Private Equity Case Interview: Step-By-Step Guide (2024)

Private equity case interview


If you have an upcoming private equity case interview and are feeling stressed, overwhelmed, or unsure of what to do, we have you covered.

 

Private equity case interviews are a common type of case given in consulting interviews in addition to market entry case interviewsgrowth strategy case interviewsM&A case interviewspricing case interviewsoperations case interviews, and marketing case interviews.

 

Fortunately, private equity case interviews are fairly straight forward. They are very predictable and all cases generally follow the same steps to solve.

 

In this comprehensive article we’ll cover:

 

  • What is a private equity case interview?

 

  • Why do consulting firms give private equity case interviews?

 

  • How to solve a private equity case interview

 

  • Private equity case interview framework

 

  • Private equity case interview examples

 

  • Private equity case interview vs. M&A case interview

 

  • Recommended private equity case interview resources

 

If you’re looking for a step-by-step shortcut to learn case interviews quickly, enroll in our case interview course. These insider strategies from a former Bain interviewer helped 30,000+ land consulting offers while saving hundreds of hours of prep time.

 

What is a Private Equity Case Interview?

 

A private equity case interview situates you in a business situation where you are helping a private equity firm decide whether or not to acquire a company to add to their portfolio.

 

For those that are unfamiliar with what private equity is, private equity firms are investment management companies that specialize in making investments in privately held companies or in public companies that they plan to take private.

 

This type of investment is called private equity because it involves investments made in privately held companies in contrast to publicly traded companies, which have shares that can be traded on public stock exchanges. However, private equity firms can also buy out a public company and take that company private.

 

Private equity firms raise capital from investors, including pension funds, endowments, and high-net worth individuals.

 

These private equity firms then identify potential companies to acquire or invest in, performing a thorough due diligence to ensure that the investments they make are attractive and will generate a high return on investment for their investors.

 

In a private equity case interview, you will be conducting a due diligence on a company that has been identified as a potential acquisition target.

 

The value that private equity firms provide include:

 

  • Providing capital to companies that need funding for growth and expansion

 

  • Bringing expertise and resources to help improve operational efficiency

 

  • Providing strategic guidance and advice for business strategy and market positioning

 

  • Providing access to an extensive network of industry contacts, potential customers, suppliers, distributers, retailers, and other stakeholders

 

  • Using financial engineering techniques to optimize capital structure, including restructuring debt, recapitalizing the company, or implementing tax-efficient strategies

 

Why do Consulting Firms Give Private Equity Case Interviews?

 

Consulting firms give private equity case interviews because they closely simulate what private equity work at the firm looks like. If candidates can do well on a private equity case interview, they’ll likely succeed doing private equity due diligences for actual clients.

 

Case interviews in general are a way for consulting firms to assess whether candidates have the skills and capabilities to succeed in consulting.

 

In just a 30 to 45-minute case interview, interviewers can assess a variety of different skills that are critical to management consulting. Skills assessed in a case interview include:

 

Logical and structured thinking: Consultants need to be organized and methodical in order to work efficiently.

 

  • Can you structure complex problems in a clear, simple way?

 

  • Can you take tremendous amounts of information and data and identify the most important points?

 

  • Can you use logic and reason to make appropriate conclusions?

 

Analytical problem solving: Consultants work with a tremendous amount of data and information in order to develop recommendations to complex problems.

 

  • Can you read and interpret data well?

 

  • Can you perform math computations smoothly and accurately?

 

  • Can you conduct the right analyses to draw the right conclusions?

 

Business acumen: A strong business instinct helps consultants make the right decisions and develop the right recommendations.

 

  • Do you have a basic understanding of fundamental business concepts?

 

  • Do your conclusions and recommendations make sense from a business perspective?

 

Communication skills: Consultants need strong communication skills to collaborate with teammates and clients effectively.

 

  • Can you communicate in a clear, concise way?

 

  • Are you articulate in what you are saying?

 

Personality and cultural fit: Consultants spend a lot of time working closely in small teams. Having a personality and attitude that fits with the team makes the whole team work better together.

