The private equity interview process is intentionally opaque. The truth is you need to find a way to access certain interview guides in order to have a real chance. Nobody is born knowing this stuff, and nobody has the incentive to lay out these interview questions for free since it’s a competitive market. So the best way to get access to these guides is to join clubs – for example in college – where you have others around you who share the best materials and help you succeed. When I search for these guides on my Google drive I have about 20 of them and you can clearly see it’s been some time since I last opened them. However, I’d bet not much has changed. You know what they say: there’s very little that changes from textbook edition to edition in the sciences. Maybe a new chapter, or maybe you get a teacher with a penchant for quizzing certain areas. Still, these guides are what you need to memorize to break into the industry. In the following post I’ll go through some of the top questions they expect you to know.

As for my background: I interviewed with a number of top firms and ultimately ended up at GI Partners in San Francisco. I interviewed at Apax Partners, Lindsay Goldberg, Onex Partners, KKR, Warburg Pincus, the list would show that I had plenty of experience. 

Steps:

1. All of these interviews start with a headhunter screening you for “fit” and prestige

2. If you’re invited to interview with a certain firm, the interview starts with a 1-3 hour technical assessment where you’re given some basic assumptions about a business and have to build a LBO from scratch. I will say by the time you do a few of these they become much easier. I remember using every minute on the clock on the first few of these. After a while I’d finish them and do the extra credit with time remaining. So it’s really a game of repetition - as are most things in life (and finance, and programming).

3. Then, you go through a series of onsite interviews meeting a number of key decision makers at the firm. What I didn’t take as seriously at this step but now have an appreciation for as a manager myself is that you need an advocate at the firm in order to get in. Someone in particular has to want you on the team. It’s best if that person will go on to work with you and train you, since they now also have skin in the game proving their decision was the right one. 

4. The onsite interviews are about getting to know you (sure) but they are also about impressing people by showing you’ve done your homework. As an Associate, you are in charge of running with the model and so that’s core to the process. Quizzing you on accounting, finance, and financial modeling. 

First, I want to go into an important differentiator. Suppose two people equally know their technical material – who gets the job? The person who (1) knows somebody at the firm that can reference or vouch for them, or (2) the person who shows more serious interest and has done research into that particular firm. The first point is maybe to be expected. It works this way in most industries. What you’ll see is that certain firms end up with very successful employees from certain banks or schools, and then they start to have a pipeline of these candidates. The second, knowing the firm, shows maturity. It’s something I didn’t have as much of when I was interviewing. Maturing on this point of going deep on the firm and treating it like a major life decision where you are also picking them benefits both parties. If you come into an interview knowing the portfolio company that Partner works with day to day, that makes for a better conversation simply because it’s more realistic than what you’d learn about in your current interview bubble. What I’ve also seen work well is showing a preference for a certain industry. Suppose a firm is choosing between two people for a role on the Healthcare team. One has an undergraduate degree in biology and the other in electrical engineering. The person with the biology degree will likely have a better story to tell in terms of fit. So then a third differentiator would be this sort of “industry preference” dimension.

One other thing. For people outside of private equity one of the points that stood out to me about the recruiting process was: “there are two times to get in: right from investment banking, and right after an MBA” – this entry window is unique to the industry. 

So back to the core of what I wanted to share, some main interview questions. Here are some guides I was looking at in the image below. I remember the M&I 200 question guide was particularly useful.

Now that I think about it most of the questions bubble up to the meta question: do you understand the three statements? It sounds easy…right? Here are some ways this is tested.

The basics. As I’m writing these five years later, they still roll off the tongue. They are the bread and butter. What are the ways in which you can value a company? Which results in the highest valuation? The lowest? What are the pros and cons of a discounted cash flow model? What is EBITDA? What are some adjustments you can make to EBITDA. In one interview I was given a number of financial documents and had to call out adjustments to EBITDA. These adjustments can seriously impact what a business is worth.

Paper LBO and buyout modeling. In terms of particular questions I’d say know the “paper LBO” like the back of your hand. It comes up every time. The Paper LBO tests: can you walk me through each line of the income statement and then do some basic math in your head to get to an expected return? Basically, do you know what multiples correspond to what IRR/MOIC. You need to know the formula for debt paydown and practice the paydown waterfall involved in an LBO as well.

Accounting questions. Questions about current assets, working capital, there are certain questions that always mess people up. Usually these are in the accounting section because they are boring, not used daily, and boring. You’ll be dealing with balance sheets often. So they love to ask them. 

Overall, what a process. It’s pretty painful and both the firms and people trying to break in spend plenty of time networking and practicing to get in. Luckily, you only have to go through it a few times and knowing how the game is played can help you do it successfully. I didn’t know but learned through trial and error. It’s interesting to reflect on how I’d summarize the whole process looking back.