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

AnyCoreIntermediateHard

Type

AnyTechnicalCaseFitMarket viewBrainteaser

1. 001Walk me through an LBO.LBO mechanicsCorefirst roundTPTPGInvestment Banking · New York · 2024Advent InternationalTechnology, Media and Telecom · Palo Alto · 2020Advent InternationalPrivate Equity · New York · 2021TSTruist SecuritiesGeneralist · Charlotte · 2024

   Say this

   Buy a business mostly with debt, use its cash flow to pay that debt down, improve the operations, then sell in five years. The equity return comes from deleveraging, EBITDA growth and any change in the exit multiple.

   Then walk it

   1. Entry: agree a purchase price as a multiple of EBITDA, then build sources and uses. Debt goes in as far as the credit market will support, say five times EBITDA, and the sponsor funds the rest plus fees.
   2. Operating model for five years, then the debt schedule: interest, mandatory amortisation, and a cash sweep applying surplus cash to repay debt.
   3. Each year free cash flow after interest reduces debt, so the equity slice grows even with a flat enterprise value.
   4. Exit at an assumed multiple on final-year EBITDA, subtract remaining debt, and that is exit equity.
   5. Compute IRR and money multiple, then attribute the return across the three drivers. An investment committee will always ask which one carries the deal.
   6. The discipline point: if the return only works on multiple expansion, it is not a thesis, it is a market bet. I would want it to clear on deleveraging and EBITDA alone.

   Where candidates lose it

   Describing the mechanics without attributing the return. Every serious LBO answer ends with which of the three drivers produces the IRR and an acknowledgement that multiple expansion is the one you do not control.

   Expect next

   • How does private equity create value?
   • Do a paper LBO for me.
   • What makes a good LBO candidate?

   Reported by candidates at TPG (Investment Banking, New York, 2024); Advent International (Technology, Media and Telecom, Palo Alto, 2020); Advent International (Private Equity, New York, 2021); Truist Securities (Generalist, Charlotte, 2024). Source: Wall Street Oasis.

2. 004Do a paper LBO. EBITDA of $100, bought at 10 times, five turns of leverage, exit at the same multiple in five years with EBITDA at $150.LBO mechanicsHardtechnicalBain CapitalGeneralist · Boston · 2024WPWarburg PincusPrivate Equity · New York · 2014Clayton Dubilier and RicePrivate Equity · London · 2026

   Say this

   Entry equity is $500. With about $250 of debt repaid over five years, exit equity is $1,500 less $250, so $1,250. That is 2.5 times the money and roughly a 20 percent IRR.

   Then walk it

   1. Entry: $100 EBITDA at 10 times is $1,000 enterprise value. Debt at five turns is $500, so the sponsor writes $500.
   2. Cash generation: EBITDA ramps from $100 to $150, averaging about $125. Interest on $500 at 8 percent is roughly $40. Less CapEx of $25, working capital of $5, and cash taxes on EBIT.
   3. That leaves around $50 a year to sweep, so about $250 of debt repaid. Ending debt is $250.
   4. Exit: $150 at 10 times is $1,500, less $250 of debt, equals $1,250 of equity.
   5. Return: $1,250 on $500 is 2.5 times. Using the standard grid, 2.0 times over five years is about 15 percent, 2.5 times is about 20 percent, 3.0 times is about 25 percent.
   6. Attribution: EBITDA grew 50 percent and debt halved, with no multiple expansion assumed. That is the version an investment committee likes, because the return does not depend on the exit market.

   Where candidates lose it

   Reaching for a calculator or chasing decimal precision. Round hard, state every assumption out loud, and know the IRR grid cold. Also announce your interest rate and CapEx assumptions rather than letting them appear silently.

   Expect next

   • What if you exit at 8 times?
   • What return does the fund actually need?
   • How much of that return came from each driver?

   Reported by candidates at Bain Capital (Generalist, Boston, 2024); Warburg Pincus (Private Equity, New York, 2014); Clayton Dubilier and Rice (Private Equity, London, 2026). Source: Wall Street Oasis.