 

  • Are you coachable and easy to work with?

 

  • Are you pleasant to be around?

 

Consulting firms typically charge anywhere from 20-50% higher rates for private equity work compared to other types of consulting work. Therefore, consulting firms are always trying to sell more private equity work and really value candidates that show the potential to do private equity diligences.

 

Showing competency during a private equity case interview will make you a highly attractive candidate.

                                              

How to Solve a Private Equity Case interview

 

Although the exact industry or company that you will do a due diligence on during a private equity case interview will vary, all private equity cases typically follow the same five steps.

 

Once you have done a few private equity cases, you’ll quickly notice this pattern and be able to take your learnings from your previous cases and apply them to future private equity case interviews.

 

1. Understand the goal of the acquisition

 

The first step of any private equity case interview is to understand what is the goal of the acquisition. Only once you understand the goal or objective can you start to evaluate whether the acquisition or investment makes sense.

 

There are a number of different reasons why a private equity firm may want to acquire or invest in a company:

 

  • Potential for growth: Private equity firms may target companies that have strong growth potential, including the potential to expand into new markets, introduce new products or services, or for increasing market share in existing markets

 

  • Operational improvement: Private equity firms often specialize in operational optimization and efficiency. They may target companies with underperforming operations or inefficient processes to implement changes to improve profitability and performance

 

  • Strategic fit: Private equity firms may pursue investments that align with their overall investment thesis or strategic objectives. This includes investing in companies that complement their existing portfolio holdings or fill a gap in industry coverage

 

  • Turnaround opportunities: Private equity firms may also specialize in turning around distressed companies that are facing significant financial challenges or difficulties. They may see an opportunity to acquire a distressed company at a heavily discounted price

 

  • Market timing: Private equity firms may also opportunistically invest in companies based on market conditions, lower than average valuation multiples, or industry trends. They may see attractive opportunities during periods of economic downturns or industry consolidation

 

2. Create a framework

 

The next step to solving a private equity case interview is to create a framework to guide your due diligence.

 

A case interview framework is a tool that helps you structure and break down complex problems into smaller, simpler components. You can think of a framework as brainstorming different ideas and organizing them into different, neat categories.

 

Instead of answering the overall question of whether the acquisition should be made, a framework can break up this large question into a few smaller, more manageable ones:

 

  • Is the market that the acquisition target in attractive?

 

  • How does the company perform relative to its competitors?

 

  • Does the private equity firm have the skills or expertise to improve or turn around this company?

 

  • Are there synergies that can be realized from this acquisition with other companies in the private equity firm’s portfolio?

 

  • What are the major risks of this investment?

 

  • What is the expected return on investment?

 

As you can see, using a framework helps you break down an ambiguous and daunting due diligence task into several more manageable steps.

 

3. Develop a hypothesis

 

Once you have developed a great framework to help you solve the private equity case, the next step is to develop a case interview hypothesis.

 

Based on the limited information that you have, what is your preliminary hypothesis on whether the company should be acquired?

 

Hypotheses are used in case interviews, as well as in consulting, because they are a very efficient way to solve problems. A hypothesis helps you focus your attention on the issues that matter most in developing a recommendation.

 

Many candidates find it challenging and intimidating to develop an initial hypothesis with very limited information. However, don’t be discouraged from this.

 

Know that it is completely acceptable for your initial hypothesis to be wrong.

 

Remember, the goal of coming up with an initial hypothesis is to help guide your analysis and discussion towards the right direction. You can think of your hypothesis as a strawman that you will either build support for or reject.

 

Your hypothesis will help you decide on an area of your framework to tackle first.

 

4. Build support for a recommendation

 

Now that you have a hypothesis for your private equity case interview, it is time to start building support for it or rejecting it.

 

As with any other type of case interview, you’ll likely need to do both case math as well as have qualitative discussions with the interviewer to discover more information and uncover key insights.

 

It is important that throughout the case, you are keeping track of all of the new information presented to you. It will be especially important to keep track of the major insights or key takeaways from each question that the interviewer asks you.

