36 Private Equity Interview Questions (Plus Sample Answers)
By Indeed Editorial Team
Published 31 May 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
If you're interviewing for a private equity role, employers may ask questions that test your specific knowledge and experience related to this type of role. These questions may reference your professional experience, background and skills. Learning about these questions may help you succeed in your interview and secure the position. In this article, we list 36 of the most common private equity interview questions and share some examples of professional answers to help you craft your own.
10 general private equity interview questions
Here are 10 general private equity interview questions a hiring manager may ask you during an interview for this type of position:
What do you know about our firm and our portfolio companies?
Why are you interested in working in private equity?
What are your career goals for the next five years?
How do you handle stress in the workplace?
What kinds of private equity investing do you enjoy the most?
What motivates you to perform your best work?
Do you have any questions about our firm or this role?
What are your salary expectations?
What makes you the most suitable candidate for this position?
How do you think our firm differs from our competitors?
10 background and experience questions
Potential employers may ask questions about your work experience and background to determine whether you have the skills and qualifications needed to be successful in a private equity role. Here are 10 common questions you may encounter:
Can you describe the most significant investment deal on which you've worked?
Tell me about the most difficult leveraged buyout (LBO) model on which you worked. What steps did you take to accomplish it?
What types of consulting assignments have you worked on in your previous roles?
How much experience do you have with various kinds of investment banking transactions?
How would your former employers describe you?
Can you tell me about your day-to-day job duties in your most recent private equity position?
How do you rank your financial modelling skills?
Based on your previous experience, what challenges do you expect to face in this role?
What do you appreciate most about working in private equity?
What's your greatest professional achievement to date?
10 in-depth questions
Hiring managers may ask you questions about specific terms and processes related to working in a private equity role to determine whether you're a good fit for their company. Here are 10 examples of in-depth questions you may encounter during your interview:
Can you explain what an LBO is?
What actions would you take to build an LBO model?
How would you achieve EBITDA growth in this role?
What qualities do you think support a business in becoming an ideal LBO candidate?
Can you explain what a cyclical industry is?
How would you use customer engagement to assess a potential investment opportunity?
Can you list the levers a private equity investor needs to increase the IRR on one of their investments?
Can you describe what rollover equity is and whether you view this as a positive or negative sign?
When might a private equity firm use dividend recapitalisation?
What are your views on payment in kind (PIK) interest?
6 interview questions with sample answers
Here are six interview questions related to a private equity role that a hiring manager may ask you and examples of how to answer them successfully:
1. What are three strengths you can bring to our private equity firm?
Hiring managers may ask this question to determine whether you understand what the requirements of the position are. Consider what skills the employer listed in the job description and then select three relevant strengths that can help you excel in this job role.
Example: 'Three of my biggest strengths are collaboration, critical thinking and data modelling. In my current role, I use my collaboration skills to work closely with the CFO and other team members to develop accurate revenue forecasts. My ability to assess situations critically and build accurate data models also helps me analyse information to develop smart business suggestions.'
2. If you noticed that a potential investment opportunity had a high employee churn rate at their company, what would you do?
Employers may ask this question to test your critical thinking abilities and communication skills. A high churn rate may indicate poor management or employee compensation, and is important to consider in private equity investments. In your answer, describe the importance of employee churn rate and the steps you might take to analyse the investment opportunity.
Example: 'To determine whether the investment opportunity had a high employee turnover, I would first conduct an analysis of other companies in that industry to see how their employee turnover rates compared. If the churn number was higher than industry peers, I may investigate why such a high percentage of employees left the company. Then, I would assess whether or not this information indicates any challenges for this business in the long term.'
3. How do you evaluate the financial strength of a company?
Employers may ask this question to determine whether you have experience in evaluating different components of company financial statements. In your answer, focus on the most important items to look for when assessing financial strength. It can also be beneficial to provide an example of how you would conduct an analysis.
Example: 'I evaluate financial strength by reviewing a company's balance sheet to see if they have enough cash to cover their short-term liabilities, such as accounts payable and short-term debt. I also look at their long-term liabilities, including pension obligations and long-term debt. If a company can cover these two major liabilities, I would consider them financially healthy. Additionally, if their equity is higher than their total debt, which is another indicator of financial strength, I may be very interested in this investment opportunity.'
4. When you assess the financial health of a borrower, what types of credit ratios do you look for?
Employers may ask this question to determine whether you know what to consider when assessing the financial health of a borrower. In your answer, consider some factors that can affect the credit health of a company. Then, describe how you might go about assessing these factors during your analysis.
Example: 'When I assess the financial health of a borrower, I look for key indicators, such as their current ratio and quick ratio. The current ratio measures whether a company has enough current assets to cover their short-term liabilities. The quick ratio is another ratio that I often use to determine financial stability because it doesn't include inventory in its calculation. In general, I like to see that the credit ratio is higher than one, which means the company has enough assets to cover its liabilities.'
5. How do you stay informed about changes in the private equity industry?
Hiring managers may ask this question to determine whether you're actively interested in what's new in the industry. To answer this question, consider some of the recent trends that may affect private equity firms. Then, describe how you can stay informed about these developments.
Example: 'As a finance professional, I'm constantly looking for new investment opportunities and often this involves staying up-to-date about changes within the industry and investment trends. For example, cryptocurrency investments have become more popular recently. I first heard about this trend through a financial journal I subscribe to and that's one of the best sources of industry information I've found. I also watch several financial television shows that discuss changes in the industry.'
6. If our private equity firm needed to exit an investment, what strategies would you explore?
Employers may ask this question to test your ability to generate and execute a course of action. You may want to consider the exit strategies that a private equity firm is most likely to look at or has used in the past. Then, identify some additional approaches that you could explore if needed.
Example: 'I would first consider selling this investment back to the company. If they're not interested in purchasing it, I may explore selling it on a secondary market or taking it public.'
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