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Lbo Case Study Example

Private Equity Case Study Example – Smart Gaming

Operating assumptions


Smart Gaming Ltd develops games for smartphone users. The main product is sold for £19.90 per download (this is a one-off cost). The company sold 1.5 million copies in 2011 (the first year it started trading) and 2.5 million copies in 2012. The number of downloads is expected to grow by 30%, 20%, 15% and 10% going forward over the next four years. Every game sold generates an extra £5 revenue per year (i.e. in-game products and advertising) which is recurring and increases by 20% every year. However, only 30% of the users keep the app on their smartphone every year (that is, only 30% of the previous year user base keeps using the product).

Cost / cash flow items:

  • Royalties to patent owners = £4.00 one-off per download
  • Customer acquisition cost = £2.00 one-off per download
  • Fees paid to smartphone companies = 15% of sale price one-off
  • Rent = £150,000 annually, growing 5% every year
  • License fee to telecom Internet providers = $1.5 million annually, growing 3% every year
  • Salaries and benefits = £1.75 million annually, growing 30% every year
  • Other administrative costs = £450,000 annually, growing 25% every year
  • Fixed assets depreciation: 5 years straight-line from 2012
  • No change in working capital
  • Intangible / other assets: no change
  • Capital expenditure: £300,000 per year
  • Tax: 25%

Candidate Instruction

  • Build an LBO model based on the information below, including the following:
  • Flexibility for base, upside, and conservative cases on sales growth
  • Exit Returns schedule (including both cash-on-cash and IRR) showing the returns to the financial sponsor equity
  • Time allocated: 3 hours

Good Luck!

For a worked out answer, please check here

For higher level practice, we also have more case studies here

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. In some instances, you may come across SHL type tests testing your verbal, numerical or logic skills.

However, all candidates should be prepared for general CV overview interviews, as well as the case study and LBO modeling round. The majority of mid-market and large cap buyout funds will test candidates on their modeling skills. Smaller cap or growth equity funds are less likely to test these skills, but may have a business case study where you present on a private investment. All firms will want to test your commerciality and business sense. Ultimately, as an entry-level candidate you need to prove that you can make the transition from the sell-side to the buy-side and think like an investor.

The key to doing well in any interview is preparation. Do your homework on the firm, the professionals and the portfolio. At a minimum you should know the fund’s size, how long they have been around, the stage at which they invest, which sectors they invest in and their investor base. It would be worth thinking through a couple of the investments the firm has made in the past and assessing why they were good investments (or even why not) and how they developed the firm’s investment strategy. Without fail, prepare some questions that you can ask the investment professionals at the firm where you’re interviewing, as they are likely to give you the opportunity during your interview. These can range from asking about the amount of capital available to invest, to the number of deals the firm screens at any one time, to asking more specifically about a recent investment the firm made.

There are some extremely practical things you can do throughout the interview process to guarantee that you present yourself to best effect. The most basic and important are:

Always be on time, if not 5-10 minutes early for each interview

  • Stick to a scheduled interview time to the best of your ability
  • Prepare questions for your interviewer
  • Give a firm handshake on introduction and departure
  • Always make eye contact with your interviewer
  • Think carefully about your answers; it’s better to take an extra minute structuring your thoughts than rambling on for too long and without focus
  • Speak clearly and with confidence, at the same time try to be humble and not too aggressive
  • Remember you are selling yourself to them, not vice versa

During the CV interview rounds there are certain points and questions that you should specifically prepare for. We have listed examples below for you to think about. This is not an exhaustive list, but it should give you a sense of what to expect:

Know your CV: you must be able to answer questions on anything on your CV. If you’ve listed several transactions then make sure you really know what happened and know the relevant numbers: IRR, debt equity ratio, price, earnings multiple etc. Practice walking through your CV from university onwards in a structured 2-3 minute overview.

Tell me about a deal on your CV: If you are from investment banking you should definitely expect this question. Pick a deal that would be most relevant for a private equity investor (either in industry or type of transaction).

Why do you want a career in Private Equity? Tailor your answer to your experience, skills and relevant interests, as demonstrated on your CV.

Why are you interested in our firm? If you’ve done your homework on the firm, then you should be able to easily answer this question.

From the companies you’ve worked with, which would make a good private equity investment and why? Tailor your answer to the firm you are interviewing with and be prepared to go into financial detail on why you would invest in that company.

Explain the mechanics of an LBO model? You need to be able to either talk an investment professional through this, or calculate a simple one on an A4 sheet of paper. (see our modellings tests page if you require practice )

Why are EBITDA and FCF important to private equity investors? You need to know the difference and explain how they are used in relation to the new debt borrowed for an LBO.

