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

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1. 048What is an earnout and when would you use one?Deal structuringIntermediatetechnicalMiddle-market private equityM&A

   Say this

   Deferred consideration contingent on the business hitting agreed targets. You use it to bridge a valuation gap when the buyer does not believe the seller's forecast and the seller will not accept a lower price.

   Then walk it

   1. The mechanism: part of the price is paid at closing and the rest depends on performance over one to three years, usually against revenue or EBITDA targets.
   2. It resolves genuine disagreement. The seller says growth will continue; the buyer is sceptical. An earnout lets each be paid according to what actually happens.
   3. It also retains the seller, which matters most in founder-led and people-dependent businesses where the relationships walk out of the door.
   4. The problems are well known. Revenue-based earnouts incentivise selling at any margin. EBITDA-based earnouts create arguments about cost allocation, because the buyer now controls the accounting. Integration is often delayed to keep the earnout measurable, which destroys value.
   5. So the documentation has to be very precise: exactly how the metric is defined, what the buyer may and may not do during the period, dispute resolution, and treatment on a subsequent sale.
   6. My own view: earnouts solve a negotiation problem and create an operating problem. For a business you intend to integrate immediately, a lower price with no earnout is usually cleaner than a higher price with one.

   Where candidates lose it

   Describing the mechanics without the misalignment problem. The reason experienced buyers dislike earnouts is that they constrain what you can do with the business during the period, and that is the answer worth giving.

   Expect next

   • Revenue or EBITDA based, and why?
   • What if the buyer wants to integrate immediately?
   • How would you handle a dispute?
2. 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.