Private Equity shortly known as PE, refers to financial approach. From here the companies get funds from firms or accredited investors as alternative of stock markets. These PE firms do the direct investments in companies for a long period because many companies are not publicly traded. Here we will see about Private Equity Interview Questions.
Private Equity Interview Questions
This is a rescue fund while growing companies can’t get either public trading or bank loans. So, by the help of private equity firm company get investments directly or indirectly without need for public listing. This fund will get from rich investors, labor unions, insurance companies, university fundings, etc.
List Of Private Equity Interview Questions:
Why to choose Private Equity?
Ans. This question is posed by interviewer to know the behavior of candidate. At this point candidate should give answer by providing background of candidate work (internships) and spill out the interest of candidate over the private equity.
Why private equity firm?
Ans. Answer this by giving knowledge of yours on the firm and how your goals and firm goals are aligned each other. Provide the information of their company like funds handling by them, profit margin of firm, clientele, growth plans and so on. To answer this question in effective way it’s better to do some research work on the firm and company.
What do you think about our company works and what are the wrong steps or wrong procedures followed by us?
Ans. Primarily provide previous works done by the firm, their strengths, what kind of deals they are completed, how it added value to its clientele.
Basically, this is a tricky question from the interviewer because it is posed to know what do you think of their company. So, first of all no company ever does any thing wrong but they have some areas to get improved in. so, just mention about their areas to be improved and how to get improved.
Why don’t you think of working in Hedge Fund/ Portfolio company?
Ans. This question is posed to know the real interest of candidate in private equity.
So, the answer of this question has to short and to the point.
Face this question by telling all the pros of private equity like great workspace and environment, great peers, good fund management, etc.) and all the cons in hedge funs like high risk, large uncertainty, etc. tell how perfect are you for private equity describing along with your skills.
How do you be a great private equity?
Ans. Major requirements of private equity are just 3. They are,
- Searching for new, better investment opportunities.
- Making more money.
- Save more money.
Answer this question by simply by stating them in a line like searching for new, recurring and better investors, making and save more money by providing some plans and by creating some values to them in accomplishment of requirements.
If you want to protect our company’s down side, how would you structure investment?
Ans. By making a structural deal. This structural deal helps to protect the company’s downside even at the large stage of investment. Take a real time example and explain in practical manner from your work or research.
By the answers you have provided I think you have visited our company website, what investment did you liked most? and explain
Ans. To answer this you have to do some research about the company for 5-7 years and closely follow their investments, marketing strategies of their firm. Answer this based on the analysis you have done.
It is good to make a report about the research you have done. Then if you explain the things in short, the interviewer might get impressed about the homework you have done and seriousness about the job.
If you can able to look into only one financial statement, what that statement would be?
Ans. This is a basic question for PE. Majority of people choose to look into income statement. After saying your answer, it is better explained why you have chosen that income statement or what ever statement it is. By following a method called accrual accounting method it is highly important to analyze the cash flow statement than income statement, through the cash flow statement you can able to see the real picture of amount of cash incoming and outgoing not in contact with hefty profits and revenues.
If you can able to look into only two financial statements, what that statement would be?
Ans. Here the answer should be balance sheet and income statement. By the values in beginning of year and ending of the year you can able to make a cash flow statement by yourself. All the values at year beginning and year ending will be from balance sheet and income sheet.
From a deal book how will you verify the information?
Ans. From the work experience only you can answer this PE question.
Because you are much needed to work with investment banker to answer this crucial question or you have to know this from someone who already dealt with investment bankers.
Usually the information like,
- Providing value that you have paid.
- Maintenance of integrity.
- Attendance of meetings.
- How investment banker handled a situation where buyer has tried to re-trade the deal with someone other than you?
What do you think about investing in air lines?
Ans. This answer may get varied from person to person. Basically, airlines are not very profitable on the ground level.
Answer this by providing the statistical point of view for better understanding. US domestic airlines have reported negative net income in 23 out of 31 years since deregulation. However, passenger airlines have made some consistent growth over the years, around 4.9% per year in aircraft and 3.6% in aircraft seats.
But even after all of this, an airline is a very risky investment, and it’s better not to get into it.
In order to crack the PE interview, it’s better to do high analysis and research about the firm or company that you are going to apply. And candidate needed to have high knowledge on market, market strategies, market behavior, investments, business management, current affairs and other subjects to face the interview with ease.
So, these are 10+1 questions that will help you to crack PE interview. Good luck!