What determines how much debt you can put on a company? Talk about the cash profile of the business and the state of the debt market.

How would you source potential investments? Indicate how you would research and identify attractive targets in a sector. Think about where recent private equity deals have been done. Mention networking in an industry, through cold-calling, conferences, reading trade publications. Keep it relevant to the firm you’re interviewing with.

How important is management in a private equity deal? They are extremely important, good business need good managers.

Tell me about an interesting deal in the news recently? Make sure you have a clear opinion on the deal that you chose in order to demonstrate your business judgement.

What are your thoughts on the private equity industry and/or a specific industry the firm looks at? Again, have an opinion.

Where do you see yourself in five years? Demonstrate your ambition and commitment to private equity.

A few other general questions...

What motivates you? Tell me about a time you’ve failed? What are your three main strengths? What do you do in your spare time? Finally, personal fit is important. As teams are smaller in private equity firms than in other corporates, personality fit is a key part of a firm’s overall evaluation process. Remember to "be yourself" during your interviews. A private equity firm will only want to hire candidates that they feel fit well with the firm’s culture and ethos. If hired, you will be working with the people who interviewed you on an intensive basis and having strong professional relationships will determine how much you enjoy your new job and ultimately how successful you are.

Why Private Equity? Why Our Firm?

Invariably, this question will be asked during any private equity interview, and is one of the most critical. Most bankers who prepare well and have a good deal of experience are able to pass all the technical interview questions, but a lot of them fail on providing a compelling answer to "why PE, why our firm".

What are the private equity firms looking for when they ask "why PE, why our firm"?

Obviously, the interviewer will want to know your motivations behind doing this job, and also behind joining their firm.

However, the question is actually much more complex than you might think. Private equity firms already know why people apply to their firms: prestige, better long-term money, fewer hours, and the entrepreneurial aspect. But they are really looking for the answers to these questions:

1. What's driving you professionally and personally?

2. Have you done some research about the firm?

3. What special skills do you have, and how can they be of use to the firm?

4. Are you going to stay long-term?

Structures to best answer the question

Make sure that you address the four points described above, directly or indirectly. Notice that the question is actually twofold: 1) why PE and 2) Why our firm. However, in most cases it is best to address the two questions at the same time, even if they are asked separately. For example, if you are just asked "Why PE", I would still answer the "Why our firm" at the same time.

When answering, we suggest that you use the following structure:

1. Answer why you like PE first (addresses points no.1 and 4)? For this question, there needs to be a solid personal motivation as well as a professional motivation.

> Personal motivations: Those usually revolve around an "entrepreneurial spirit" and desire to do investments and act as a principal. Great stories include coming from an entrepreneurial family, some evidence of entrepreneurial activities, risk-taking or outstanding initiatives, in or outside your job.

> Professional motivations: This usually revolves around the aspects of your work that are similar or related to private equity. Bankers and consultants can mention work they did with Private Equity and how they enjoyed it. You just need to show that you know the work that PE involves. Points not to mention: money, prestige, fewer hours, or plainly saying "I like to do investments". Another danger zone is to mention personal stock trading - be aware that stock trading is short-term and more suited to hedge funds, not PE, so if you mention it talk about a long-term "hold" strategy.

2. Show off your knowledge about their firm (addresses point no. 2) 

Mention positives and success factors of the firm that are attractive to you:

> Strategy: unique positioning of the firm, sector focus, geographic focus

> Recent fundraising or expansion: big new fund, new offices, new partners

> Great investments or exits they have done: mention any known details to show knowledge

> Strength of some partners (i.e. the more prominent figures): mention names

3. Tie in the firm positives with your skills (addresses points 3 and 4)

This is the hardest part - you need to tie the firm's strategy to your skills. This part will vary with each individual, but these are the most common rationales:

> Language skills that tie in with the fund regional expansion strategy. For example, "You have made several investments in France, and as a French speaker, I would really love to work on some of those portfolio companies." Or "I speak three European languages, so I like your pan-European focus," etc.

> Sector experience that ties in with sector focus. For example: "I worked on three media transactions and really enjoyed the work, so I think I would really love working in a TMT-focused private equity firms such as yours."

> Showing relevant business experience. For example: "I have worked for three years in investment banking and with several private equity clients, so I am well aware of the strong reputation of your firm."

> "Business acumen" or "belief". Basically, this would be something saying that you believe that the PE firm is well positioned, and that is why you want to join them. Again, you can mention their strong track record, nice positioning, great management, and all those success factors that make you want to join them.

You will get bonus points if:

- You reached out to the PE firm directly without going through headhunters (shows initiatives, credibility)

- You get "championed" by somebody working at the firm (alumni, friend). If you got recommended, do mention this fact.

