How to Walk through a Deal in Private Equity Interviews (and HF)

Deal discussion is probably the most important part of any private equity interview and the conversation usually starts with the interviewer asking you to walk him through the deal. Getting this question right is particularly important because this is the first impression that the interviewer gets about your deal experience and because you use it to set the context for the interviewers to ask follow-up questions. In this article, we’ll show you how to deliver a structured and coherent answer and kick the deal discussion off with a bang.

Note that you should use the structure laid out in this article if you’re interviewing for private equity & hedge fund roles because our framework is designed to highlight your ability to think like an investor. For readers preparing for investment banking interviews, you should follow our other approach.

With that established, let’s get started..

In general, your approach towards this question should be to set the high-level context for your interviewer rather than diving deep into the details. AVOID rambling on. Keep your response between 30-60 seconds. Don’t go beyond 1 minute.

We suggest you structure your answer in 5 parts:

1. Deal Background
2. Your Role
3. Business Description & Financial Parameters
4. Your Perspectives
5. Deal Outcome

Deal Background

Start off your answer by providing the deal background for your interviewer. There are 4 things you should cover in this part:

1. Type of transaction (buy / sell / merger / other)
2. Your bank’s role
3. Who the buyers / sellers are
4. Size of the transaction

Suppose you were the Analyst at Perella Weinberg that worked on the Rue21 LBO transaction. You might say something like the below.

Example: “On this transaction, Perella Weinberg served as financial advisor to the Special Committee of Rue21 on its $1.1 billion sale to Apax Partners.”

Your Role

After you set the context of the transaction, you need to describe your role & contributions on the deal. From the interviewer’s perspective, they don’t know how the work is split up between a first year and a second year analyst or between the industry group analyst and the product group analyst. At the top of their mind is whether you built the model and how involved you were with the diligence. Interviewers need to check the box so do them a favor and address it early on.

Example: “As the sole Analyst on the team, I built the detailed bottom-up 3-statement model, put together our CIM, and was actively involved throughout the diligence process”

Business Description & Financial Parameters

This is where you give a 1 sentence summary about what the business does and 1 sentence on the financials to give a sense of size, growth & profitability. The pitfall you want to avoid is spending too much time at this point talking about what the business does or diving too deep into the numbers. Stay concise and keep things simple here.

Example: “Just a little background on the business, Rue21 is a publicly traded apparel retailer with a focus on small to medium communities rather than urban cities. It has $900 million in revenue, growing at about 18% with $100 million in EBITDA so an 11% margin business.”

Your Perspectives

Here you need to offer your perspectives on whether you think it’s a good or bad deal. This is your chance to show that you can think like an investor. We suggest that you point out 3 key merits. In general, we suggest you to frame the response here in a positive way. Even if you think it’s a bad deal for your client, you can try to frame it as a great deal for the other side.

Example: “From an investment perspective, I think this was a great investment for Apax because of its differentiated market position, highly attractive store-level economics and large whitespace opportunity.”

Deal Outcome

To conclude, give the interviewer a sense of what the deal will accomplish in the future.

Example: “Over the next 5 years, I think Apax can triple its investment and earn about 25% IRR.”

Here’s an Example of How to Walk Interviewer Through a Deal

“On this transaction, Perella Weinberg served as financial advisor to the Special Committee of Rue21 on its $1.1 billion sale to Apax Partners. As the sole Analyst on the team, I built the detailed bottom-up 3-statement model, put together our CIM, and was actively involved throughout the diligence process.

Just a little background on the business, Rue21 is a publicly traded apparel retailer with a focus on small to medium communities rather than urban cities. It has $900 million in revenue, growing at about 18% with $100 million in EBITDA so an 11% margin business.

From an investment perspective, I think this was a great investment for Apax because of its differentiated market position, highly attractive store-level economics and large whitespace opportunity. Over the next 5 years, I think Apax can triple its investment and earn about 25% IRR.”

About 10X EBITDA

We are a small team composed of former investment banking professionals from Goldman Sachs and investment professionals from the world’s top private equity firms and hedge funds, such as KKR, TPG, Carlyle, Warburg, D.E. Shaw, Citadel, etc. Our mission is to cultivate the next generation of top talent for Wall Street and to help candidates bring their careers to new heights. We’re based in the United States, but we have expertise across Europe and Asia as well.