Investment Banking interview preparation

Questions

100

Traced to a firm

100

Firms

46

Updated

September 2026

Asked at

All firmsTSTruist Securities10Rothschild & Co8Centerview Partners7CSCredit Suisse7HWHarris Williams6Houlihan Lokey6Lazard6Mizuho6Barclays5Citi5Deutsche Bank5Evercore5Moelis & Company5MSMorgan Stanley5Piper Sandler5RCRBC Capital Markets5Goldman Sachs4Nomura4TD Securities4Bank of America3GSGuggenheim Securities3J.P. Morgan3Jefferies3Moody's3Perella Weinberg Partners3WPWarburg Pincus3WBWilliam Blair3HSBC2Lincoln International2Scotiabank2TPTPG2UBS2Wells Fargo Securities2Advent International1Apollo Global Management1Bain Capital1Balyasny Asset Management1BLBlackRock1BPBNP Paribas1General Atlantic1Invesco1Morningstar1PIMCO1STSociété Générale1SSState Street1WMWellington Management1

Topic

All topicsAccounting14Valuation21M&A10Markets and deals10Capital markets3LBO8Leveraged finance3Restructuring2Credit3Debt capital markets2Capital structure2Case and estimation11Brainteasers6Fit5

Level

AnyCoreIntermediateHard

Type

AnyTechnicalCaseBrainteaserFitMarket view

1. 051Walk me through an LBO.LBOIntermediatetechnicalTSTruist SecuritiesGeneralist · Charlotte · 2024TPTPGInvestment 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

   1. 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.
   2. 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.
   3. 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.
   4. Exit at an assumed multiple on final-year EBITDA, subtract the remaining debt, and you have exit equity value.
   5. 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.
   6. 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.

2. 052How do you drive returns in an LBO?LBOIntermediatetechnicalCenterview PartnersInvestment Banking · Menlo Park · 2025TPTPGInvestment 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

   1. 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.
   2. 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.
   3. 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.
   4. 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.
   5. 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.

3. 053A PE firm bought a company for $1,000 and sold it for $1,000. How did they make money?LBOIntermediatetechnicalTD 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

   1. Entry: $1,000 enterprise value, $700 debt, $300 sponsor equity.
   2. Over the hold, the company's free cash flow after interest pays down $300 of debt. Nothing else changes.
   3. Exit: $1,000 enterprise value less $400 remaining debt equals $600 of equity.
   4. That is 2.0 times the money. Over five years it is roughly a 15 percent IRR.
   5. 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.

4. 057What makes a good LBO candidate?LBOCoretechnicalWPWarburg PincusPrivate Equity · San Francisco · 2014GSGuggenheim SecuritiesHealthcare · London · 2026

   Say this

   Predictable, recurring cash flow that can service debt, low capital intensity, a defensible market position, an identifiable operational improvement, and a credible exit. Cash flow stability matters more than growth.

   Then walk it

   1. Stable cash flow first, because the debt has to be serviced whatever happens. Contracted or subscription revenue, low cyclicality, sticky customers.
   2. Low CapEx, because every dollar into maintenance is a dollar not repaying debt.
   3. Strong market position and real barriers to entry, so margins survive the hold period without the company needing to outspend rivals.
   4. A visible value-creation lever: an underinvested sales function, a bloated cost base, a fragmented sector that supports a bolt-on strategy, or a non-core division to divest.
   5. And an exit that is not hypothetical. A deep strategic buyer list, or a peer set that trades publicly at a decent multiple. The best entry price in the world is worthless if nobody will buy it from you in five years.
   6. Conversely, the anti-candidate is a high-growth, cash-burning, cyclical business with heavy CapEx. It can be a great investment and a terrible LBO.

   Where candidates lose it

   Saying 'high growth' near the top of your list. Growth consumes cash and cash service is the constraint. Venture-style growth is the opposite of what an LBO needs, and saying so shows you understand why the structure exists.

   Expect next

   • Tell me about a company you like. Is it a good LBO candidate?
   • Why is high growth not necessarily good here?
   • What type of company is a good candidate for a dividend recap?

   Reported by candidates at Warburg Pincus (Private Equity, San Francisco, 2014); Guggenheim Securities (Healthcare, London, 2026). Source: Wall Street Oasis.

5. 058What type of company is a good candidate for a dividend recapitalisation?LBOHardtechnicalRothschild & CoInvestment Banking · London · 2026

   Say this

   One that has already deleveraged meaningfully, has very stable cash flow, and has no near-term need for its balance sheet. Typically a sponsor-owned asset two or three years into the hold where the exit has been delayed.

   Then walk it

   1. The mechanical precondition is headroom. The company must have paid down enough debt that re-levering back to its original multiple is still something the credit market will fund.
   2. Cash flow has to be genuinely stable, because you are removing the cushion. Contracted revenue, low cyclicality, low CapEx.
   3. No competing call on capital. If the company needs to fund a plant or an acquisition, the cash should go there instead.
   4. The motivation is almost always sponsor-side: fund life is advancing, the exit window is shut, and the sponsor wants to de-risk and crystallise part of the return. It resets the IRR clock because cash returned early is heavily weighted.
   5. And the honest downside: nothing about the operating business improved. Leverage went back up, the equity cushion is thinner, and if the cycle turns the company is more fragile. Lenders price that, and the covenant package usually tightens.

   Where candidates lose it

   Describing the mechanics but not the motive. This question is really asking whether you understand sponsor incentives and fund life. And you should name the downside, because a banker who pitches a recap without acknowledging the fragility is not credible.

   Expect next

   • How does it affect the sponsor's IRR?
   • Why would lenders agree to it?
   • What happens if the cycle turns afterwards?

   Reported by candidates at Rothschild & Co (Investment Banking, London, 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.