Investment Banking interview preparation
Every question below is either traced to a named firm from a public candidate report, or tagged at desk level when we could not trace it. Answers are written the way you would actually say them out loud — answer first, then the mechanism, then the limitation.
100 questions, mapped to the firms that asked them
- Questions
- 100
- Traced to a firm
- 100
- Firms
- 46
- Updated
- September 2026
051Walk me through an LBO.Truist SecuritiesGeneralist · Charlotte · 2024TPGInvestment Banking · New York · 2024Advent InternationalTechnology, Media and Telecom · Palo Alto · 2020LazardInvestment Banking · New York · 2026
Say this
Buy a company using mostly debt, use its own cash flow to pay that debt down over five years, then sell it. The equity return comes from deleveraging, from growing EBITDA, and from any multiple expansion.
Then walk it
- Set the entry: purchase price as a multiple of EBITDA, then a sources and uses table. Debt takes you as far as the credit market allows, say five times EBITDA, and the sponsor writes a cheque for the rest plus fees.
- Project the operating model for five years, then build the debt schedule: interest, mandatory amortisation, and a cash sweep that applies surplus cash to the debt.
- Free cash flow after interest pays down debt each year, so the equity slice grows even if enterprise value does not move at all. That is deleveraging.
- Exit at an assumed multiple on final-year EBITDA, subtract the remaining debt, and you have exit equity value.
- Compute IRR and money multiple against the initial cheque. Then attribute the return across the three drivers: debt paydown, EBITDA growth and multiple change. A sponsor will always ask which one is carrying the deal.
- The sanity test: if the whole return depends on exiting at a higher multiple than you paid, it is not an investment thesis, it is a bet on the market.
Where candidates lose it
Describing the mechanics with no attribution of returns. Every good LBO answer ends with which of the three drivers produces the IRR, and an acknowledgement that multiple expansion is the one you cannot control.
Expect next
- How do you drive returns in an LBO?
- What makes a good LBO candidate?
- Do a paper LBO for me.
Reported by candidates at Truist Securities (Generalist, Charlotte, 2024); TPG (Investment Banking, New York, 2024); Advent International (Technology, Media and Telecom, Palo Alto, 2020); Lazard (Investment Banking, New York, 2026). Source: Wall Street Oasis.
052How do you drive returns in an LBO?Centerview PartnersInvestment Banking · Menlo Park · 2025TPGInvestment Banking · New York · 2024
Say this
Three levers: pay down debt with the company's cash flow, grow EBITDA through revenue and margin, and exit at a higher multiple than you paid. The first two you control, the third you mostly do not.
Then walk it
- Deleveraging: every dollar of debt repaid transfers a dollar of enterprise value to the equity. At five times leverage this alone can double equity over five years with no growth at all.
- EBITDA growth: organic revenue growth, pricing, cost programmes, and bolt-on acquisitions. Bolt-ons are especially powerful because a small target bought at six times inside a platform valued at twelve times creates value on day one through multiple arbitrage.
- Multiple expansion: selling at a higher multiple, either because the market re-rated or because you made the asset more valuable, bigger, more diversified, faster-growing.
- A fourth, less discussed: the dividend recap. Refinancing to pull cash out early shortens the duration of the return and lifts IRR without any exit.
- The discipline point: a sponsor's investment committee wants to see the return work on deleveraging and EBITDA alone, with flat or lower exit multiples. Anything that only works on multiple expansion does not get approved.
Where candidates lose it
Naming only leverage. Leverage amplifies returns; it does not create them. And forgetting that IRR is time-sensitive, so the speed of the return matters as much as the size.
Expect next
- Which lever matters most?
- What would you do in the first hundred days?
- How does a dividend recap change the IRR?
Reported by candidates at Centerview Partners (Investment Banking, Menlo Park, 2025); TPG (Investment Banking, New York, 2024). Source: Wall Street Oasis.
053A PE firm bought a company for $1,000 and sold it for $1,000. How did they make money?TD SecuritiesInvestment Banking · Toronto · 2026
Say this
Debt paydown. Enterprise value did not move, but the debt inside it shrank, so the equity slice grew. Buy at $1,000 with $700 of debt and $300 of equity; if cash flow repays $300 of debt, you sell at $1,000 and the equity is now $600.
