TOP 17 Private Equity Interview Questions & Answers [2021 Edition] (2022)

Private equity–the world of the rich, the world of the brave. How can you become a player? How can you get into one of the investment companies? And how to succeed in the job interview? To be honest, the easiest way (and also the most common one) leads through a personal referral. Someone knows your qualities, they recommend you to the management of the company. You will still have to pass the interview, but you won’t be just another person from the street.

Such an interview is mostly about demonstrating your experience in the field (with the help of your resume and projects you’ve worked on before), and about building a good connection with the decision makers. Of course, you will still face some questions, and we will look at them right now. Later on in an article I also describe some other ways of getting invited for the interviews–if you are still waiting for your invitation for the big day. But let’s have a look at the questions.

Table of Contents

Why do you want to work for us, and not for another private equity firm?

You should do your homework. Research about the company, about their recent investments, goals and vision. Find something that resonates with you, and point it out. Praise them for something they do well, and show them that you did not apply for a job with them by a chance, that they happen to be your first choice (even if they are simply the only company that invited you for a face to face interview).

It can be the working environment, the salary structure, employee benefits, their portfolio, successes, or even location of the company–anything that makes them stand out in your eyes.

Tell us about your biggest professional failure.

Failures belong to life of every single investor. Tell them about a bad decision you made, one that cost you a lot of money, or even your reputation, or even your former job.

(Video) Private Equity Interview Questions and Answers

Your attitude matters the most for the interviewers. Show them that you can admit making a mistake, and that you actually learn from your failures, and that they help you to become better in what you do. Sure enough, something has not panned out the way you wanted in your last occupation. Otherwise you would not be sitting in the room with them today. But you learned your lesson, improved, and now you are ready to move on. TOP 17 Private Equity Interview Questions & Answers [2021 Edition] (1)

What would motivate you in this job?

Obviously the financial compensation is amazing in this sector. And while I’d not recommend talking about money in most job interviews, I’d recommend that in this one. It is a tough field, and people who are driven by money are typically the people who do well in private equity.

Nevertheless, you can go for another motives, such as your passion for investing, an option to transform existing companies, and other reasons that motivate you to work in the field. You should adjust your answer to the type of job you want to get with them–be it an analyst or an associate…

Where do you see the markets heading? What do you consider the best investment opportunity at the moment?

Try to be bold in your predictions. Do not say what everyone else is saying. Point out certain opportunities you see on the market. Show them that you watch the trends, but think outside of the box. However, you should not talk about instruments that do not really belong to the world of private equity, some extreme speculations or cryptocurrency for example.

Good alternative is also saying that you do not rely on guesses or intuition. You cannot tell where the markets are heading, or how a particular financial instrument will fare in the next months. But you are ready to sit on your ass for hours and do your analysis, trying to find the answers they are looking for.

Here are profiles of three startup companies. Have a look at them and tell us in which company you would invest.

Be aware of the pitfalls. All profiles may report some flaws, and there may be no clear winner. Or, the best answer can be that you wouldn’t invest in any of the companies they presented.

Study the materials carefully, and try to explain your reasons. In private equity it is often hard to tell what a good investment is, since we do not know how things will pan out… Therefor the key is to show them that you can do some analysis, and have your reasons for investing, or for not investing in something. Think out loud, and explain your reasoning. If you manage to do so, there isn’t anything like a bad answer.

Describe a situation when you had to make a difficult decision.

Decisions. Life of an investor is all about making decisions, and a bad one can sometimes cost the company millions of dollars–depending on your playground, and the budget you operate with.

(Video) TOP 21 QUICK ANSWERS TO JOB INTERVIEW QUESTIONS!

In your answer you should clearly explain the variables you considered before you made the final decision, and you should also ensure the interviewers that you are not afraid of making a decision.

If I gave you one million right now, where would you invest the money?

