with (prior to a more holistic discussion and targeted questions). This doesn't happen super often, but there are obviously places that try to simulate investment committee experiences, and ask that you walk through the materials in a more structured presentation.

I'm essentially looking for something that I could use across different case studies so that I don't have to develop a script from scratch each time. So slightly more detailed than bullet points on the topics to cover (I'm familiar with the topics to touch on). If more context is helpful to understand what I'm hoping someone here will have given thought to, I'm comfortable walking through things generally in the day-to-day aspects of the job, am a relatively structured thinker, and don't have issues with people/social anxiety/etc. However, I can't help but feel awkward in these situations and have a hard time getting the simulation dynamic out of my head (it's clear the interviewers have done this before, there's something unnatural, etc.). In the context of my current firm, I'm a few years away from completely carrying conversations at investment committee (just a cultural norm) and/or opening the discussion with an overview/update, so have less experience than I'd like with this. Lastly, my firm tends to have a somewhat specific approach to conversations evaluating potential investments, which I don't believe would translate well to case study situations (aspects of those discussions at my firm take some getting used to).

Long-winded way of saying that I don't feel 100% confident in my ability to deliver in this part of the interview process, and I'm looking for ways to improve/resources to supplement my thinking. With humility, I'm really hoping this community can help me out!! Thank you.

PS - I haven't purchased interview guides (WSO/ BIWS /etc.), though I'm open to looking into one if there' s a consensus around which resource is most helpful.

Interested as well…In my experience of being in sell-side meetings with senior bankers when they talk to PE partners …These tend to be unstructured except for the first few 5 mts of giving quick biz description, some financial and management info - PE then tend to pepper with random questions (some anticipated) depending on each fund's focus.. point being practice is the best template

Happy to be a practice partner as am also looking to develop this skill set

OP here, appreciate the response. I am overly-protective of my anonymity here so will choose to decline your practice partner offer, but wanted to acknowledge that up front before diving in below.

Totally get what you're saying around practice. I generally agree, objectively you're better off having spent time practicing than going into these situations cold. Also agree with how you characterize these discussions; the vast majority of my experiences have been consistent with what you described, i.e. all you really need is a prepped intro upfront and the discussion thereafter is more similar to a regular interview (that happens to reference specific content/knowledge). I don't have much to add/comment on within your post, so my further engagement below should be taken as offering more context for others in case helpful to frame what I'm looking for.

As I alluded to, I recruited for my current seat while I was in business school. I was going through other interview processes at the time so it's not as though anything about this is new. I progressed as far as I wanted to in each of those b-school processes (dropped out in certain cases for different reasons, some processes got put on hold, etc.), which I'm taking as evidence of the fact that my performance in the case study/case study debrief phase isn't overtly disqualifying.

I think where I get hung up involves some combination of the following: 1) I never felt confident in the case study debriefs to begin with, they're scenarios I've always approached as something to tolerate/get through rather than as an opportunity to differentiate myself, 2) This is the main difference from what you described with your MDs, but the awkwardness of the simulated pretext in these debriefs always felt really palpable (from my POV), i.e. it was super clear that the interviewers had already had this conversation so their engagement never feels authentic which throws me off to a frustrating degree (frustration towards myself, not them), and 3) Regardless of how short the prepared/structured intro part of the conversation ends up being, I never feel as though I'm setting the tone optimally - if the overall conversation ends up going well, I typically ascribe it to luck/interpersonal chemistry vs. my ability to manufacture that outcome - and would love to feel better about my capacity to deliver so that I can focus more intently on navigating the more unstructured portion of the discussion.

It's worth acknowledging that I might appear to be overly-fixated on this given the content/tone of my posts. I am very aware that these exercises in 99% of cases are nothing more than check-the-box components in the context of the overall interview process. However, it's the only area in my interview skillset that feels noticeably behind everything else, and any progress/improvement hasn't been satisfying. Plus, why not try to improve things you can control?!

