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LBO financing explained
When a private equity firm does a "leverage buyout" or LBO, it uses a significant amount of debt. The list below is a high level explanation on the different types of debt instruments that are commonly used in LBO transactions.
When purchasing a company, the private equity fund will usually provide anything between 30-50% of the purchase price in equity (i.e. the fund own money), and borrow the rest. The 30-50% range varies depending on market conditions and the type of company that is bought, but usually most LBOs falls in that range.
Private Equity Interview Preparation
Below is some good advice from specialist recruiting firm KEA Consultants about the Private Equity Recruiting Process.
The private equity interview process is challenging from start to finish. Most firms will interview a candidate over three to four rounds, but there are cases where it can be as many as ten rounds. It all depends on the firm, the number of people they want you to meet and the testing involved.
How to answer: "Do you have any questions for me?"
After having gone through all the online tests, case studies, presentations and the whole investment banking application process, the last 5 or 10min of your interviews will always end with "Do you have any questions for me?"
While this part of the interview is not the most critical one, many applicants still manage to destroy their chances by asking the wrong questions, or not knowing what to ask.
I did not do any banking internship: do I still have chance for a the graduate position?
The answer is: yes you do have chance.
I have a non-finance related degree (i.e. history, chemistry, engineering), will Investment Banks be interested in me?
Many students believe that having a degree that is not related to finance will hurt their chances of getting an interview with London investment banks. However, the truth is that many investment bankers never studied accounting or finance when they were undergraduate students.
Nevertheless, there are a few traps that you will need to avoid, and some good tips to best position yourself. Here is what you should bear in mind when applying and interviewing:
#1 If you are a science student, play on the analytical angle
How to answer "why investment banking"
For students and graduates, besides the technical questions,CVs, questions and brainteasers, this is a question you WILL get during asked at interviews: "Why investment banking?"
There is no engineered answer for this, but, based on our experience of interviewing candidates, the best answers are:
1) The learning curve in investment banking is very steep and you want to learn a lot and take on new challenges
Typical PE Interview Process
Private Equity recruiting tends to be much more informal compared to banking or consulting, however there are very common steps that most Private Equity Firms go through for interviews. I would describe a typical process in the UK (or Europe in general) as follows:
The First Round: fit, case studies, technical tests
"fit" questions
Why Private Equity?
If you are working in Investment Banking, you'll often hear about private equity, and bankers wanting to move to private equity. But why do people want to move to private equity and why is it so competitive? A few answers below:
The job is considered intellectually more challenging than investment banking.
While in investment banking, you are merely advising companies on what to acquire, divest, or on ways to optimise itself financially, private equity professionals are the ones taking the risks by directly investing money in companies.