- You worked on a deal with the firm (as a banker or consultant, provided you did well!)

- You dealt with companies they thought about buying (bankers and consultants: check the all bidders for the deals on your CV!)

Private Equity Interview Questions

Private Equity interviews are notoriously difficult and will contain a mix of fit questions, technical questions, mini cases and investment pitches and brainteasers. Below are some of the questions that you would typically get in a Private Equity Interview


Qualifications, Motivations and Background

- Why are you interested in Private Equity, why our firm?

- Why not work for a Hedge Fund / Startup / Portfolio company?

Business Acumen / Ability to think like an investor

- What industry trends are key when you are looking at a potential investment?

- How do you source potential investment?

- If I wanted to protect my downside, how would I structure an investment?

- Have you looked at our website? Which investment do you like most/least? Why?

- If you could only have one financial statement, which one would you choose? Why? What if you could have 2? Why?

- An investment banker gives you a deal book - how do you verify the information in it?

- What should we buy next? What kind of IRR would we make? (provide high level financials/LBO model workings)

Technical Questions

- You buy a business at an 8.0x EBITDA multiple and you believe you can sell it in 5 years time at the same 8.0x EBITDA multiple. Your required return rate is 20%/year. Assume that banks are willing to lend up to 4x debt/EBITDA, and that half of the debt would get repaid after 5 years. How much do you need to grow EBITDA by within this timeframe?

- You buy a company for 10x EBITDA. It has EBITDA of £100 in yr 1, and £150 in yr 5: what kind of multiple should we exit at to get at least 25% IRR

- What different levers can be used to improve IRRs?

- What is the advantage of a vendor loan?

Mini cases

- Would you invest in an airline? Why and why not?

You will find detailed answers to the above questions in our Private Equity Interview Guide, as well as more practice questions.

Private Equity LBO Modelling Test

Most Private Equity firms will give you modelling tests to complete realtime at their offices from scratch. Without practice, this can be challenging, even for seasoned investment bankers. Here are a few tips and an example of a test you will likely get:

LBO Modelling Tips

Tip#1: Spend enough time to understand all the requirements properly

Read in detail the information provided, as well as what is asked. Often, candidates fail to answer the question asked by trying to do too much or waste time as they add complexities that are not required.

Tip#2: Always keep models simple

Do not try to "show off" by building complex models and advanced functions. Build a practical model that answers the question; only if you have enough time, then add a few more advanced functions or clean up the formatting, but this is not necessary.

Tip#3: Watch your time, and if you are running out of time, simplify

If you get stuck on a point, just simplify it; at minimum, provide an IRR output. If you build only half of the model, then your ability to build a full LBO cannot be judged. But if you take a shortcut on some parts but still build the full LBO and IRR calculations, you might be able to get away with it.

Tip#4: Have a well-practiced template in mind

Make sure you have a very well-rehearsed basic template in mind with the following items:

- Simple Source and Uses table (one or two branches of debt). Input your entry/exit multiple assumptions here

- Basic income statement (Revenue, EBITDA, D&A, EBIT, Taxes, Interest, Net profit - that's it). Leave Interest blank and link it later on from your debt schedule.

- Cash Flow Statement (EBITDA, Capex, Working Capital, Tax, Debt Repayments and Interest Paid). You could model Working Capital and Capex separately in a mini-balance sheet for added details. Leave Debt Repayments and Interest Paid blank for now and link from Debt Schedule later.

- Debt Schedule: Here you need to detail the Debt Repayments and Interest Paid. You can then link those to the Cash Flow and P&L.

- IRR Calculation. The cash flows should come from your cash flow statement and you only need to insert the IRR Calculation here. You should also insert some sensitivity tables for different exit years and different entry/exit multiples.

LBO Model Test Example (2 hours)

For practice, try to solve this case:

LBO Model Assumptions

1. A Private Equity Firm wants to acquires a German business for €280m + any Advisory Fees equivalent to 2% of the transaction value. Assume a transaction date of 30 June 2012 and no cash.

- Senior debt of 3.0x EBITDA at transaction date has been obtained from a regional bank.

- The seller has also agreed to provide an additional €35m in the form of a vendor loan.

- The private equity firm will invest the balance in the form of a shareholder note.

3. The Senior Bank Debt pays 7% per annum (cash pay), with this repayment plan in place: 5% repaid in year one, 15% in year two, 20% in year three, 30% in year four, and 30% in year five.

4. The Vendor Loan pays 8% (non-cash) which accrues annually. This vendor loan is subordinated to the bank debt.

5. The Private Equity Firm shareholder loan pays a 15% non-cash pay coupon, which accrues annually. This loan is subordinated to the senior bank debt and to the vendor loan.