 

Keeping track of the major insights or key takeaways will make it significantly easier to develop a final recommendation at the end of the private equity case interview.

 

5. Deliver a recommendation

 

The last step in a private equity case interview is to develop a recommendation and present it to the interviewer.

 

Developing an ultimate recommendation is difficult because it requires you to review all of the work that you have done so far in the case interview and synthesize and distill all of it into just the most important points or takeaways.

 

You’ll also likely need to exercise business judgment to determine whether you should recommend acquiring the company or passing on the investment opportunity.

 

It is completely acceptable to ask the interviewer for a few minutes of silence so that you can collect your thoughts and deliver your recommendation in a clear, concise, and confident way.

 

When delivering your recommendation, make sure that you start with your recommendation first. Then, present the reasons or evidence that supports your recommendation. Finally, end by discussing potential next steps that you would look into if you had more time.

 

You don’t want to start your recommendation by summarizing all of your work and then stating a recommendation at the very end of your presentation.

 

This makes your recommendation excessively long and potentially unclear and confusing because the interviewer won’t know which way you are leaning towards until the very end.

 

Private Equity Case Interview Framework

 

The framework that you develop for your private equity case interview is the most important step of solving a private equity case interview.

 

Having a comprehensive and robust framework will make solving any private equity case interview easier. On the other hand, having an incomplete and poorly thought out framework will make solving the case significantly more challenging.

 

While you should not resort to purely memorizing frameworks for case interviews, there is a single framework that we recommend all candidates become familiar with. Many of the components of this private equity case interview framework can be applied to nearly any private equity case interview.

 

The major components of a private equity framework could include: market attractiveness, company attractiveness, private equity firm capabilities, synergies, financial implications, and risks.

 

  • Market attractiveness: What is the market size of the market that the acquisition target is in? What is the growth rate of that market? How competitive is the market?

 

  • Company attractiveness: What is the financial performance of the acquisition target? What are their key strengths or competitive advantages? What are their weaknesses?

 

  • Private equity firm capabilities: Does the private equity firm have expertise in the industry or market that the acquisition target is in? Does the private equity firm have the capabilities or resources to improve the company’s performance?

 

  • Synergies: Are there potential revenue synergies that can be realized with other companies in the private equity firm’s portfolio? Are there potential cost synergies that can be realized?

 

  • Financial implications: Is the acquisition price fair? What is the potential return on investment? How long will it take the private equity firm to recoup their initial investment?

 

  • Risks: What are the major risks of this investment? Can these risks be mitigated? What is the likelihood of these risks materializing?

 

An outstanding private equity case interview framework should include at least a few of these components, if not all of them.

 

However, make sure that you are customizing your private equity case interview framework based on the specific pieces of information and nuances of the case that you receive.

 

Private Equity Case Interview Examples

 

Below, we’ve provided examples of several different types of private equity case interviews you could see on interview day.

 

You can find more case interview examples in our articles on case interview examples and practice and MBA casebooks.

 

Private Equity Case Interview Example #1: A private equity firm is interested in acquiring a technology startup with innovative products and a strong customer base. The firm sees significant growth potential in expanding the company's offerings to new markets and leveraging its technology to capture market share. Should they make this acquisition?

 

Private Equity Case Interview Example #2: A private equity firm is considering acquiring a manufacturing company with inefficient operations and high production costs. The firm believes it can implement operational improvements, streamline processes, and reduce costs to enhance profitability and competitiveness. Should they acquire this manufacturing company?

 

Private Equity Case Interview Example #3: A private equity firm that specializes in the healthcare sector is evaluating the acquisition of a pharmaceutical company with a promising drug pipeline. The firm's industry expertise and network could help accelerate the development and commercialization of the company's products. Should they make this acquisition?

 

Private Equity Case Interview Example #4: A private equity firm wants to expand its presence in the consumer goods industry and is looking to acquire a well-established retail brand with a loyal customer base. The acquisition would complement the firm's existing portfolio and provide synergies in distribution, marketing, and brand positioning. Should they acquire this retail brand?

 

Private Equity Case Interview Example #5: A private equity firm has identified a target company with substantial real estate assets and a strong cash flow from its core business. Should they make this acquisition?