Ever diligence an investment so much that you actually believed in it and wanted to talk about it / defend it? You should notice if you think back on it there was a pretty simple story / narrative for why.   

recreate that confidence for case studies, and don’t overthink and get anxious about the details - bucket those as further DD and key risks.   

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Private Equity Interview Questions

Step-by-Step Guide to Navigating the Top 25 Private Equity Interview Questions

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Common Private Equity Interview Questions

The Top 25 Private Equity Interview Questions covered in our comprehensive interview guide are intended to help prepare candidates for the competitive recruiting process and improve their odds of receiving an offer.

How to Prepare for Private Equity Interview Questions

Unlike investment banking interviews where you’ll likely get a lot of technical interview questions, private equity interviews will stress the Paper LBO and LBO Modeling Test to confirm you’ve got the technicals down.

However, you are likely to still encounter private equity interview questions in the earlier rounds of the interview process, so we’ve compiled the most common technical interview questions that you absolutely must know the answer to.

The types of questions asked in a private equity interview can be broken into four categories:

• Behavioral Questions (“Fit”)
• Technical LBO Questions
• Investing Acumen Questions
• Firm-Specific Industry Questions

Understanding the fundamental LBO concepts is essential to perform well on the LBO modeling and case study portions of the interview, as well as to showcase your judgment during investment rationale and deal discussions in the later stages of the recruiting process.

Generally, the standard technical questions are most applicable to interviewees from non-traditional backgrounds and are less common for more experienced candidates. Nevertheless, the following article still should serve as a helpful refresher for those that have completed a stint in investment banking.

Let’s move on straight to the top private equity interview questions now.

Top 25 Private Equity Questions and Answers

Q. what is a leveraged buyout (lbo).

An LBO is the acquisition of a company, either privately held or publicly traded, where a significant amount of the purchase price is funded using debt. The remaining portion is funded with equity contributed by the financial sponsor and in some cases, equity rolled over by the company’s existing management team.

Once the transaction closes, the acquired company will have undergone a recapitalization and transformed into a highly leveraged financial structure.

The sponsor will typically hold onto the investment for between 5 to 7 years. Throughout the holding period, the acquired company will use the cash flows that it generates from its operations to service the required interest payments and pay down some of the debt principal.

The financial sponsor will usually target an IRR of approximately ~20-25%+ when considering an investment.

Q. Walk me through the mechanics of building an LBO model.

• Step 1: Entry Valuation → The first step to building an LBO model is to calculate the implied entry valuation based on the entry multiple and LTM EBITDA of the target company.
• Step 2: Sources and Uses → Next, the “Sources and Uses” section will lay out the proposed transaction structure. The “Uses” side will calculate the total amount of capital required to make the acquisition, whereas the “Sources” side will detail how the deal will be funded. Most importantly, the key question being answered is: What is the size of the equity check the financial sponsor must contribute?
• Step 3: Financial Projection → Once the Sources & Uses table has been completed, the free cash flows (FCFs) of the company will be projected based on the operational assumptions (e.g. revenue growth rate, margins, interest rates on debt, tax rate). The FCFs generated are central to an LBO as it determines the amount of cash available for debt amortization and the interest expense due each year.
• Step 4: Returns Calculation → In the final step, the exit assumptions of the investment are made (i.e. exit multiple, date of exit), and the total proceeds received by the private equity firm are used to calculate the IRR and cash-on-cash return, with a variety of sensitivity tables attached below.

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Q. What is the basic intuition underlying the usage of debt in an LBO?

The typical transaction structure in an LBO is financed using a high percentage of borrowed funds, with a relatively small equity contribution from the private equity sponsor. As the principal of the debt is paid down throughout the holding period, the sponsor will be able to realize greater returns upon exiting the investment.

The logic behind why it is beneficial for sponsors to contribute minimal equity is due to debt has a lower cost of capital than equity. One of the reasons the cost of debt is lower is because debt is higher up on the capital structure – as well as the interest expense associated with the debt being tax-deductible, which creates an advantageous “tax shield”. Thus, the increased leverage enables the firm to reach its returns threshold easier.