6. The Company needs to maintain a minimum of €1m operating cash at all times. Assume a full cash sweep for any amounts above €1m.

7. The Private Equity firm wants to maintain control of the company and at the time of the acquisition will have 85% shareholding in the company, while the management will retain 15%.

8. Sales at closing were €100m; assume this will grow by 5% in year one, and 7% p.a. thereafter

9. EBITDA margins will increase from 35%, and increase by two percentage points per year until 2017.

10. It is thought that Capex over this period will be €15m per annum (equal to depreciation).

11. The Company has 10 days (of sales) funding gap in working capital.

12. Tax will be charged at 30%.


'A. What is the Private Equity firm IRR, and cash on cash returns at 7.0x, 8.0x and 9.0x EBITDA exit multiples in years four and five?

'B. What are the returns if you assume senior debt of 2.5x and 3.5x EBITDA? What are the issues that we need to consider in deciding the necessary level of bank debt?

'C. What is your recommended level of bank debt?

'D. Which EV exit is realistic given the data provided, and what return would you expect?

'E. What kind of return should you be looking for with this kind of business?

'F. What is the benefit of a vendor loan?

'G. What would be a sensible strategy you would adopt with regards to the vendor loan in two or three years?

H. How much of the exit proceeds will go to shareholders and how much will go to management

For a fully worked out answer, please refer to the LBO Model.

Ideal Backgrounds for Private Equity

There is no standard way of entering the Private Equity industry, but this article aims at illuminate the typical characteristics that private equity firms are looking for in a candidate.

What age or level of experience do private equity firms want?

- The large majority of people joining private equity firms do so after two to five years’ work experience in a relevant field such as investment banking, strategy consulting, corporate development, or restructuring.

- It is very unusual for people to join a private equity firm right after graduation from university with an undergraduate degree. The main reason is that most private equity firms are small and do not have the ability to train people within the firm. Notable exceptions include the very big private equity firms such as Blackstone, who sometime hire from straight from undergraduate degrees - but note that the students being considered have typically worked through several internships in banking, strategy consulting, restructuring, or at other private equity firms.

- A common route to enter private equity is right after an MBA (more common in the US). Similarly, this implies two to five years’ prior experience in relevant fields.

- Age is always a sensitive topic, but most private equity firms like to hire people below 30 for an entry position.

What are the typical educational backgrounds?

- Private equity is notoriously picky about educational backgrounds, are will usually target graduates from top universities. In Europe, there is a strong representation from schools such as Oxford/Cambridge in the UK, HEC/Essec in France, etc. The reasons are that they have a large choice of applicants so the school is an easy first screening ground, and also because the networking aspect of private equity is quite important (who you know matters). Note that the name of a good school is not enough and is often just a pre-requisite. If you are not from one of those top schools, however, it is still possible to break in if you have outstanding work experience, skills, or achievements.

- For MBA degree earners, Private Equity is also very picky, even more than for undergraduate degrees. The very large majority of MBAs in private equity in Europe come from three schools: Harvard, Wharton, and Insead (also Stanford in the U.S.).

- While you don't need to be a finance major, your degree should demonstrate strong analytical ability. Science and finance degrees tend to be popular.

What are the typical professional backgrounds?

On top of a great education (ideally with top grades and lots of extracurricular activities), Private Equity firms like to see prestigious company names and impressive transactions in your background. The most common backgrounds are these:

- Investment bankers: usually from second-year analyst to first-year associate levels. Why? Because of the excellent modelling training, transaction management skills, ability to work extremely hard, and sometimes sector knowledge. The rule of thumb is that the larger the Private Equity firm is, the more demanding they will be in terms of investment bank "prestige". The large majority of ex-bankers in private equity come from Goldman Sachs, Morgan Stanley, ex-Lehman Brothers, ex-Merrill Lynch, Rothschild and Lazard. Some private equity firms will ask for your analyst or Associate ranking; the more deals you have done, the better. You can still break in from smaller banks but you will need some really impressive transactions or other specific skills.

- Junior Strategy consultants. Why? For the strategic thinking ability, ability to work very hard, and sector knowledge. Consultants are a bit less prevalent than bankers in private equity because they usually lack a bit in modelling skills, but people working at firms such as McKinsey, Bain & Co and BCG will have a good shot at private equity jobs, especially if they have worked on private equity due diligence assignments. Some PE firms (like Bain Capital) focus on hiring strategy consultants as opposed to bankers.

- "Others": depending on the firm, private equity companies may hire qualified accountants from the Big 4 (if they worked on private equity deals with a very UK-specific background), talent from restructuring, and sometimes people with a bit more unconventional backgrounds (i.e. equity research, ECM, corporate strategy).

What other characteristics are private equity firms looking for?