 

Private Equity Case Interview Example #6: A private equity firm that specializes in distressed investing is interested in acquiring a struggling automotive supplier facing liquidity challenges. The firm sees an opportunity to stabilize the business, renegotiate contracts, and implement cost-saving measures to return the company to profitability. What price should they bid for this potential acquisition?

 

Private Equity Case Interview Example #7: A private equity firm has recognized a favorable market opportunity in the renewable energy sector and is considering the acquisition of a solar power company with a competitive cost structure and strong growth prospects. The firm aims to capitalize on increasing demand for clean energy solutions and government incentives. What is the most the private equity firm should bid on this solar company?

 

Private Equity Case Interview Example #8: A private equity firm is evaluating the acquisition of a software company with a differentiated product offering and a growing customer base. The firm plans to invest in scaling the business and increasing market penetration, with the ultimate goal of exiting through a strategic sale or IPO to realize significant returns for its investors. How much should the private equity firm acquire this software company for?

 

Private Equity Case Interview vs. M&A Case Interview

 

Although private equity case interviews and M&A case interviews share many similarities, specifically that both are case interviews that involve deciding on whether to make an acquisition, there are some notable differences.

 

1. Long-term vs. short-term perspective

 

Private equity case interviews typically have a longer-term investment horizon since private equity firms may hold onto an investment for 5 to 10 or more years before selling. They are not heavily concerned with exactly how well the investment will perform in the first few years because they have a longer time horizon.

 

In contrast, for M&A case interviews, there is generally an expectation that a merger or acquisition will provide immediate tangible benefits to the company and shareholders.

 

2. Reasons for the acquisition

 

For private equity case interviews, candidates are often asked to develop an investment thesis for a potential acquisition. They will need to articulate why the target company represents an attractive investment opportunity and how the private equity firm can create value from the investment.

 

This may include identifying growth drivers, operational improvement opportunities, and synergies that can be realized with the existing portfolio.

 

In contrast, for M&A case interviews, candidates mainly focus on understanding the rationale behind a potential acquisition, including strategic fit, synergies, and market dynamics.

 

3. Different risk factors

 

In both private equity and M&A case interviews, candidates will need to give thought behind the potential risks of the acquisition. However, the major risks for a private equity firm making an acquisition vs. a company making an acquisition differ slightly.

 

For private equity acquisitions, major risks include: market risks, competitive threats, and execution risks. In contrast, for a merger or acquisition, major risks include company integration risks, legal risks, and regulatory compliance.

 

4. Exit strategies

 

Private equity case interviews often emphasize the importance of exit strategies since private equity firms typically aim to realize returns for their investors within a specific timeframe.

 

Therefore, for private equity case interviews, candidates may be asked to evaluate potential exit options, such as strategic sales, IPOs, and secondary buyouts. They may be asked to assess the timing and feasibility of each option.

 

For M&A case interviews, candidates may need to consider potential exit scenarios, such as divestiture or spin-offs, but the focus may be less on maximizing financial returns and more on strategic objectives.

 

Recommended Private Equity Case Interview Resources

 

To prepare for private equity case interviews as well as all other types of case interviews, we recommend the following resources:

 

  • Comprehensive Case Interview Course (our #1 recommendation): The only resource you need. Whether you have no business background, rusty math skills, or are short on time, this step-by-step course will transform you into a top 1% caser that lands multiple consulting offers.

 

  • Hacking the Case Interview Book (available on Amazon): Perfect for beginners that are short on time. Transform yourself from a stressed-out case interview newbie to a confident intermediate in under a week. Some readers finish this book in a day and can already tackle tough cases.

 

  • The Ultimate Case Interview Workbook (available on Amazon): Perfect for intermediates struggling with frameworks, case math, or generating business insights. No need to find a case partner – these drills, practice problems, and full-length cases can all be done by yourself.

 

 

  • Behavioral & Fit Interview Course: Be prepared for 98% of behavioral and fit questions in just a few hours. We'll teach you exactly how to draft answers that will impress your interviewer