You have a few options at this point. One of them is going for diversification, saying that you do not like to put all eggs in one basket, and would invest in a variety of stocks/options/commodities/real estate.

Another alternative consists in going for a risk, saying you’d invest in a certain company or stock, trying to maximize the profit. The right answer depends a lot on the philosophy of the private equity firm, the type of investments they prefer, and they risk aversion ratio.

You can also go for an experimental answer, saying that you would invest the money in your education, or just get some good looking girl and travel around the world for a year, trying to understand other cultures, trying to find your purpose. At the end of the day, such a journey is also an investment (and one with an uncertain end).

Why should we hire you, and not one of the other applicants?

Try to list your strengths, talk about the value you can bring to the company. If you have an ace hidden in your sleeve, this is the time to show your cards.

Do you have good connections in the banks? Do you have some insider information? Or perhaps you know something other job candidates do not know? Do you have a special skill? This is the time to reveal it to the hiring managers.

And if there is no special skill, you can either bet on your motivation and readiness to work 80 hours a week for the start, trying to make something happen with your career, or on humility, saying that other candidates also have their qualities, and they will have to figure it out on their own, who the best candidate for the job is.

Other questions you may face in your private equity job interview

  • Describe a time when you struggled to communicate something to your boss, colleague, or to a customer. How did you manage to get your message over?
  • Describe a situation when you had a conflict with one of your colleagues. How did you solve the conflict?
  • Tell us about a time when you felt overwhelmed with work.
  • Here is a balance sheet and a cash flow statement of one company, for the last ten years. Have a look at the numbers and tell us your predictions. Would you suggest investing in the company?
  • Tell me about your most successful investment experience.
  • Have a look at this company, what they achieved in recent years. If we were to invest in them, what strategy would you suggest?
  • Where do you see yourself in five years from now?
  • If your investment increased by 35% and now you have $350, how much did you begin with?
  • Tell me about a time when you had to meet a tight deadline.
  • Tell us one think about yourself you wouldn’t want us to know.

Special Tip: If you experience anxiety, or do not feel ready for the questions from my list, have a look at our Interview Success Package. Up to ten sample answers to each tricky interview question (including 31 dreaded scenario-based questions) will help you get ready for this challenging interview, and outclass your competitors–since you will know something they won’t know… Thank you for checking it out!

(Video) Walk Me Through An LBO - Investment Banking Interview Question

Final thoughts, next steps

Unless they approach you directly (personal referral, headhunting), it is tough to ace this interview and get a job of your dreams. My short selection of questions should help you to understand what to expect, in terms of personal, behavioral, and technical questions.

But it isn’t only about your answers in the interviews. It is about the connection you manage to build with the members of the interviewing panel, motivation you show in the interviews, willingness to work super hard and sacrifice something for the company, and so on. Keep it on your mind on the big day. They should get an impression that you’ve been eagerly waiting for this interview, and that you are just making your dreams come true… If you manage to make such an impression, you have good chances of making it. I wish you good luck!

Matthew

May also interest you:

  • How to overcome interview nerves – 4 steps guide on overcoming anxiety and showing your very best when it matters the most.
  • Salary negotiation tips – Learn how to get as much as you deserve, if not more, at the end of the interviews.

* You can also download some questions in a simple one-page long .PDF document, print it, and practice your interview answers anytime later:

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Matthew Chulaw

Matthew has been working in international recruitment since 2008. He helps job seekers from all walks of life to pursue their career goals, and to prepare for their interviews. He is the founder of InterviewPenguin.com website.

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    FAQs

    What questions should you ask in private equity interview? ›

    Fund strategy & positioning
    • How many funds and/or product lines does the firm operate? ...
    • Which kind of assets does the company invest in? ...
    • What is the fund's investment strategy? ...
    • What is the size of the fund? ...
    • Which stage of the company's lifecycle does the fund invest in? ...
    • Where is the fund present?