3. 016Walk me through an SPV or holding company model.LBO mechanicsHardtechnicalNUNuveenPrivate Equity · London · 2024

   Say this

   Model the operating asset first, then layer the holding structure on top: cash flows rise from the asset through the acquisition vehicle, paying debt at each level in order, and whatever reaches the top is the sponsor's return.

   Then walk it

   1. Build the asset-level model: revenue, costs, taxes, CapEx and working capital, producing operating cash flow available for debt service.
   2. Then the asset-level or senior debt: interest, amortisation, and the debt service cover ratio. Lock-up tests at this level determine whether cash can move upward at all, which is the key structural feature.
   3. Cash that passes the tests distributes up to the holding company. There it services any holdco debt or shareholder loan, which is structurally subordinated because it sits behind the operating company's lenders.
   4. Whatever remains is distributable to the sponsor, so the equity return is computed on distributions received rather than on accounting profit.
   5. Model the tax and the group structure explicitly: where the deductions arise, whether losses can be surrendered between entities, and withholding on cross-border payments.
   6. The output is an equity IRR on the sponsor's cash flows, with the distribution lock-up tests as the thing to sensitise. In infrastructure especially, a covenant breach does not mean default, it means the cash stops flowing upward, and that alone can destroy the equity return.

   Where candidates lose it

   Modelling it as a single-entity LBO. The distinctive content is structural subordination and the distribution lock-up tests that trap cash at the operating company. Those tests are usually what breaks the equity case.

   Expect next

   • What is structural subordination?
   • What happens if the DSCR test is breached?
   • Why do infrastructure deals use this structure?

   Reported by candidates at Nuveen (Private Equity, London, 2024). Source: Wall Street Oasis.

4. 071Walk me through the sources and uses table for a buyout.LBO mechanicsIntermediatetechnicalTSTruist SecuritiesGeneralist · Charlotte · 2024

   Say this

   Uses is everything you have to pay for; sources is where the money comes from. They must equal, and sponsor equity is the plug that makes them balance.

   Then walk it

   1. Uses: the purchase price of the equity, repayment of existing debt if it is not assumed, transaction fees for advisers and lawyers, financing fees, and cash left on the balance sheet to run the business.
   2. Sources: new senior debt, any subordinated or mezzanine tranche, management rollover equity, seller notes if any, cash already on the target's balance sheet, and finally sponsor equity.
   3. Sponsor equity is calculated last as the difference. That is why raising another turn of debt directly reduces the cheque size and mechanically lifts the equity return.
   4. Two things candidates forget: financing fees, which can be two to three percent of the debt raised and are real cash out, and minimum cash to operate, which is a use not a free resource.
   5. Cash on the target's balance sheet is a source, but only the excess above what the business needs to trade. Treating all of it as available is a common error.
   6. The table is also where the structure becomes visible: the mix of senior, mezzanine and equity, and how much management is rolling, are all read off it in one glance, which is why it is the first page of any investment committee memo.

   Where candidates lose it

   Omitting fees and minimum cash. Both are real uses and both make the equity cheque bigger. And treating the entire cash balance as a source when most of it is working capital the business needs to operate.

   Expect next

   • Where does management rollover sit?
   • How much cash would you leave in the business?
   • What happens to the table if you raise another turn of debt?

   Reported by candidates at Truist Securities (Generalist, Charlotte, 2024). Source: Wall Street Oasis.

5. 072How does purchase accounting work in a buyout, and why does the goodwill matter?LBO mechanicsHardtechnicalLazardInvestment Banking · New York · 2026

   Say this

   The target's assets are written up to fair value, identifiable intangibles are recognised, and whatever is left of the purchase price becomes goodwill. The write-up creates extra depreciation and amortisation, which reduces reported earnings.

   Then walk it

   1. Start with the equity purchase price, add assumed debt, and allocate that total across the target's assets at fair value.
   2. Tangible assets get written up to market value. Identifiable intangibles are recognised separately: customer relationships, technology, trade names, order backlog, each with its own amortisation life.
   3. Whatever cannot be allocated becomes goodwill, which is not amortised but is tested annually for impairment.
   4. The earnings effect: the write-up of tangibles and the new intangibles both generate incremental D&A, which depresses reported net income for years after the deal even though the cash economics are unchanged.
   5. The tax question is what matters commercially. In a stock deal the step-up is usually not deductible, so the extra D&A is a book charge only. In an asset deal or with a 338(h)(10) election, the step-up is tax-deductible and creates a real cash tax shield, which is worth paying for.
   6. Also write off the target's existing goodwill and reset deferred taxes. And note that a deferred tax liability is usually created against the non-deductible write-up, which is a common modelling error to miss.