Simply put, the smaller the equity check the financial sponsor has to write toward the transaction, the higher the returns to the firm.

Private equity firms, therefore, attempt to maximize the amount of leverage while keeping the debt level manageable to avoid bankruptcy risk.

Another side benefit of using higher amounts of debt is that it leaves the firm with more unused capital (i.e. “dry powder”) that could be used to make other investments or to acquire add-ons for their portfolio companies.

Q. What is the “Sources and Uses of Funds” section of an LBO model?

The “Sources and Uses of Funds” section of an LBO model outlines the amount of capital required to complete the transaction and how the proposed deal will be funded.

• Uses Side → The “Uses” side answers, “What does the firm need to buy and how much will it cost?” The most significant usage of funds in an LBO is the buyout of equity from the targets’ existing shareholders. Other uses include transaction fees paid to M&A advisors, financing fees, and oftentimes the refinancing of existing debt (i.e. replacing the debt).
• Sources Side → On the other hand, the “Sources” side answers: “Where is the funding coming from?” The most common sources of funds are various debt instruments, the equity contribution from the financial sponsor, excess cash on the balance sheet, and management rollover in some cases.

Example “Sources & Uses” Table from the BMC Case Study ( Wall Street Prep LBO Modeling Course )

Q. How do private equity firms exit their investment?

The most common ways for a PE firm to monetize its investment are:

• Sale to a Strategic Buyer → The sale to a strategic buyer tends to be the most convenient while fetching higher valuations as strategics are willing to pay a premium for the potential synergies.
• Secondary Buyout (aka Sponsor-to-Sponsor Deal) → Another option is the sale to another financial buyer – but this is a less-than-ideal exit as financial buyers cannot pay a premium for synergies.
• Initial Public Offering (IPO) → The third method for a private equity firm to monetize its profits is for the portfolio company to undergo an IPO and sell its shares in the public market – however, this is an option exclusive to firms of larger size (i.e. mega-funds) or club deals.

Buyout Exits by Channel ( Bain 2020 Private Equity Report )

Q. What are the primary levers in an LBO that drive returns?

• Deleveraging → Through the process of deleveraging, the value of the equity owned by the private equity firm grows over time as more debt principal is paid down using the cash flows generated by the acquired company.
• EBITDA Growth → Growth in EBITDA can be achieved by making operational improvements to the business’s margin profile (e.g. cost-cutting, raising prices), implementing new growth strategies to increase revenue, and making accretive add-on acquisitions.
• Multiple Expansion → Ideally, a financial sponsor hopes to acquire a company at a low entry multiple (“getting in cheap”) and then exit at a higher multiple. The exit multiple can increase from improved investor sentiment in the relevant industry, better economic conditions, and favorable transaction dynamics (e.g. competitive sale process led by strategic buyers). However, most LBO models conservatively assume the firm will exit at the same EV/EBITDA multiple it was purchased at. The reason is that the deal environment in the future is unpredictable and having to rely on multiple expansion to meet the return threshold is considered to be risky.

Q. What attributes make a business an ideal LBO candidate? 

An ideal LBO candidate should have most (or all) of the following characteristics:

• Steady, Predictable Cash Flow Generation
• Operates in a Mature Industry with Defensible Market Positioning
• Business Model with Recurring Revenue Component
• Strong, Committed Management Team
• Diversified Revenue Streams with Minimal Cyclicality
• Low Capex Requirements & Working Capital Needs
• Currently Undervalued by Market (i.e. Low-Purchase Multiple)

Q. What types of industries attract the most LBO deal flow?

The industries that tend to attract higher amounts of interest from private equity investors are those that are mature, growing at a moderate rate, and non-cyclical. The companies found in these types of industries are more likely to generate predictable revenue with fewer disruption risks from technological advancements or new entrants due to having high barriers to entry.