On top of a great education and a great work experience at a top firm, private equity firms would really like to see these characteristics:

- Languages: The more you speak fluently, the better. You can significantly increase your chances if you speak two or three European languages fluently, and in most cases English + another European language is required. ‘Hot’ languages include Nordic and Eastern European languages. German, French, Italian, Spanish and Dutch are also very useful.

- Extracurriculars: To make you stand out from the rest, extracurriculars (such as athletics or art) are very useful, especially if they are impressive. Anything that shows that you are a well-rounded person is often required!

- Entrepreneurial drive and leadership: Anything that shows that you are a driven person who likes to show initiative can apply, such as the position of a club president, organising charities, etc.

Private Equity Psychometric Tests

After applying for a job at a Private equity firm, sometimes you will be sent several online psychometric tests. These tests help companies to weed out candidates before starting the actual face-to-face interview process and are becoming more and more common with large private equity companies. On average, more than half of potential candidates do not pass this stage, usually as a result of lack of preparation. In order to get a good score on these psychometric tests it is essential to remember that preparation is key.

The good news is that companies will always let you know that there will be a test, and it will almost always be an SHL test.

What is SHL?

SHL is one of the most popular and well-known assessment companies in the world. Major Private Equity companies rely on companies like SHL to provide psychometric tests for job candidates.

You can practice SHL aptitude tests just like the ones used for actual job assessments here.

The Tests Explained

1. A Verbal Reasoning Test:

Verbal Reasoning Tests are designed to measure your ability to understand written information and to evaluate arguments pertaining to this information. You’ll be presented with a paragraph of text or excerpt and will need to use logical and comprehension skills to answer specific questions. You can get Verbal Reasoning Practice Tests here.

2. A Numerical Reasoning Test:

Numerical Tests are designed to assess your understanding of statistical and numerical data as well as your ability to make logical deductions. You’ll be presented with a table or graph depicting specific numerical information and will need to answer questions about the data. The questions are often based on mathematical calculations involving percentages and ratios. You can get Numerical Reasoning Practice Tests here.

3. An Inductive Reasoning Test:

Inductive Reasoning Tests are designed to test conceptual and analytical thought based on pattern and consistency identification. You’ll be presented with a group of images and shapes that follow a particular chronological pattern and be asked which image is the next in the pattern.

4. A Personality Questionnaire (sometimes)

The purpose of Personality Questionnaires is to assess specific character traits of applicants to build a “personality profile”. Companies then compare this profile to the requirements of the company and the requirements of the particular position. Personality Questionnaires will often claim that there are no right and wrong answers but that is obviously not true, as there are specific answers that point to either positive or negative characteristics that have a big effect on whether or not you’ll get the job.

How to find out more and get some practice?

The only way to practice is to do mock tests online. You can find some free samples or purchase more practice, if needed, via the following link:

Take a Mock Test Online

Walk me through an LBO model

An common question you get during private equity interviews is "can you please walk me through an LBO? feel free to make your own assumptions". While this may sound a bit daunting at first, the trick here is to keep things simple. The theory behind an LBO is actually fairly simple.

In what level of detail should you go? What the interviewer is trying to test is only that you have a good understanding of the mechanics of an LBO, so there is no need for you to go into a lot of details. Details will come during the LBO modelling test! Here is what you should be able to understand and the steps you should take.

If possible, lay out some assumptions on a piece of paper. 

Step one: Lay out the Sources and Uses assumptions assumptions and some example company.

"Lets assume we have an consumer retail company. My first step would be to lay out some assumptions with regards to source an uses.

- I need to know how much I will pay for the company. This can be expressed as a multiple of EBITDA. Let's assume 8 times of current EBITDA, which I think is a reasonable multiple.If current sales are 500 and EBITDA margin is 20%, then EBITDA is 100, that means 8*100 = 800 is what I need to pay.

- I need to know how much of that purchase price will be paid in equity and how much through debt. Lets assume that I will use 50% of debt and 50 % of equity. So that means I used 400 of equity and 400 of debt.

- Also, lets now assume that we will sell this company in 5 years, at a same 8 times EBITDA multiple.

Step 2. Make some basic cash flow assumptions

"Now I need to know about the financial forecast to see what the cashflow looks like and see how much of debt I can repay over the period.  My cashflow before debt repayment is calculated as: EBITDA - Capex - Changes in Working capital - Interest paid on the debt - Taxes.

[Here you may be asked to go into detail of how you come up with each number, or you may jump some steps - interviewer will guide you].

I assume EBITDA can grow from 100 to 150 over five years. Then lets say that based on those forecasts, I am able to repay 20 of debt per year [you may be asked to derive the amount you can repay based on the details you calculated above], that is 100 over the next five years."