   Where candidates lose it

   Saying the step-up always creates a tax benefit. It only does in an asset deal or with a 338(h)(10) election. Distinguishing the book effect from the cash tax effect is the entire technical content of the question.

   Expect next

   • When is the step-up actually deductible?
   • What is the deferred tax liability doing there?
   • How does this change your accretion-dilution analysis?

   Reported by candidates at Lazard (Investment Banking, New York, 2026). Source: Wall Street Oasis.

6. 073What is a cash sweep and how does it work in the debt schedule?LBO mechanicsIntermediatetechnicalLeveraged finance

   Say this

   A contractual requirement to use a percentage of excess free cash flow to repay debt early, on top of mandatory amortisation. In the model it is what drives deleveraging beyond the scheduled repayments.

   Then walk it

   1. Order of operations in the schedule: start with cash available for debt service, pay interest, pay mandatory amortisation, then apply the sweep percentage of whatever remains to prepay the term loan.
   2. The sweep percentage is usually stepped: 75 percent of excess cash flow at high leverage, falling to 50 percent and then to zero as leverage ratios come down. That gives the sponsor cash back as the credit improves.
   3. It applies to the term loan, and prepayments are typically applied to the remaining amortisation schedule, which reduces future mandatory payments as well.
   4. Modelling note: the sweep is circular, because interest depends on the debt balance and the debt balance depends on the cash left after interest. Either iterate or use a simple average balance convention and say which you are doing.
   5. Why lenders want it: it forces deleveraging automatically rather than letting the sponsor accumulate cash or pay it out.
   6. Why sponsors resist it: cash swept is cash not available for bolt-on acquisitions or a dividend. Negotiating the step-downs and the carve-outs for permitted acquisitions is a real part of the financing negotiation.

   Where candidates lose it

   Not knowing that the percentage steps down with leverage, or ignoring the circularity in the model. Both are things you only know from having built a debt schedule rather than read about one.

   Expect next

   • How do you handle the circularity?
   • Why would a sponsor negotiate the sweep down?
   • What is a permitted acquisition basket?
7. 087How would you model a bolt-on acquisition inside an existing platform?LBO mechanicsHardtechnicalAudax GroupPrivate Equity · Boston · 2021

   Say this

   Add the target's EBITDA and synergies to the platform, fund it with incremental debt and any equity top-up, then check the pro forma leverage against the credit agreement and the effect on the sponsor's equity return.

   Then walk it

   1. Start with sources and uses for the bolt-on: purchase price at the target's multiple, fees, funded by incremental term loan, revolver drawing, or a sponsor equity contribution.
   2. Add the target's EBITDA plus realisable cost synergies to the platform's consolidated EBITDA. Be conservative on synergies and phase them over 12 to 24 months rather than assuming day-one delivery.
   3. Check pro forma leverage immediately. The credit agreement will have a permitted acquisitions basket and an incurrence test, usually requiring leverage to be no worse than before or below a defined level. If the deal breaches it you need lender consent.
   4. The accretion test: because you buy at six times and the platform is valued at twelve, the deal is immediately value-accretive on a multiple basis. Show that arbitrage explicitly, since it is the core of the strategy.
   5. Then the return effect: model the exit with the enlarged EBITDA at the platform multiple and compare the sponsor IRR with and without the bolt-on. If the sponsor has to fund equity, the timing of that cheque matters for IRR.
   6. And model the integration cost as real cash, because it always is, and it is the line most often omitted.

   Where candidates lose it

   Assuming synergies arrive immediately and forgetting integration costs. Also ignoring the credit agreement: many bolt-ons are constrained not by economics but by what the existing documentation permits.

   Expect next

   • What is a permitted acquisitions basket?
   • How do you phase the synergies?
   • What if it breaches the leverage test?

   Reported by candidates at Audax Group (Private Equity, Boston, 2021). 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.