The ideal industry should exhibit stable growth in the upcoming years and have positive tailwinds that present growth opportunities. Typically, industries expected to contract or prone to disruption are avoided. Some PE firms do specialize in high-growth sectors (e.g. Vista Equity Partners, Thoma Bravo), but drift more so onto the side of growth equity than traditional buyouts.

Furthermore, if the investment strategy of the firm is based around roll-up acquisitions – the PE firm will look for fragmented industries where the consolidation strategy (i.e. “buy-and-build”) would be more viable since there are more potential add-on targets in the market.

Q. What would the ideal type of products/services being sold be for a potential LBO target?

• Mission Critical → The ideal product/service is essential to the end market being served. In other words, discontinuance should be detrimental to the customers’ business continuity, result in severe monetary consequences, or damage their reputation. For example, the decision for a data center to terminate its contract with its security solutions provider (e.g. video surveillance, access control) could impair the data center’s relationships with its existing customers in the case of a security breach and loss of confidential customer data.
• High Switching Costs → T he decision to switch to another provider should come with high costs that make customers reluctant to move to a competitor. Said another way, the switching costs should outweigh the benefits of moving to a lower-cost provider.
• Recurring Revenue Component → Products/services that require maintenance and have a recurring revenue component are more valuable given the greater predictability in revenue. In most cases, customers prefer to receive maintenance and other types of related services from the original provider they purchased the product from.

Ultimately, there are various avenues that you can go down when answering this question and it would be best to tailor your response based on the specific types of portfolio companies the firm owns and their investment strategy.

Q. What is the typical capital structure prevalent in LBO transactions?

The capital structure in an LBO tends to be cyclical and fluctuates depending on the financing environment, but there has been a structural shift from Debt to Equity ratios of 80/20 in the 1980s to around 60/40 in more recent years.

The different tranches of debt include leveraged loans (revolver, term loans), senior notes, subordinated notes, high-yield bonds, and mezzanine financing . The vast majority of the debt raised will be senior, secured loans by banks and institutional investors before riskier types of debt are used.

In terms of equity, the contribution from the financial sponsor represents the largest source of LBO equity. In some cases, the existing management team will roll over a portion of their equity to participate in the potential upside alongside the sponsor. Also, because most LBOs retain the existing management team, sponsors will usually reserve anywhere between 3% to 20% of the total equity as an incentive for the management team to meet financial targets.

Buyout Leverage Multiples Historical Trends ( Bain 2020 Private Equity Report )

Q. Which credit ratios would you look at when assessing the financial health of a borrower?

Leverage ratios compare the amount of debt held by a company to a specific cash flow metric, most often EBITDA. The leverage ratio parameters will be highly dependent on the industry and the lending environment; however, the total leverage ratio in an LBO ranges between 4.0x to 6.0x with the senior debt ratio typically around 3.0x

• Total Debt / EBITDA
• Senior Debt / EBITDA
• Net Debt / EBITDA

Interest coverage ratios examine a company’s ability to cover its interest payments using its cash flows.

As a general rule of thumb: the higher the interest coverage ratio , the better (ideally >2.0x)

• EBITDA / Interest Expense
• (EBITDA – Capex) / Interest Expense

Q. List some of the red flags you would look out for when assessing a potential investment opportunity.

• Industry Cyclicality: The ideal candidate for an LBO should generate predictable cash flows. Therefore, highly cyclical revenue and demand fluctuations based on the prevailing economic conditions (or other external factors) make an investment less attractive from a risk standpoint.
• Customer Concentration: As a general rule of thumb, no single customer should account for more than ~5-10% of total revenue as the risk of losing that key customer due to unforeseen circumstances or the customer’s refusal to continue doing business with them (i.e. decides not to renew their contract) presents a significant risk.
• Customer and Employee Churn : While the circumstances will be specific to the case, high rates of customer and employee churn are generally perceived as a negative sign as high customer churn creates the need for constant new customer acquisitions while low employee retention signals issues in the organizational structure of the target.