Step 3. Calculate your IRR

-I have spent 400 of equity and taken 400 of debt

-After 5 years, EBITDA is 150, and assuming I can sell at a 8 times multiple, I will get 150 * 8 = 1,200. From that 1,200, I need to repay the 400 of debt but I already repaid 100 over the last 5 years, therefore I only have 300 left to repay. That leaves me with 1200 - 300 = 900 of equity.

-My overall return is therefore 900 / 400 = 2.25x return over 5 years, which is roughly an 18% IRR [to be able to estimate IRRs, you need to memorise IRR conversion tables]


For more advanced private equity LBO modelling practice, you can also refer to our tips and LBO practice example 

The Value of MBAs For Private Equity

An MBA is typically regarded as a prerequisite to reach the higher echelons of private equity, especially at the larger firms. But is that really

true? What does the data tell us? 

MBAs are in almost every PE firm

I checked the percentage of MBAs in each one of a few firms. Out of 315 executives, 166 had MBAs (about 52%). Views are mixed; in some firms an MBA is a prerequisite. A partner at a global firm recently stated, "We view senior associate positions as post-MBA positions, and would therefore require that qualification unless there are exceptional circumstances". However, the communications director at 3i Group also said last year, " the MBA is not a pre-requisite but it can be of tremendous help for some people, people with non-financial backgrounds for example".

The larger the firm, the more MBAs you will find

The largest PE funds such as KKR, Blackstone, and Apax had the most MBAs. I've gathered some data here:

1. PE FIRM, (% MBAs)

2. Apax (77%)

3. Blackstone (63%)

4. KKR (61%)

5. Candover (59%)

6. Permira (58%)

7. 3i (48%)

8. CVC (46%)

9. Bridgepoint (38%)

10. EQT (22%)

11. PAI (21%)

The number of executives with MBAs is increasing

By looking at the younger executives in the firm, there is also clear evidence that the MBA is becoming increasingly popular amongst the new generation of buyout executives.

Among MBAs, five schools provide the vast majority of PE professional graduates

Five schools provide more than 80% of all the MBA graduates who work in private equity; Wharton, Harvard, and Stanford are provided from the U.S., and in Europe, Insead and LBS. PE firms tend to hire their own kind, so the PE MBA community is a very closed circle. If you are interested in our MBA essay review service by alumni from top business schools, please get in touch at

Headhunters for Private Equity

While PE firms tend to recruit people through their network first (e.g. alumni, bankers they worked with, friends and ex-colleagues) before going to headhunting firms, here is a list of the well known headhunters in London that have a specialised private equity practice:

Argyll Scott International (

Specialist Recruitment Consultancy managing permanent mid to senior level appointments within Corporate Finance. Clients range from top tier Investment Banks and Boutiques to Private equity houses in London. 

Contact Name: Jade Sweeney


contact phone: +44 (0) 207 936 1125

Arkesden Partners (

Dedicated stand alone Private Equity team with a track record and experience of the sector for over a decade. Principal, Senior Associate, Associate and Executive level mandates taking a pure search methodology for every mandate. Mandates are UK, CEEMEA and MENA focused. Nearly half of placements in 2012 were outside of the UK. Source candidates from Investment Banking (M&A, Leveraged Finance and Financial Sponsors), lateral Private Equity professionals and Management Consultants.

Contact name: Adam Cairns


contact phone: +44 (0) 203 762 2023

Blackwood (

Blackwoods is a London-based search firm that recruits for a large variety of finance and non-finance roles, but they also have a good recognition in the London private equity recruiting space.

EH Partners (

EH Partners is a London boutique executive search firm focussed on the alternative assets space and investment banking.

Contact Name: Simon Hegarty


contact phone: +44 (0) 203 432 2552

KEA consultants (

Kea Consultants is an executive search firm that specialises in moving young professionals from top tier investment banks and consultancies into the buy-side. They work on an exclusive basis with firms such as Blackstone, TPG, Advent & Och Ziff and have strong relationships with a number of other funds ranging in size


contact phone: +44 (0) 203 397 0840

One Search (

Pure finance-focused firm with a good presence in private equity and hedge funds.

Contact name: Chris White

contact phone: +44 (0) 207 887 7500


Private Equity Recruitment (PER) focuses exclusively on investment-related functions such as Private Equity, Venture Capital, Mezzanine Capital, Fund of Funds and Secondaries. They mainly cover Europe and Middle East.

Principal Search (

Specialist financial services search firm providing global hiring solutions to clients across a wide range of product areas within the investment banking and financial services sectors.

