The short answer: private equity interviews test whether you can think like an investor: why PE, the deals you’ve worked on and what you’d have done differently, LBO mechanics and what drives returns, how you’d judge a business and its risks, and, usually, a modeling test or case study ending in an investment recommendation. Expect a paper LBO done in your head, a take-home or timed model, and an investment memo you defend. Show judgment, not just technique: would you invest, at what price, and why? Below are the common questions with short answers.
Sample answers are illustrations, not quotes from real candidates.
What private equity firms do
The U.S. Securities and Exchange Commission describes private equity funds as pursuing strategies such as buyout, growth equity and venture capital, and says “a typical investment strategy undertaken by private equity fund is to take a controlling interest in a portfolio company and engage actively in the management and direction of the business in order to increase its value.” Interviewers want to see that you understand that: PE is about buying, improving and selling businesses, not just modeling them.
Fit questions
“Why private equity?”
Sample answer: “In banking, my favorite part of every deal was the diligence: understanding why a business wins and what could go wrong. I want to be on the side that makes the investment decision and then works with management to improve the company over several years. On the sale of a packaging business last year, I spent weeks with the operating data, and I kept thinking about what I’d change as an owner. That’s the job I want.”
“Walk me through a deal you worked on.”
Explain the company, the rationale, the valuation and structure, your role, key diligence findings, and whether you would have invested as a principal and at what price. Interviewers love candidates with a view.
“Why our firm?”
Mention its strategy (sector focus, deal size, control vs minority, operating approach), recent deals and the people you’ve met.
LBO questions
“Walk me through an LBO.”
A sponsor buys a company using a mix of equity and significant debt. The company’s cash flow pays interest and down the debt over the holding period, often three to seven years. At exit, the sponsor sells and repays any remaining debt, and the equity’s growth determines the return, measured by IRR and multiple of money (MOIC).
“What drives returns in an LBO?”
Three levers: EBITDA growth (revenue growth and margin improvement), debt paydown (which increases the equity’s share of enterprise value), and multiple expansion (selling at a higher multiple than you bought at). Strong deals rely mostly on the first two.
“Do a paper LBO.”
“You buy a company with $100 million of EBITDA at 10× ($1 billion), funded with 60% debt and 40% equity. EBITDA grows to $130 million in five years, the company pays down $250 million of debt, and you exit at 10×. What’s the return?”
- Entry: equity = $400 million; debt = $600 million.
- Exit: enterprise value = 10 × $130 million = $1.3 billion; remaining debt = $600 million − $250 million = $350 million; equity = $950 million.
- Return: $950 million / $400 million ≈ 2.4× MOIC. Over five years, that’s roughly a 19% IRR (2× in five years is about 15%; 2.5× is about 20%).
Say your steps out loud and round sensibly.
“What makes a good LBO candidate?”
Stable, predictable cash flows; a strong market position; low capital expenditure needs; opportunities to improve operations; a reasonable purchase price; and a clear exit path.
“Would you rather have higher leverage or a lower purchase price?”
A lower price reduces risk and raises returns without adding debt; more leverage raises potential returns but also the risk of default if performance disappoints.
The case study and memo
Expect either a timed model (often one to three hours) or a take-home with a company’s data. Typical steps:
- Understand the business: market, customers, competition, unit economics.
- Build the model: projections, debt schedule, returns at different entry and exit multiples.
- Find the key risks: customer concentration, cyclicality, margins, management.
- Recommend: invest or not, at what price and structure, with the risks and how you’d mitigate them.
Lead your memo with the recommendation, and be ready to defend your assumptions.
Portfolio-company questions
- “How would you create value in this business after buying it?” Pricing, procurement, sales effectiveness, add-on acquisitions, management upgrades.
- “A portfolio company is missing its budget. What do you do?” Understand the drivers with management, act on what’s controllable, and check covenants and liquidity.
See also our investment banking interview questions and venture capital interview questions.
Frequently asked questions
What questions are asked in a private equity interview?
What drives returns in an LBO?
What is a paper LBO?
What makes a good LBO candidate?
How do I prepare for a private equity case study?
Sources
- U.S. Securities and Exchange Commission, Small business glossary: private equity fund. Read on 1 October 2026.