Q. When measuring returns, why is it necessary to look at both the internal rate of return (IRR) and cash-on-cash return?

The cash-on-cash multiple cannot be a standalone metric as it does not consider the time value of money , unlike the IRR calculation.

For instance, a 3.0x multiple may be impressive if achieved in five years. But whether it took five years or thirty years to receive those proceeds, the cash-on-cash multiple remains the same.

Over shorter time frames, the cash-on-cash multiple is more important than IRR – however, over longer time frames, it is better to achieve a higher IRR.

On the other hand, IRR is an imperfect standalone measure because it is highly sensitive to timing.

For example, receiving a dividend right after the acquisition immediately increases the IRR and could be misleading for near-term time frames.

Nonetheless, these two metrics are interlinked, and both are widely used by investors to assess returns accurately.

Q. What are some positive levers to increase the IRR on an LBO?

• Earlier Receipt of Proceeds → Dividend Recapitalization, Sooner than Anticipated Exit, Opted for Cash Interest (as opposed to PIK Interest), Annual Sponsor Consulting Fees
• Increased FCFs Generation → Achieved through Revenue and EBITDA Growth, Improved Margin Profile
• Multiple Expansion → Exiting at a Higher Multiple than the Purchase Multiple (i.e. “Buy Low, Sell High”)

Q. A private equity firm has tripled its initial investment in five years, estimate the IRR.

If the initial investment tripled in five years, the IRR would be 24.6%.

Since it is very unlikely for you to be handed a calculator to solve this calculation, it is highly recommended that you memorize the most common IRR approximations as shown in the table below:

Q. If an LBO target had no existing debt on its closing balance sheet, would this increase the returns to the financial buyer?

Upon the completion of an LBO, the firm essentially wiped out the existing capital structure and recapitalized it using the sources of funds that were raised. When calculating the IRR and cash-on-cash returns, the companies’ debt balance pre-investment does NOT have a direct impact on returns.

Q. If you had to choose two variables to sensitize in an LBO model, which ones would you pick?

The entry and exit multiples would have the most significant impact on the returns in an LBO.

The ideal scenario for a financial sponsor is to purchase the target at a lower multiple and then exit at a higher multiple, as this results in the most profitable returns.

While the revenue growth, profit margins, and other operational improvements will all have an impact on the returns, it is to a much lesser degree than the purchase and exit assumptions.

Q. What is rollover equity and why is it viewed as a positive sign?

In some cases, the existing management team may roll over some or all of its equity into the newly acquired company and may even contribute additional capital alongside the financial sponsor.

Rollover equity is an additional source of funds and it reduces the amount of leverage necessary and the equity contribution from the financial sponsor to complete the deal.

Generally, if a management team is willing to roll over some equity into the new entity, it implies the team is doing so under the belief that the risk they are undertaking is worth the potential upside in it for them. It is overall beneficial for all parties involved in the deal for the management team to have “skin in the game” and altogether have closely aligned incentives.

Q. In the context of an LBO, what does the “tax shield” refer to?

In an LBO, the “tax shield” refers to the reduction in taxable income from the highly levered capital structure.

As interest payments on debt are tax-deductible, the tax savings provides an additional incentive for private equity firms to maximize the amount of leverage they can obtain for their transactions.

Because of the tax benefits attributable to debt financing, private equity firms can be incentivized to not repay the debt before the date of maturity assuming the prepayment is optional (i.e. “cash sweep”).

Q. What is PIK interest?

PIK interest (“paid-in-kind”) is a form of non-cash interest, meaning the borrower compensates the lender in the form of additional debt as opposed to cash interest.

PIK interest typically carries a higher interest rate because it has a higher risk to the investor (i.e. delayed payments result in less certainty of being paid).

From the perspective of the borrower, opting for PIK conserves cash in the current period and thus represents a non-cash add-back on the CFS .

However, PIK interest expense is an obligation that accrues towards the debt balance due in the final year and compounds on an annual basis.