Contact Name: William McCaw


contact phone: +44 (0) 207 090 7575

The Rose Partnership (

Large recruitment firm based in UK. They cover mainly Europe out of London but also have some presence in Asia-Pacific through their Hong Kong office. They recruit for Banking and Private Equity.

Walker Hamill (

Walker Hamill is widely recognised as one of Europe’s leading recruiters in private equity, venture capital, real estate, secondaries, fund of funds, mezzanine and hedge funds. It recruits for investment positions from Associate to Partner level and infrastructure roles including finance & accounting, fund raising, investor relations,compliance and portfolio management.

Contact : James Stephens

Would you like to add your firm, contact name or other details to this list? Contact us here.

PE Interview: How to Differentiate Yourself

It is not unusual for Private Equity firms to receive thousands of CVs per year, and even more for the major funds. Similarly, investment professionals tend to get bombarded by emails and calls requesting information and help to secure an interview. So, how can you differentiate yourself amongst all those CVs?

1. A mere Oxbridge/Ivy League degree + work experience at top firms doesn't cut it

In Europe, Private Equity firms may only hire 100 or so new associates every year in total. The top firms may only hire for one dozen positions per year, maybe less. To illustrate what you are up against, the Private Equity clubs from Harvard and Wharton have more than 800 members each. If you add to that number the analyst and junior associates classes of Goldman Sachs, Morgan Stanley, McKinsey, Bain & Co, etc., you will be very quickly in the several thousands of well-educated, well-trained candidates who will compete against you for a handful of jobs.

2. Find a "marketing angle" that makes you unique

Your marketing angle will come from different dimensions:

- Geography: Obviously, language is a big differentiator in Europe. But only talk about the languages you speak fluently or the regions you actually worked/lived in. Then reach out to people from those regions when sending your CV, and mention this clearly to the headhunters. Note that if you speak a language but never worked in the country, that may be a handicap, so you need to mention that you spent a number of years in said country.

- Sector expertise: Very useful for sector-focused funds or funds organised in verticals.

- Specific deal exposure: Mentioning transactions where you either worked with the private equity fund or where it was an under-bidder is a good angle to start a discussion with a PE fund, as they will be able to test your understanding and abilities very quickly. This may backfire though - make sure you know the deal inside and out.

- Transaction types: If you work for a boutiques or mid market of focused banks or consulting firms, this will be well received by small cap and mid-market funds.

- Educational background: Use your alumni base as much as you can, but don't limit yourself to your own school. For example, a top MBA is likely to be well received by somebody from another top school.

- Company alumni: Similarly, reach out to people who worked at the same firm than you. Again, you don't need to limit yourself to the same firms. For instance if you worked at McKinsey and you are reaching out to somebody who worked at a rival firm, it is still more likely to work than reaching out to an ex-banker.

- Other connections: Ex-military, specific background (i.e. if you studied medecine, law, etc.), same associations, etc.

If you build your profile along those verticals, you will now see that you can differentiate yourself effectively and make yourself much more memorable to the firms.

3. Tailor your CV and angle to different firms

I would advise against sending generic CVs to every firm or headhunter, hoping that something will fit your profile. You need to target funds, and then tailor your message accordingly. For example, if you are in a specific sector team, try to diversify your CV if you apply to a generalist fund (i.e. less detail about the sector/deals, highlight some other experiences, etc). If you apply to an all-British fund, there is no need to mention your international experience or language abilities at length, etc.

4. Personality is the ultimate differentiator

All the above advice will help you get to the interview stage. However, in the end, the "fit" is what really differentiates one candidate from another, all else being equal (i.e. same performance in the technical tests, modelling tests, etc, which is under your control if you practise). At all times during the process, do not forget to maintain a well-mannered and humble attitude, which, surprisingly, is an area where many candidates fall short. If you have the right profile and manage to differentiate yourself, build a story, maintain the right attitude and prepare, getting a job in private equity will just be a matter of time!

How to Cold Email PE Professionals

The best strategy to find a job in Private Equity is often to reach to those firms directly, especially if you feel that there would be a good fit between your background and the firm. In addition, headhunters are very selective when sharing job opportunities in PE so you might miss out on a potential interview. Sending "cold emails" is widely accepted in the PE industry, and if the email is properly crafted, you should be getting an answer in most cases. So find below a few strategy tips for cold emails to Private Equity professionals.

Make a list of your priority target firms that make most sense

> Create a big spreadsheet with the list of all PE firms that might be relevant and that come to your mind, or that you've come across.

> Narrow down to a set of priority firms (7 to 10 firms maximum) that you think would be the best fit and most relevant to your background. Sending proper cold emails is actually quite time-consuming, which is why we recommend to focus as much as possible initially.