    How can I impress in private equity interview? ›

    Good answers suggest to the interviewer what you can bring to the company. Check out recent deals, target companies, and say something that shows a genuine interest in the company you want to work for. “Summarize your experience in the context of their firm – why are you going to be useful to them?” advises McManus.

    What are 15 good interview questions? ›

    15 tricky job interview questions — and how to nail them
    • Can you tell me a little about yourself?
    • How did you hear about the position?
    • What do you know about the company?
    • What are your greatest professional strengths?
    • What do you consider to be your weaknesses?
    • What is your greatest professional achievement?

    How difficult are private equity interviews? ›

    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.

    How many rounds are in a private equity interview? ›

    Private equity or leveraged-buyout funds usually conduct three to four rounds of interviews. For junior positions, however, the interview rounds could sometimes be as few as two.

    What is dry powder? ›

    What Is Dry Powder? Dry powder is a slang term referring to marketable securities that are highly liquid and considered cash-like. Dry powder can also refer to cash reserves kept on hand by a company, venture capital firm or individual to cover future obligations, purchase assets or make acquisitions.

    What variables impact an LBO most? ›

    What variables impact an LBO model the most? Purchase and exit multiples have the biggest impact on the returns of a model. After that, the amount of leverage (debt) used also has a significant impact, followed by operational characteristics such as revenue growth and EBITDA margins.

    Are private equity interviews technical? ›

    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.

    Why do you want to work for PE? ›

    A well thought out answer should: Show your passion for and knowledge of the PE industry. Demonstrate your wish to apply your skillsets to building businesses and creating value. Establish your rationale for choosing PE specifically, as opposed to investment banking or a hedge fund.

    Why is LBO the floor valuation? ›

    To recap, a LBO model is often called a “floor valuation” as it can be used to determine the maximum purchase price the buyer can pay while still reaching the fund specific returns thresholds.

    What questions do they ask during interview? ›

    50+ most common job interview questions
    • Tell me about yourself.
    • Walk me through your resume.
    • How did you hear about this position?
    • Why do you want to work at this company?
    • Why do you want this job?
    • Why should we hire you?
    • What can you bring to the company?
    • What are your greatest strengths?
    2 Sept 2022

    What are the top 20 interview questions? ›

    Here are the rest of the top 20 interview questions hiring managers might ask:
    • Tell me about a time you worked with a difficult coworker.
    • How do you stay motivated?
    • What skills are you hoping to develop?
    • Why are you looking for a new role?
    • How do you manage your stress levels?

    What are 10 good interview questions? ›

    Top 10 Interview Questions and Best Answers
    • Tell Me About Yourself. ...
    • Why Are You the Best Person for the Job? ...
    • Why Do You Want This Job? ...
    • How Has Your Experience Prepared You for This Role? ...
    • Why Are You Leaving (or Have Left) Your Job? ...
    • What Is Your Greatest Strength? ...
    • What Is Your Greatest Weakness?
    17 Feb 2022

    What is the STAR method when interviewing? ›

    The STAR method is a structured manner of responding to a behavioral-based interview question by discussing the specific situation, task, action, and result of the situation you are describing.

    What are the top 100 interview questions? ›

    Basic Interview Questions:
    • Tell me about yourself.
    • What are your strengths?
    • What are your weaknesses?
    • Why do you want this job?
    • Where would you like to be in your career five years from now?
    • What's your ideal company?
    • What attracted you to this company?
    • Why should we hire you?

    What are some unique interview questions? ›

    Unique interview questions
    • "If you had a choice between two superpowers, being invisible or flying, which would you choose?" ...
    • "What was the last gift you gave someone?" ...
    • "How many square feet of pizza are eaten in the U.S. each year?" ...
    • "If you could compare yourself with any animal, which would it be and why?"
    15 Oct 2018

    How much do private equity guys make? ›

    Private Equity Associate Salary + Bonus: Your salary + bonus will probably be in the $150K to $300K range, depending on the size of the firm and your performance. Some of the large funds may pay more than $300K, but we're using the 25th percentile to 75th percentile range as a reference here.