Q. How does the treatment of financing fees differ from transaction fees in an LBO model?

• Financial Fees → Financing fees are related to raising debt or the issuance of equity and can be capitalized and amortized over the tenor of the debt (~5-7 years).
• Transaction Fees → On the other hand, transaction fees refer to the M&A advisory fees paid to investment banks or business brokers, as well as the legal fees paid to lawyers. Transaction fees cannot be amortized and are classified as one-time expenses that are deducted from a company’s retained earnings.

Q. If an acquirer writes up the value of the intangible assets of the target, how is goodwill impacted?

During an LBO, intangible assets such as patents, copyrights, and trademarks are often written up in value.

Goodwill is simply an accounting concept used to “plug” the difference between the purchase price and fair value of the assets in the closing balance sheet – so, a higher write-up means the assets being purchased are actually worth more.

Therefore, a higher write-up of intangible assets means less goodwill will be created on the date of the transaction.

Note: Goodwill cannot be amortized by publicly traded companies under US GAAP – however, private companies can opt to amortize goodwill for tax reporting purposes. This question is in reference to the purchase accounting on the closing date of the transaction.

Q. What is an add-on acquisition and how does it create value?

An add-on acquisition is when a portfolio company of a private equity firm (called the “platform”) acquires a smaller company. The strategic rationale for bolt-on acquisitions is that the add-on will complement the platform companies’ existing product/service offerings – thus, enabling the company to realize synergies , as well as enter new end markets.

One of the reasons that add-ons are a common strategy employed in private equity is because the acquisition target will more often than not be valued at a lower multiple than the acquirer (and thus be an accretive transaction).

For example, if a company valued at 15.0x EBITDA purchases a smaller company for 7.5x EBITDA, the earnings of the add-on target will automatically be priced at 15.0x post-closing in theory. Once the transaction has successfully closed, the cash flows of the newly acquired company will immediately be valued at the multiple of the platform company – instantly creating value for the combined entity.

Another positive consequence provided by the roll-up strategy is that it allows platform companies to better compete with strategic buyers in sale processes.

Q. What is a dividend recapitalization?

A dividend recapitalization is when a private equity firm raises additional debt with the sole purpose of issuing themselves (i.e. the equity shareholders) a dividend.

Recaps are done to monetize profits from an investment before a complete exit and have the benefit of increasing the IRR to the fund due to the earlier receipt of proceeds.

Completing a dividend recap is often considered to be a risky action that should only be undertaken when an LBO is proceeding better than originally anticipated and the acquired company has the financial stability to take on the additional leverage raised.

Q. Why is an LBO analysis often referred to as a “floor valuation”?

An LBO model provides a “ floor valuation ” for an investment as it is used to determine what the financial sponsor can afford to pay for the target while still realizing the typical 20%+ IRR.

In other words, the question being answered from the perspective of the private equity investor is: “ What is the maximum amount that we can pay while still meeting our fund’s return hurdle?”

• Basic LBO Modeling Test
• Standard LBO Modeling Test
• Leveraged Finance Guide (LevFin)

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Thought Leadership

Top 10 AI Use Cases in Private Equity [Updated 2024]

The role of AI in private equity is only growing, and this updated list reflects the latest trends and innovations in the industry. We will continue to update it as new developments emerge.

Here are 10 AI use cases that your private equity peers are diving into.

Deal Sourcing

AI can help identify potential investment opportunities by analyzing vast amounts of data from various sources, such as financial news, company websites, and existing third-party data sources. Origination teams can then benefit from the recommendations this generates, with AI tools learning from the outcomes to improve over time. Risk assessments can be automated as well, with AI identifying potential risks through stress testing and scenario evaluation.  

Document Creation

One of the most widely used features is the automation of material creation, such as pitch decks. The focus currently is on text generation, as AI financial analysis and slide generation can be generic. However, d ifferentiation remains important.

