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Top 20 Private Equity Interview Questions and Answers - YouTube
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the top 20 watched the video till the
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welcome everyone and today's topic is
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top 20 private equity interview
questions and answers let's try and
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study these ones in our very detailed
format so private equity interview
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questions there are two kinds one is
basics and another ones are the advanced
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questions let me give you a guide on how
things work see every top-notch private
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equity forum divides the interview
question in dual you can say two basic
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types okay the first question is for
everybody it is to understood whether
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the person is really fit for the firm
or not the second type of question is
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incredibly tough here so these questions
helps the interviewer sort out the best
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from the rest so in this tutorial we
will take the top 20 private equity
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interview questions and answers of both
types envy and will guide you there are
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two answers those questions are rightly
let's start with few of the questions
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let's understand them you know step by
step approach the first why are you
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interested
in PE that is private equity and why are
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firm
so this is general private equity
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interview question at a basic level the
interviewer wants to understand how much
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passion and interest you have for the
private equity so for the first
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questions you need to give a sort of a
background of your work and/or
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internships and you can tell the reason
why you have choose chosen to come into
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private equity it will help to structure
the answer before and so that you can
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answer it properly the second part of
the question is all about why our firm
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so it is all about how much do you know
about the about the firm and have your
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goals and the firms goals are in
alignment so to answer these questions
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you need to do your research prior to
the interview and you need to tell them
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that what they already know about the
company the types of the funds they are
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handling the profit margins the client
here the growth plans and so on and so
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forth second sort of question will be
asked to you something like this what do
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you think this company does right
compared to the other ones and what do
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you think we do wrong so it is a trick
question in private equity interview
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shouldn't fall for it first of all no
company ever does anything that is wrong
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so the other they have areas to improve
upon that is what you can say so your
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answer should be very in that similar
lines tell the interview about these
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trends of the company you can say those
those trends of the company and what
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sort of deals it has closed
have it as additive value to its
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clientele and however don't talk about
the improvement areas don't even try
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this
but however make sure you don't talk
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about the in a negative way rather
mentioned subtly about what it can
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improve upon few things about and how it
can improve third why not work for hedge
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fund portfolio company well this is a
trick question in private equity
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interview because through these
questions the interview is trying to
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understand whether you have a real
interest in private equity or you are
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royalty
goal is to exit the private equity and
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join something else here your answer
would be short and to the point
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you tell all the throws of the private
equity company tell all the pros like
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work environment great appears great
fund management and all the cons of the
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hedge fund fire is huge uncertainty and
then then tell the interviewer why you
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are perfect for the private equity also
you can work on some different ways of
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doing things now the fourth question is
how did you help your previous company
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so you can say how how the previous
company how did you help your previous
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company in finding their values the
right values well as a private equity
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professional you should be able to have
a few solid example with you where you
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have helped the previous current company
find value and it can be created
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operation you have created some
operational efficiencies which has saved
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cost on the M&A deal or it can be your
research with the help of the company
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launch new service or product line so
whatever you mentioned make sure it is
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something that you do you have proof of
or where you can have some specific
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numbers to illustrate what you are
speaking let's go to the fifth one what
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makes a great private equity associate
or research or deal maker well private
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equity firms wants three things first to
find new recurring and better investment
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opportunities to make money and to save
more money so as a private equity
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employee your job would be the same and
you would answer these questions by
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telling something in the same line by
finding new and regular opportunities to
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create value delivering on things and
you should you would execute and save
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cost through the research and
operational efficiencies question number
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six what industry trends you will look
at
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when you are looking at potential
investments so in that particular
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scenario this is not exactly a technical
private equity question but for a P
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candidate like you it would be easier to
answer these questions because here's
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what you should focus on while answering
the question first is the market
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position and the competitive analysis
you can write this so before LBO it's
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important to know the market positions
in competitive advantage of the
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potential investment the characteristics
would include things like high entry
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barriers strong customer relationships
and high switching cost second is the
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stable and recurring cash flow so
without continuous and stable cash flow
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low P form would buy an investment made
sure that third multiple drivers to
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trigger growth this one is very crucial
only one driver wouldn't or propel the
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company to an expensive stage more
drivers better diversify Detroit
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strategies and weather a better
execution would be essential for
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long-term growth and last is the strong
management so most of the companies in
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the industry should have strong
management team so that the PE form can
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get a strategy guidance towards better
future so these are the keys that P
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investor would look into ad before
thinking of an LBO other than this he
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would also look at changing habits of
the customers and hands automation
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application of disruptive technologies
and so on and so forth 7 if I would
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like to you can say protect my downside
how old I structure the investment well
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the best way to protect the downside is
to go for structural D even at the latest
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stage of the investment for example in
2010 team SEC invested in GMR energy
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through a structure paper which needs to
compulsory converted into equity
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so they team SEC invested close around
200 million in GMR through its fully
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only subsidy called flame or investment
so this is how we can answer such
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questions
now 8th did you look at your our website or
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what investments
and second is the website part and why
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to answer these questions all you need
to do is to research about the company
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before you ever go for the interview
look at their websites find out about
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the investments and browse through every
possible news about the firm and then
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analyze what you like and what you
didn't like and then make a report which
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can tell them about your preference if
you can explain a little and show them
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the report so they will understand that
you have already done your homework and
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you are very much sincere about this job
9 they can ask you if you can look into
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only one financial statement what would
it be and why this is a basic private
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equity interview question but it is
asked often so most people choose a the
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income statement because of the accrual