    Is private equity prestigious? ›

    Private equity is extremely prestigious. Compensation for both careers is very high, but the work/life balance in private equity is better, it is often the preferred exit route for investment bankers who have a few years of experience.

    What is the difference between hedge funds and private equity? ›

    Hedge funds are alternative investments that use pooled money and a variety of tactics to earn returns for their investors. Private equity funds invest directly in companies, by either purchasing private firms or buying a controlling interest in publicly traded companies.

    Can you go from consulting to private equity? ›

    There are two primary paths for consultants into the Private equity industry: the operations team and a portfolio company (while a small portion of consultants end up working in an Investment Team, firms primarily target individuals with investment banking or Private equity backgrounds for these roles).

    What are secondary transactions in private equity? ›

    A direct secondary transaction occurs when investors sell a directly held ownership interest in operating companies. LPs will transfer their stakes to an existing investor and not to a new buyer. A direct secondary transaction is an opportunity to sell stock before the entire portfolio of companies has been sold.

    How do you get a job at a PE firm? ›

    Key Takeways
    1. Get to know the headhunters who recruit for private equity. There aren't many of them.
    2. Get some experience. Pursue every internship and work in finance for two or three years before trying.
    3. Be patient. The jobs are few and the interview process is lengthy.

    What is private equity overhang? ›

    This refers to the amount of capital committed by investors to equity firms for investing purposes. When private equity funds are created, most have limited lifetimes. That means that fund managers typically have 5-7 years to invest the private equity overhang, or they have to send the capital back to their investors.

    What is unrealized value in private equity? ›

    An unrealized gain occurs when the current price of a security is higher than the price the investor initially paid for the security, including any fees associated with the purchase. Many investors calculate the current value of their investment portfolios based on unrealized values.

    How much dry powder is in a VC? ›

    The amount of dry powder at VC funds is now nearly double the $147 billion annual average between 2016 and 2020, before the pandemic-fueled surge in fundraising, according to Sakoda's analysis.

    What should you not ask in an interview? ›

    Questions to avoid in an interview:

    Never ask about pay, time off, benefits, etc. (Wait until later in the process to inquire about these things.) Never ask “What does your company do?” • Never ask “If I'm hired, when can I start applying for other positions in the company?” • Never ask how quickly you can be promoted.

    How do you handle stress and pressure? ›

    Taking steps to manage stress
    1. Track your stressors. Keep a journal for a week or two to identify which situations create the most stress and how you respond to them. ...
    2. Develop healthy responses. ...
    3. Establish boundaries. ...
    4. Take time to recharge. ...
    5. Learn how to relax. ...
    6. Talk to your supervisor. ...
    7. Get some support.
    1 Jul 2014

    What is the difference between DCF and LBO? ›

    An LBO type analysis models cash flows to and from various parties and from that you can calculate a rate of return to each party; a DCF models cash flows and a required rate of return, based on risk, in order to value a company or particular security.

    What does LBO stand for? ›

    What Is a Leveraged Buyout? A leveraged buyout (LBO) is the acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loans, along with the assets of the acquiring company.

    Who holds the debt in an LBO? ›

    The purchaser secures that debt with the assets of the company they're acquiring and it (the company being acquired) assumes that debt. The purchaser puts up a very small amount of equity as part of their purchase. Typically, the ratio of an LBO purchase is 90% debt to 10% equity.

    How does an LBO model work? ›

    Structure of an LBO Model

    In a leveraged buyout, the investors (private equity or LBO Firm) form a new entity that they use to acquire the target company. After a buyout, the target becomes a subsidiary of the new company, or the two entities merge to form one company.

    What should I study for private equity? ›

    Candidates should have an bachelor's degree in an analytical major like finance, accounting, statistics, mathematics, or economics. Private equity fund management requires technical ability to analyze financial performance and estimate the value of a private company.