CRM Management

AI tools can be used alongside and integrated into existing CRM systems to automate data entry and pull reports, helping to reduce repetitive manual tasks and resultant user errors. Generative AI can also be utilized to interrogate a CRM system to query out-of-place data.

Extract Unstructured Data

AI can automatically extract key information from various documents, such as capital account statements, investment schedules, and investor reports. Given the high volume of unstructured data in private markets, this can deliver significant efficiency by creating a structured data set that can be processed and analyzed.  

Generative Analytics

The utilization of generative AI tools can be used to visualize data and produce insights, reducing manual work. For a GP, this can be a useful operational tool for helping to respond to ad hoc investor requests and portfolio monitoring more broadly.  

Relationship Intelligence

AI can support and enhance LP servicing by analyzing and suggesting responses to investor queries, directly referencing any materials to which it has access. Investor communication styles can be profiled, enabling personalized communication and recommendations. AI can then analyze a relationship strength based on multiple information sources.  

DDQ Automation

Automate the completion of due diligence questionnaires (DDQs) through previously completed answers. Natural language models use semantic search to find answers to similar questions and generate responses tailored to the relevant question.

Legal Reviews

AI can help to accelerate the review and negotiation of legal documents, through automated routines. Key legal terms can be extracted using natural language search. It is also important to b uild a central repository of legal obligations.

Data Room Summary

AI is also used in the investment due diligence process. By retrieving and summarising information from data rooms, time and effort efficiencies are gained by reducing manual checks. However, thorough human oversight and testing are initially required and should be upheld to ensure information is complete and accurate.  

Sentiment Analysis

AI sentiment analysis tools can gauge public sentiments by ingesting textual data, such as news articles and social media. This can be applied at the investment level to spot hidden signals that are not visible solely through numerical analysis. This provides real-time insights to investors, empowering decision-makers to identify market opportunities and cover potential risks. It can also be used to monitor investor satisfaction, helping to improve the LP experience.

How to get started with AI?

The AI technology landscape for Private Equity is only growing, with 300+ tools listed in our latest research.

While private equity professionals can benefit from these use cases, firms must explore the risks and opportunities associated with them to best select their technology partner in alignment with their AI strategy.

Having helped 150 Private Equity and Private Credit managers with their operational needs, Holland Mountain’s team of AI specialists for private capital can help you along your AI journey. Contact us to get started.

By Matt Guy

September 3rd, 2024

Senior Advisor

Holland Mountain

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Inclusive leadership goes beyond the representation of different demographics within an organization. It involves creating a culture where diverse perspectives are actively sought out, respected and integrated into decision-making processes. Such leadership fosters a sense of belonging, where everyone feels valued for their unique contributions. The benefits of inclusive leadership include:

1. Enhanced Innovation: Diverse teams bring varied perspectives, leading to more creative solutions and innovations.

2. Improved Performance: Inclusive cultures see better overall performance because employees are more engaged and motivated.

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3. Greater Employee Satisfaction: Inclusive workplaces tend to have higher employee satisfaction and retention rates.

4. Better Decision-Making: Diverse perspectives contribute to more comprehensive and effective decision-making processes.

How To Foster Diversity And Inclusion: A Guide For Leaders

1. self-reflection and education.

Inclusive leadership starts with self-awareness. Leaders must recognize their own biases and understand how these can affect their decisions and interactions. Here’s how:

• Engage In Bias Training: Participate in workshops or training sessions focused on identifying and mitigating unconscious biases.

• Seek Diverse Perspectives: Regularly engage with individuals from different backgrounds to broaden your understanding of various experiences and viewpoints.

• Commit To Continuous Learning: Stay informed by reading books and articles, as well as attending relevant seminars or conferences.

2. Cultivate An Inclusive Culture

Creating an inclusive culture requires intentional actions that promote diversity at all levels of the organization.

• Develop Inclusive Policies: Ensure your organization’s policies support diversity and inclusion, including hiring practices, promotion criteria and conflict resolution procedures.

