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Practical LBO Interview Questions for Finance
New
< 100
Times solved
Intermediate
Difficulty
This set of questions helps you apply key LBO concepts in practical, realistic interview scenarios. You'll explore how leveraged buyout logic is used to assess deal structures, compare financing options, and evaluate the impact of working capital changes, covenants, and dividend recapitalizations on investor returns.
In total, walking through this set in an interview would take approximately 35 minutes, making up around 70% of a typical 45-minute interview. Below, you’ll find model answers for each question, along with tips for the interviewer on what to look for in candidate responses.
Can you give a real-life example or analogy to explain how an LBO works?
How is the balance sheet adjusted in an LBO?
Why are goodwill and other intangibles created in an LBO, and what do they represent?
How does working capital affect cash flow in an LBO, and why should investors care?
Do you need to project all three financial statements in an LBO model?
In a leveraged buyout, the target company typically takes on significant debt. How does this create a tax benefit, and why is it important for the investment case?
What actions can an investor take to boost his own returns in an LBO?
What is a dividend recapitalization, and why might the PE firm use it in an LBO?
How does a dividend recapitalization show up across the three main financial statements?
To limit risk in an LBO, lenders use covenants. How do maintenance and incurrence covenants differ, and when does each apply?
Why would an investor favor incurrence-based covenants?
Why might an investor buy a company in a “risky” industry like tech, and how can a deal still be attractive in this context?
< 100
Times solved
Intermediate
Difficulty
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