Private Equity interview preparation

Questions

100

Traced to a firm

83

Firms

40

Updated

September 2026

Asked at

All firmsAdvent International6Apollo Global Management6Audax Group6Carlyle Group6EQT6Silver Lake6Vista Equity Partners6WPWarburg Pincus6HIH.I.G. Capital5Oaktree Capital Management5Platinum Equity5TPTPG5General Atlantic4AMAres Management3Blackstone3Clayton Dubilier and Rice3GSGuggenheim Securities3Insight Partners3Invesco3Lazard3Neuberger Berman3NUNuveen3TSTruist Securities3Bain Capital2HWHarris Williams2Kohlberg Kravis Roberts2Millennium Management2Moody's2Rothschild & Co2WBWilliam Blair2Bessemer Venture Partners1Citi1Evercore1FTFranklin Templeton1Houlihan Lokey1HPS Investment Partners1KKR1Mizuho1MSMorgan Stanley1Sycamore Partners1

Topic

All topicsLBO mechanics7Value creation5Returns2Fund economics9Investment judgement18Valuation6Firm knowledge2Credit and financing9Operations4Due diligence8Career and fit11Sector knowledge4Accounting2Deal structuring7Industry knowledge3Brainteasers3

Level

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Type

AnyTechnicalCaseFitMarket viewBrainteaser

1. 028How do you think about leverage levels, and what determines how much debt a business can take?Credit and financingIntermediatetechnicalLazardGeneralist · Amsterdam · 2025

   Say this

   Cash flow, not EBITDA. The test is whether the business can service interest and mandatory amortisation in a downside case with headroom left over. Lenders express that as leverage and coverage multiples.

   Then walk it

   1. The headline metrics: net debt to EBITDA and EBITDA to interest. In a normal market a stable mid-market business might support four to six times, a cyclical one less, a contracted infrastructure asset far more.
   2. But the real constraint is free cash flow after CapEx and working capital. Two businesses with identical EBITDA and different capital intensity support very different debt loads.
   3. Test it in the downside: model a 20 percent EBITDA decline and check whether covenants hold and whether interest is still covered. That downside test is what determines the structure, not the base case.
   4. Sector and cyclicality matter enormously. Lenders will fund a software business with recurring revenue at leverage they would never accept for a construction business.
   5. Market conditions set the ceiling independently of the credit. In a tight market the same business raises a turn or two less, regardless of its quality.
   6. And the sponsor's own judgement: more leverage raises IRR and raises the chance of losing the equity entirely. The optimisation is not maximum debt, it is the level that survives the downside you can actually imagine.

   Where candidates lose it

   Answering purely in EBITDA multiples. The underlying constraint is free cash flow and downside resilience. Naming the covenant test in a stressed case is what makes the answer sound like someone who has underwritten a deal.

   Expect next

   • What is the difference between incurrence and maintenance covenants?
   • How does private credit change what is available?
   • How much cushion would you want in a covenant?

   Reported by candidates at Lazard (Generalist, Amsterdam, 2025). Source: Wall Street Oasis.

2. 058What is the difference between credit and equity investing?Credit and financingIntermediatefirst roundKKRDistressed Debt · New York · 2025Carlyle GroupCredit · New York · 2022

   Say this

   Credit has a capped upside and a fixed claim, so the job is avoiding losses. Equity has unlimited upside and a residual claim, so the job is finding the outcomes that go right. It changes what you spend your diligence on.

   Then walk it

   1. The payoff shape drives everything. A lender's best case is being repaid in full, so the analysis is entirely about the downside: what happens if this goes wrong and do I still get my money back?
   2. Equity is the opposite. Your downside is fixed at your investment, so the analysis weights the upside scenarios and the size of the opportunity.
   3. Diligence differs accordingly. A credit investor focuses on cash flow stability, asset coverage, covenant protection and the downside case. An equity investor focuses on growth, market position and the value creation plan.
   4. Seniority and control: credit sits ahead in the waterfall and gets contractual protections; equity sits last and gets governance rights. Control in credit is negative, meaning the right to block, while equity control is positive, the right to direct.
   5. Return profile: credit returns are contractual and mostly known at entry, typically high single to low double digits for private credit. Equity returns are uncertain and target 20 percent plus.
   6. And the crossover that makes distressed interesting: in a restructuring the fulcrum creditor converts into the equity, so a credit investor becomes an owner. That is why the two skill sets overlap at the distressed end.

   Where candidates lose it

   Describing seniority only. The examinable insight is that the asymmetric payoff changes what you diligence and how you think, and the distressed crossover is what makes the answer sound like someone who understands both.

   Expect next

   • Which would you rather do and why?
   • How does that change what you look at in diligence?
   • What is the fulcrum security?

   Reported by candidates at KKR (Distressed Debt, New York, 2025); Carlyle Group (Credit, New York, 2022). Source: Wall Street Oasis.

3. 074How would leverage change if the business were cyclical rather than stable?Credit and financingIntermediatetechnicalNUNuveenLeveraged Finance · Chicago · 2019

   Say this

   Materially lower, and sized against trough EBITDA rather than current EBITDA. A cyclical business at five times peak earnings can be at nine times in a downturn without anything else changing.

   Then walk it

   1. The arithmetic: if EBITDA falls 40 percent in a downturn, leverage of five times at the peak becomes over eight times at the trough purely through the denominator. Covenants set against peak earnings breach automatically.
   2. So you underwrite to the trough: what did EBITDA do in the last downturn, and can the structure service interest at that level with headroom?
   3. Practically that might mean three times for a cyclical where a stable business supports five and a half, plus a wider covenant cushion of 30 to 35 percent rather than the standard 25 to 30.
   4. You also want more liquidity: a larger undrawn revolver, more cash on the balance sheet, and lower mandatory amortisation so the fixed cash burden is smaller in a bad year.
   5. The cost structure interacts with this. A cyclical business with high fixed costs is far worse than one with variable costs, because EBITDA falls faster than revenue.
   6. And the exit risk compounds it: cyclicals trade at low multiples at the peak and you cannot sell at the trough, so the hold period is less controllable. That is a real reason sponsors underweight deep cyclicals despite the apparent value.

   Where candidates lose it

   Answering with a lower multiple but no reason. The mechanism is that leverage is a ratio and the denominator collapses, so covenants set against current EBITDA breach without any operational failure. Say that explicitly.

   Expect next

   • What covenant cushion would you want?
   • How do you find the trough EBITDA?
   • How does that change the exit plan?

   Reported by candidates at Nuveen (Leveraged Finance, Chicago, 2019). 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.