The private equity recruitment process is notoriously competitive, with top firms receiving thousands of applications for a limited number of positions. For example, Blackstone reports an acceptance rate of just 0.3%, with 62,000 applicants vying for only 169 positions. Similarly, KKR’s acceptance rate is under 1%.
Given these numbers, it’s clear that standing out in the selection process demands thorough preparation, especially for the technical interview. The technical interview is crucial because it evaluates your ability to assess investments, build financial models, and make data-driven decisions — skills essential for success in the industry.
This article offers 30 of the most common private equity technical interview questions and answers to help you prepare.
Key skills evaluated in technical interviews
Preparing for a private equity interview means being ready to showcase a range of technical skills that prove your ability to analyze deals, build models, and think like an investor. Below is a list of the most common technical skills assessed during the process:
- Financial modeling. Private equity investors and finance professionals must be skilled in building models like leveraged buyouts (LBOs), discounted cash flow (DCF), and integrated three-statement models to assess cash flows, capital structure, and the internal rate of return (IRR).
- Accounting. Understanding how financial statements interact is critical. Investors need to know how depreciation, non-cash items, and leverage affect the company’s profitability and cash flow to assess financial health accurately.
- Valuation methods. Private equity firms use metrics like enterprise value, equity value, and earnings before interest, taxes, depreciation, and amortization (EBITDA) multiples for valuation. Investors must be comfortable with comps, precedent transactions, and applying adjustments based on market conditions or growth potential.
- Excel proficiency. Excel is the primary tool for financial modeling and analysis. Candidates should demonstrate advanced skills in Excel, including using complex formulas, pivot tables, and macros to build models, analyze data, and present findings efficiently.
- Private equity fundamentals. Key knowledge includes capital structure, deal structuring, and rollover equity, all of which help align incentives between investors and management. Understanding different deal types is also crucial, as it helps determine the most appropriate investment strategy.
- Strategic analysis. Candidates must be able to evaluate a business model, assess a company’s projected growth, and analyze the strength of the management team.
- Market analysis. Analyzing market trends and competition helps assess an investment’s viability. Candidates should be able to evaluate economic conditions, consumer behavior, industry trends, and regulatory factors to understand how these impact potential acquisitions.
- Due diligence. Due diligence is a comprehensive investigation into a company’s operations, financials, and risks. Candidates should be able to identify key areas to evaluate during due diligence, such as financial health, legal risks, and operational performance, to ensure the investment aligns with the firm’s goals.
30 common private equity technical interview questions
Unlike investment banking interviews, where the focus is often on technical skills, deal experience, and the ability to work under pressure, private equity interviews emphasize strategic thinking, financial modeling, and assessing long-term value creation.
To help you prepare, we’ve compiled a list of common private equity interview questions that cover key concepts and test your ability to think like an investor.
1. Accounting
These questions assess your understanding of financial statements, helping firms determine whether you can evaluate a company’s financial health. A strong grasp of accounting helps you evaluate companies effectively, which is essential when assessing potential investments.
- Walk me through the three financial statements.
An income statement shows profitability, a balance sheet shows financial position, and a cash flow shows liquidity over a period.
- How does a $10 increase in depreciation affect the three financial statements?
A $10 increase in depreciation reduces net income on the income statement by $10, adds back $10 to operating cash flow on the cash flow statement, and decreases both assets and retained earnings by $10 on the balance sheet.
- How do the three financial statements link together?
Net income flows from the income statement to the balance sheet via retained earnings and to the cash flow statement as a starting point.
- What is working capital, and why is it important?
Working capital is the difference between current assets and liabilities, and it indicates a company’s ability to cover short-term obligations.
- What are deferred tax assets and liabilities?
Deferred tax assets are future tax reductions, while deferred tax liabilities are taxes owed later due to timing differences.
- A company has had positive EBITDA for years but just filed for bankruptcy. Why?
High interest expense, large debt maturities, or lack of cash despite earnings.
- Say you know a company’s net income. How do you calculate cash flow?
Add back non-cash expenses like depreciation and adjust for changes in working capital and any cash flows from financing and investing activities.
- What is goodwill and how does it impact financials?
Goodwill arises in acquisitions and is tested for impairment. It doesn’t amortize but can reduce net income if written down.
2. Finance and valuation
In these questions, you’ll be asked about valuation techniques. They’re designed to test your ability to assess the worth of a business. Valuation is key in private equity because you need to know how much to pay for a company and whether it’s a good investment.
- Why might a company issue debt instead of equity?
To retain control, avoid diluting ownership, and benefit from tax deductions on interest payments.
- What are the limitations of a DCF model?
It relies heavily on assumptions and forecasts, making it sensitive to errors in growth rates and discount rates.
- Rank the valuation methods by value.
1) Precedent transactions, 2) Comparable company analysis, 3) DCF (depending on context).
- What’s the difference between enterprise value and equity value?
Enterprise value includes debt and equity, representing the total value of a company, while equity value represents the value attributable to shareholders.
- What is WACC and how is it used?
Weighted average cost of capital (WACC) is the average rate of return a company must pay to finance its operations, used as a discount rate in DCF models.
- What does excess cash mean for a company?
Excess cash refers to funds not required for daily operations, which may be used for investments, acquisitions, or returned to shareholders.
- What factors impact bond yields?
Interest rates, credit risk, inflation expectations, and supply and demand for bonds.
3. Leveraged buyout (LBO)
Leveraged buyout questions focus on your understanding of how private equity firms acquire companies using a mix of debt and equity. These questions are asked because LBOs are one of the most common strategies used in private equity. Firms want to know if you can structure deals, calculate returns, and understand how leverage impacts a company’s financials.