accounting method but the most important
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statement to analyze before anything is
in cash flow statement because through
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cash flow statement only you can see the
real picture of how much cash is coming
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in and how much is going out
irrespective of hefty profits and
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revenues ok 10th question if you can
choose the two financial statement what
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they will be in while this is a
variation of the previous question okay
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but the answer to this question would be
completely different the answer would be
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the balance sheet and the income
statement if you have the beginning of
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the year and ending of the your values
of all the items the balance sheet along
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with income statement you can make a
cash flow statement by yourself as
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simple as that ok let's jump to the next
question
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11 how would you verify the information
in a deal
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book given by an investment banker so do
to answer the is a question the private
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equity interview question you need to
have a prior experience in dealing with
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the investment bankers or you should
have asked someone who have dealt with
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an investment bankers he usually you
need to make questioned framework to
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check the information investment banker
has mentioned in the deal book there's a
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book called by an author called Bill
know writing for you the author of the
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mergers and acquisition for dummies has
mentioned that you can begin to ask
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following questions to start reference
second letter if you need to dig deep
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you need to do as well so you can the
questions can be like this did they
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provide you the value that you paid that
you paid for did they maintain the
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integrity very important did they do
what they said or they they would do the
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next question is did they attend all the
meetings they said they would attend
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fourth if the buyer has tried to re
trade the deal how the investment
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bankers have handled it and 5th
without them could you do it on earth
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next 12 how would you handle a
situation where you have a question and
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no one has a answer this is a private
equity interview question which will test
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your emotional agility in an interview
when these questions is asked your
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answer would be brief and to the point
you may say something like this
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according to me everything is figure out
a table let's say no one has an answer
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to the question I have now if we talk
about no one the first thing is who
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these people are these people are
generally the relatives peer groups
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friends family members but what if I can
manage to ask a stranger or an expert so
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in this age of massive connectivity not
getting an answer to a question is
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rarest
things remember us so 13th if your
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investment is increased by let's say
25% and now you have
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let's say $100 how much did they begin
at your first place so it is simple in
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private equity questions in the
interview wants to see how fast you can
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answer it okay make sure you you don't
fall in trap so you can answer it by you
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know if there's a 25 increase on the
principle means 20% increase on
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the principal plus interest so it means
that you have started with bracket 100
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minus another bracket 100 * 20%
close the bracket that's it just
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add an is equal to sign in you have the
answer as 80 okay
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14th what would you prefer lump sum 1
million right now or $2,000 every month
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for the rest of your life see this is a
private equity interview question based
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on your time value of money from the
approach or the time value of money
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$2000 please one wouldn't be
similar in the value of the next year so
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the value of the money will reduce with
time so it's always better to receive
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million dollar right now and then
getting 2000 per month for the
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rest of your life 15 they can ask you do
you think that market for mega like you
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know mega cap is for LBO or M&A is over
so to answer these kind of private
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equity question you need to be thorough
with the current events in your industry
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read up everything you can and ask your
connections what use are there in the
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market and soak up your knowledge as
much as you can so a time was there when
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the industry was ready with a $100
billion they'll be your deals but
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recently this is very infrequent events
you can pick something in you have
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worked on before if you have ever worked
on a mega cap fund an extreme buy that
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isn't it possibly as of now 16 what do
you think or will happen to LBO or the
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M&A markets in the next 10 years well
this is another private equity into
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questions interview question which
requires you to know about the current
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events if you want to get into the
top-notch form learning must be your
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best friend if you are borrowing through
the material related to private equity
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LBO M&A mega cap funds acquisition
financial analysis you would know what
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to see
to this question basically you need to
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give your point of view simple as that
and if you can give an example why you
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are saying this or what you are saying
it would separate you from the crowd 17
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the MNC company have been struggling
with the real estate what would you do
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to break it up or try re renting the
business see you can explain the typical
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hypothetical private equity interview
questions like this you will get this
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all you need to know for answering these
questions is to be informed about any
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important recent event that is happening
the similar industry as simple 18 if you
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have a chance to go after a company yes
would you go after it in why this is
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another typical hypothetical private
equity question if the interviewer is
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talking about company maybe that company
a is the it's in the news remember
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this the interview is just trying to
test you somewhere or the other so if
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you see these companies has a lot of
debt and no possible advantage of course
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you should say no if the company has
decent financial statement but there are
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few operational issues you need to
explain how you would take up the
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challenge 19th if you want to
improve your IRR what different levels
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what different levels can be used this
is a technical private equity question
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you will need to know exact answer here
are some possible levers you can do is
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that you can increase the amount of debt
in big deal and it will increase the
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leverage you can reduce the purchase
price that the private equity company
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has to pay to buy out and you can
increase the company growth rate today
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to enhance the operating income or EBITDA
of the company so this is how the error
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can be you can say improve 20th last what
you ever invest
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would you ever invest in an airline come
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if here's why and if not why see the
answer may vary from person to person
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but airlines aren't very profitable on
the surface level to mention on a
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statistic one of US domestic airlines
have reported negative in net income in
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23 out of 31 years since deregulation
however the passenger airlines have made
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some consistent growth over the years
around 4.9% per year in terms of
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aircraft in 3.6% terms of aircraft seats
but even after all of this an airline is
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very risky investment and it is better
not to get into it so in final
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analysis to crack the interview of our
top notch private equity firm it is a
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very big thing and you need to have a
wide variety of knowledge in the
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financial industry economics mathematics
statistics business management current
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affairs and various other subjects to be
able to answer these questions so the
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idea is to know it all and the above all
- any question will help you to prepare
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the types of the private equity
interview questions and you can expect
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to be asked in and in to prepare hard
and all the very best for your interview
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that's it for this particular topic if
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