• Promote Open Communication: Foster a culture where employees feel safe to express their ideas and concerns. This can be achieved through regular town hall meetings, cross-functional meetings, anonymous feedback channels and open-door policies.

• Celebrate Diversity: Recognize and celebrate cultural, religious and other significant events of diverse groups within your team. This shows appreciation for different backgrounds and promotes inclusiveness.

3. Diverse Hiring Practices

Building a diverse team starts with the hiring process. Implementing inclusive hiring practices can help attract a wide range of candidates.

• Broaden Recruitment Channels: Use diverse job boards, career fairs and community outreach programs to attract candidates from various backgrounds, ages and experience.

• Bias-Free Job Descriptions: Write job descriptions that are free from biased language and focus on the essential skills and qualifications needed for the role.

• Diverse Interview Panels: Assemble diverse interview panels to minimize bias and ensure a fair evaluation of candidates.

4. Provide Opportunities For Growth And Development

Inclusive leaders ensure that all employees have access to opportunities for professional growth and advancement.

• Mentorship And Sponsorship Programs: Establish mentorship and sponsorship programs that pair employees with leaders who can provide guidance, support and advocacy. Young professionals today are particularly interested in growth through mentorship.

• Training And Development: Offer training programs that focus on skill development, leadership training and other professional growth opportunities for all employees.

• Career Path Transparency: Clearly communicate potential career paths within the organization and provide the resources and support needed to achieve career goals.

5. Measurement And Accountability

To foster a truly inclusive environment, leaders must track progress and hold themselves accountable.

• Set Clear Goals: Establish specific, measurable goals related to diversity and inclusion and regularly review progress against these goals.

• Conduct Regular Surveys: Use employee surveys to gather feedback on the inclusiveness of the workplace and identify areas for improvement.

• Report On Progress: Regularly share progress reports within the organization, highlighting successes and areas where further effort is needed.

Success Stories Of Inclusive Leaders

Let's look at a few examples I've encountered in my years as an executive coach and consultant.

Case Study: High-Tech

Maria, a tech company CEO, made inclusive leadership a cornerstone of the company's culture. Recognizing the tech industry’s diversity challenges, Maria implemented comprehensive strategies to attract, retain and promote diverse talent.

• Inclusive Hiring: Maria expanded recruitment efforts to historically black colleges and universities (HBCUs) and women in tech organizations, significantly increasing the diversity of job applicants.

• Employee Resource Groups (ERGs): She established ERGs to support underrepresented groups, providing them with a platform to voice their concerns and contribute to company policies.

• Leadership Training: Maria mandated that all managers participate in inclusive leadership training, equipping them with the skills to lead diverse teams effectively.

This high-tech company saw a 25% increase in employee satisfaction and a notable boost in innovation as a result of the diverse perspectives within the team.

Case Study: Global Health Organization

Dr. Patel, a medical doctor and director of a global health organization, faced the challenge of creating a cohesive and inclusive environment in a highly diverse organization with employees from over 30 countries.

• Cultural Competency Workshops: Dr. Patel introduced mandatory cultural competency workshops to educate employees about different cultures and customs, fostering mutual respect and understanding.

• Inclusive Decision-Making: He established cross-functional and diverse teams for key projects, ensuring a wide range of perspectives were considered in decision-making processes.

• Flexible Work Policies: Recognizing the diverse needs of the team, flexible work policies, including remote work options and flexible hours, to accommodate different lifestyles and commitments were implemented.

These initiatives led to higher employee engagement, improved team collaboration and a stronger sense of community within the organization.

Final Thoughts

Inclusive leadership is not just a moral imperative but a strategic advantage in today’s business environment. By fostering diversity and inclusion, leaders unlock the full potential of their teams, driving innovation, performance and satisfaction. Through self-reflection, cultivating an inclusive culture, implementing diverse hiring practices, providing growth opportunities and maintaining accountability, leaders can create workplaces where everyone feels valued and empowered.

Let’s commit to being the inclusive leaders our teams need and deserve.

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