Then walk it
- Entry: $1,000 enterprise value, $700 debt, $300 sponsor equity.
- Over the hold, the company's free cash flow after interest pays down $300 of debt. Nothing else changes.
- Exit: $1,000 enterprise value less $400 remaining debt equals $600 of equity.
- That is 2.0 times the money. Over five years it is roughly a 15 percent IRR.
- Other routes to the same outcome: a dividend recap that returned cash mid-hold, or selling a division and returning proceeds while the remaining business held its value. Both put money in the sponsor's pocket without any change in headline enterprise value.
Where candidates lose it
Freezing because the entry and exit prices match. The question is testing whether you understand that the sponsor owns the equity, not the enterprise. Use round numbers immediately and show the two balance sheets.
Expect next
- What IRR is that over five years?
- What if they had used no debt at all?
- How else could they have made money at a flat exit?
Reported by candidates at TD Securities (Investment Banking, Toronto, 2026). Source: Wall Street Oasis.
055If I make 8 times my money in 6 years, what is my IRR?Warburg PincusPrivate Equity · New York · 2012
Say this
About 41 percent. Eight times is two doublings and a bit: 2 times is 100 percent, 4 times is 300 percent, 8 times is 2 cubed, so the money doubles three times in six years, which is a doubling every two years. A doubling in two years is about 41 percent a year.
Then walk it
- Reframe 8 times as 2 to the power of 3. Three doublings in six years means one doubling every two years.
- The rule of 72 in reverse: 72 divided by 2 years is 36, so roughly 36 percent. That gets you close, and the precise answer is 41 percent because the rule of 72 is an approximation.
- Exact check: 1.41 squared is 2, so a 41 percent annual return doubles money in two years, and three of those gives 8 times.
- Worth memorising the grid, because these come up constantly: 2 times in 5 years is 15 percent, 2.5 times in 5 years is 20 percent, 3 times in 5 years is 25 percent, 2 times in 3 years is 26 percent.
- Then say the practical caveat: IRR is time-weighted, so an early dividend recap flatters it. Money multiple and IRR can disagree, and sponsors quote whichever looks better.
Where candidates lose it
Trying to compute the sixth root arithmetically and stalling. Decompose the multiple into powers of two and use doublings. Interviewers are testing mental agility and whether you know the standard IRR grid cold.
Expect next
- Which is better, 25 percent IRR over 5 years or 30 percent over 3?
- Why can IRR and money multiple disagree?
- How does a dividend recap affect IRR?
Reported by candidates at Warburg Pincus (Private Equity, New York, 2012). Source: Wall Street Oasis.
056Which yields a greater return, an IRR of 25 percent over 5 years or an IRR of 30 percent over 3 years?Centerview PartnersGeneralist · New York · 2026
Say this
The 25 percent over five years returns more total money: about 3.05 times against about 2.2 times. But the 30 percent is the better rate of return, so the answer depends on whether you can redeploy the capital.
Then walk it
- 1.25 to the fifth is roughly 3.05 times. 1.3 cubed is roughly 2.2 times. So more absolute money from the longer hold.
- But IRR is an annualised rate, and 30 percent beats 25 percent per year of capital employed.
- The deciding question is reinvestment. If you can put that capital straight into another 30 percent deal for the remaining two years, the short hold wins comfortably: 2.2 times 1.69 is about 3.7 times.
- If the capital sits in cash for two years, the long hold wins.
- This is exactly why limited partners care about both IRR and multiple on invested capital, and why a fund with spectacular IRR from fast flips can return less cash than one with lower IRR and longer holds.
Where candidates lose it
Answering with only one of the two framings. The question is deliberately ambiguous, and the right move is to compute both, then name reinvestment risk as the thing that decides it.
Expect next
- So which would a limited partner prefer?
- Why do funds report both IRR and MOIC?
- How would you game an IRR?
Reported by candidates at Centerview Partners (Generalist, New York, 2026). Source: Wall Street Oasis.
Firm tags come from public, anonymous candidate reports on Wall Street Oasis: strong signal, not sworn testimony. Firms are named as the places a question was reported, not as partners of Fin Maverick. Answers are written for this page to show how to think out loud; they are not scripts to recite.