- What is a leveraged buyout?
The acquisition of a company uses a significant amount of debt to finance the purchase, with the target’s assets often used as collateral.
- Walk me through a basic LBO model.
In a basic LBO model, the PE firm uses debt financing and equity to acquire a company. It then forecasts cash flow, calculates interest payments, and determines how to pay down the debt over time to achieve returns.
- What makes a company a good LBO target?
Good buyout targets have strong cash flows, low capex, reliable management, and undervalued assets.
- What affects the IRR in an LBO?
The IRR in an LBO is affected by the purchase price, exit price, holding period, leverage level, and operational performance.
- How does a PE firm boost returns in an LBO?
Boosting returns is achieved by improving operational efficiency, increasing revenue, cutting costs, and reducing debt through strong cash flow generation.
- What’s the difference between senior debt and subordinated debt?
Senior debt has priority during liquidation and typically carries lower interest rates, while subordinated debt is riskier, with higher interest rates, and is paid after senior debt in liquidation.
4. M&A
Mergers and acquisitions (M&A) are a key part of private equity, and firms ask these questions to determine if you can assess potential deals, understand strategic fit, and identify the risks of mergers or acquisitions.
- What are typical M&A synergies?
Cost savings, revenue enhancements, economies of scale, and improved market access.
- What are the key terms in a purchase agreement?
Purchase price, payment structure, representations and warranties, closing conditions, and indemnities.
- What makes a merger risky?
Cultural clashes, integration challenges, overvaluation, regulatory issues, or unforeseen financial difficulties.
5. Modeling
These questions test your ability to build financial models, often for a company’s future performance or an acquisition. Modeling is critical in private equity because it helps to predict future cash flows, assess risk, and structure financing. Your ability to build accurate models reflects your ability to analyze data and make informed investment decisions.
- Walk me through a merger model.
Start by projecting the financials of both companies, then combine them, adjusting for purchase price, synergies, and financing. Next, calculate the accretion or dilution to earnings per share (EPS) and analyze the impact of the transaction on the combined company’s financials.
- How do you build a DCF model?
Project a company’s free cash flows for a forecast period and calculate the terminal value using perpetuity or exit multiple. Then, discount the cash flows and terminal value back to the present using the WACC.
- What inputs are most sensitive in a financial model?
Revenue growth rates, terminal growth rates, operating margins, interest rates, capital expenditures, and EBITDA growth.
6. Market and strategy
These questions evaluate your understanding of market trends and strategic decision-making. Private equity firms want to see if you can think strategically about a company’s growth and value creation.
- What does the current yield curve indicate?
As of April 9, 2025, the 10-year U.S. Treasury yield is 0.43% higher than the 2-year yield, indicating a positively sloped yield curve, which typically suggests economic growth expectations.
- What happened in markets recently?
Markets experienced significant volatility due to President Trump’s announcement of a 90-day tariff pause, leading to a dramatic rally followed by declines in stock futures.
- What role does the company’s management team play in PE investments?
It plays a critical role, as their track record, strategic vision, and operational expertise are essential for successful execution.
Continue your preparation with other private equity interview questions for further insights.
Preparing for technical questions in PE interviews
To succeed with PE technical interview questions, preparation is essential. The best candidates combine technical knowledge with strong communication and a genuine understanding of the private equity industry.
Here are the key preparation steps:
- Master financial modeling. Learn LBO, DCF, and three-statement modeling in Excel. Practice with case studies and public company data.
- Strengthen accounting skills. Understand how income statements, balance sheets, and cash flow statements are linked. Practice explaining these concepts clearly.
- Study private equity concepts. Review capital structure, purchase price allocation, rollover equity, excess cash, and dividend recapitalization.
- Review technical questions. Practice private equity technical interview questions and sample answers, focusing on logic, not memorization.
- Practice case studies. Simulate investment memos and presentations. Analyze business models, financial health, and strategic rationale.
- Research the firm. Understand their portfolio companies, industry focus, track record, and firm values. Be prepared to answer, “Why this firm?”
What to expect after
After completing the technical portion of the private equity interview process, candidates can expect additional interview rounds that explore both technical and soft skills.
Here’s what typically follows:
- Case study presentations. You may be given a Confidential Information Memorandum (CIM) and asked to assess a target company’s financial health, revenue growth, and investment viability.
- Meetings with senior team members. These assess your fit with the firm’s culture and how you align with their values and long-term goals.
- Behavioral and fit interviews. Focus shifts from technical knowledge to strategic thinking, communication, and team compatibility.
- Additional modeling tests. In some firms, extra LBO or financial modeling tasks may be required.
- Reference checks and team interactions. The final steps often include conversations with potential colleagues and checking professional references.
To dive deeper into the private equity recruiting process, check out our article on the private equity recruiting timeline.
Key takeaways
- Private equity recruitment is highly competitive, with firms receiving thousands of applications for a few positions, making preparation for the technical interview questions essential.
- Technical interview questions for private equity include categories like accounting, finance and valuation, LBOs, M&A, modeling, and market.
- Strong financial modeling skills, particularly in LBO and DCF models, are critical for success in technical interview questions for private equity.
- Valuation techniques like comparable company analysis, precedent transactions, and DCF are crucial in private equity, as they help determine the value of a potential investment.
- Knowledge of M&A processes, due diligence, and how leveraged buyouts work is vital, as these are central to private equity investment strategies.
