Private Equity interview preparation

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September 2026

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1. 082What is the difference between an asset deal and a share deal, and which would a sponsor prefer?Deal structuringIntermediatetechnicalMSMorgan StanleyInvestment Banking · Hong Kong · 2025

   Say this

   Buyers prefer asset deals for the tax step-up and the ability to leave liabilities behind; sellers prefer share deals for a single layer of tax and a clean exit. Most sponsor deals end up as share deals with indemnity protection instead.

   Then walk it

   1. Asset deal: you choose the assets and liabilities you take, and you get a stepped-up tax basis you can depreciate, which is a real cash tax shield.
   2. Share deal: you take the entity whole, with its history, its liabilities and its existing tax basis. Simpler mechanically, riskier legally.
   3. The seller's tax position usually decides it. A corporate seller in an asset deal can face tax at the entity level and again on distribution, which is why they resist. An individual seller often gets capital gains treatment on a share sale.
   4. Practical friction: asset deals require every contract, licence, permit and employee to be transferred or novated, and some consents cannot be obtained. For a business with thousands of customer contracts that is often prohibitive.
   5. So in practice most sponsor transactions are share deals, and the buyer manages the inherited liability risk through warranties, indemnities, specific escrows and warranty and indemnity insurance rather than through structure.
   6. The middle ground in the US is a 338(h)(10) or 336(e) election, which treats a share sale as an asset sale for tax while avoiding the contractual transfer problem. The tax cost to the seller is usually shared through the price.

   Where candidates lose it

   Stating the preferences without explaining that practicality usually overrides them. Most large deals are share deals despite the buyer preferring assets, and knowing why, plus the 338(h)(10) workaround, is what makes the answer complete.

   Expect next

   • How do you quantify the value of the step-up?
   • How do you protect against inherited liabilities in a share deal?
   • What is a 338(h)(10) election?

   Reported by candidates at Morgan Stanley (Investment Banking, Hong Kong, 2025). 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.