    Is private equity A fund? ›

    Similar to a mutual fund or hedge fund, a private equity fund is a pooled investment vehicle where the adviser pools together the money invested in the fund by all the investors and uses that money to make investments on behalf of the fund.

    What are the 10 most common interview questions and answers for? ›

    Top 10 Interview Questions and Best Answers
    • Tell Me About Yourself. ...
    • Why Are You the Best Person for the Job? ...
    • Why Do You Want This Job? ...
    • How Has Your Experience Prepared You for This Role? ...
    • Why Are You Leaving (or Have Left) Your Job? ...
    • What Is Your Greatest Strength? ...
    • What Is Your Greatest Weakness?
    17 Feb 2022

    Why should we hire you answer best? ›

    Show that you have skills and experience to do the job and deliver great results. You never know what other candidates offer to the company. But you know you: emphasize your key skills, strengths, talents, work experience, and professional achievements that are fundamental to getting great things done on this position.

    How do you prepare for a 2022 interview? ›

    Here are the most important interview skills to focus on and how to make sure you project professionalism and expertise in your field.
    1. Interview preparation.
    2. Know the company.
    3. Speaking skills (clear, cohesive, calm)
    4. Think first, speak second.
    5. Listening.
    6. Show interest, not desperation.
    7. Show gratitude.

    What should we write in tell me about yourself? ›

    Key Takeaways
    1. Structure your answer in a way that makes sense. Stick to the past-present-future format, and you're all good!
    2. Keep it relevant and brief (1-2 minutes max). No one wants to hear your whole life story.
    3. Mention any of your top achievements and relevant work experiences.

    What are 50 common interview questions and answers? ›

    50+ most common job interview questions
    • Tell me about yourself.
    • Walk me through your resume.
    • How did you hear about this position?
    • Why do you want to work at this company?
    • Why do you want this job?
    • Why should we hire you?
    • What can you bring to the company?
    • What are your greatest strengths?
    2 Sept 2022

    What is the star method in interviews? ›

    The STAR method is a structured manner of responding to a behavioral-based interview question by discussing the specific situation, task, action, and result of the situation you are describing.

    What are some unique interview questions? ›

    Unique interview questions
    • "If you had a choice between two superpowers, being invisible or flying, which would you choose?" ...
    • "What was the last gift you gave someone?" ...
    • "How many square feet of pizza are eaten in the U.S. each year?" ...
    • "If you could compare yourself with any animal, which would it be and why?"
    15 Oct 2018

    What not to say in a job interview? ›

    Photos courtesy of the individual members.
    • Speak Negatively About Yourself.
    • Criticize Your Previous Employer.
    • Act As If You're Not Excited.
    • Be The First To Bring Up Compensation.
    • Ask For Feedback At The End.
    • Discuss Personal Things.
    • Ask Why The Position Is Vacant.
    • Admit You Didn't Do Your Research.
    30 Mar 2021

    What is your weakness best answer? ›

    Answer “what is your greatest weakness” by choosing a skill that is not essential to the job you're applying to and by stressing exactly how you're practically addressing your weakness. Some skills that you can use as weaknesses include impatience, multitasking, self-criticism, and procrastination.

    How do you deal with pressure or stressful situations? ›

    2. Commit to a Positive Attitude
    1. Decide what you can do. Pinpoint which parts of the situation you have the power to change or influence for the better. ...
    2. Get support. Find someone to talk to about your situation. ...
    3. Care for yourself. Take especially good care of yourself when stress in your life is high.

    What are 7 common interview questions and answers? ›

    7 most common interview questions
    1. Where do you see yourself in five years? ...
    2. What are your strengths/weaknesses? ...
    3. Why should we hire you? ...
    4. Tell me about yourself / your past work experience. ...
    5. Why do you want to work for us? ...
    6. What are your salary expectations? ...
    7. What skills or experience will help you succeed in this role?

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