Identify the best contact person(s)

> Seniority: We would recommend that you avoid reaching out to a very junior person, or one at your same level, for a number of reasons (they are the busiest, there might be a fear of competitors, a lack of incentive to help), or to those too senior (most won't care or have time). The ideal people are at the "principal", "director" or "vice-president" levels, because they are senior enough to have a say in the recruiting process but still junior enough to take time to answer candidate emails.

> Common background: check out the websites of the firms and review the biographies of the people working there to get an idea of their backgrounds. From the background descriptions, try to find the persons who are most similar to you: people who worked at the same firms, same country of origin, same school, same kind of work experience or educational background, etc.

> LinkedIn: LinkedIn is very powerful tool for identifying potential contacts, and researching people's backgrounds and potentially common friends. Always do a search on LinkedIn for your target firm as you might also find people who are not listed on the website.

> HR: Some PE firms have HR departments. However, I would actually advise against sending your CV directly to HR if you find some other suitable contact in the firm, as HR's candidate criteria are usually narrower compared to investment professionals, which means less of a chance to get an interview.

Structuring the email

Never write a cold email that is more than one or two paragraphs long. Most people won't take the time to read longer emails, and it also shows that you are not able to write concisely. Get straight to the point and attach a CV.

We recommend the following structure:

> First sentence: Your background (basic key relevant points) + optionally how you got their details, if it was an introduction from a friend.

Example: "Hello Mark, I am a second-year analyst working at Morgan Stanley in the Consumer team here in London, and I'm from Germany (I also speak Spanish)."

> Second sentence: Purpose of the email + asking to discuss + CV

Example: "I'm very interested in Private Equity and your firm in particular, and I was wondering if your firm had any expansion plans in the short or medium term? I would be happy to have a quick chat at your convenience. I'm attaching my CV for reference. Best/regards, ". 

Other reasons: "I read that your firm just raised a fund / just opened an office in Munich", etc.

What happens next?

Usually the person will open the CV and take a five-second look to see if your profile would fit. If it doesn't fit, they might say that they are not hiring, or simply say that you don’t have the required profile. You might also get a standard "reject" email. If it fits, they might reply that they are not hiring if they are indeed not hiring, and keep your CV on file. They might also accept a quick phone chat to do some informal pre-screening process, or they might even ask you to come in for an interview!

What if I get ignored?

There might be a good number of reasons why you get ignored, not always negative - people travel, miss emails, forget to reply, etc. If you don’t get a reply within a week, it’s perfectly find to send a reminder email: "Hi Mark, I wanted to follow up on my previous email, happy to have a chat whenever convenient. Thanks". One reminder email is enough and we would not advise to go beyond that. If you still don't hear back, try another person or two in the firm! You have nothing to lose by trying, but we would advise against trying more than three people in the firm.

Track your progress, persevere, and be consistent!

Do maintain your spreadsheet and make a note of each rejection, each email sent, and person contacted so that you always know the status of your attempts. Private Equity recruiting is a long-term game:

> If they said no - don't waste your time and move on to other firms in your list

> If they said that they are not hiring now, try again in six months’ time, or whenever they do a fundraising (fundraising usually means expanding the team!)

> If you need to contact the firm again, contact the same person

> Once you have been through a few firms within your priority list, start investigating firms outside your top priority

> As you read the press, work on deals, talk to friends, etc. Don’t forget to add to your list any interesting PE firm name that you come across.

Private Equity Case Studies

If you get invited to Private Equity interviews, you will almost always encounter Private Equity case studies. PE case studies can be notoriously difficult, and require a great deal of preparation. While every firm will have different types of case studies, this article aims to give you an overview of what you should be expecting.

What is a case study?

Case studies are investment problems that you will be asked to analyse. Based upon your analysis you need to propose a final recommendation: should they invest in this company or sector? At what price?

Why do private equity firms use case studies?

Case studies are great because they enable the interviewer to assess several aspects of a candidate:

The ability to absorb a large quantity of information and focus on what is relevant

The ability to structure your thoughts and analysis

General business acumen

Pure "problem-solving" skills (i.e. intelligence)

Analytical skills (calculations are always involved)

Presentation and communication skills (you will be asked to present a solution)

Excel modelling / PowerPoint

Time management skills

At what stage of the interview process do I get case studies?

Usually after the first round of interviews, but sometimes in the very first round.

How are they given? How much time do I have to work on case studies?

Case studies can take on several forms, but these are the most common:

1. Take-home case studies: The firm will send you a case via email and give you a few days to complete it, then send it back in a Word document with your Excel model.

2. Mini-cases: at the firm, in person, as a live discussion. In this case, there is no Excel model (or you may be asked to do a "back of the envelope" model on paper) and the discussion generally lasts between 45 minutes to an hour.

3. Full-blown cases: At the firm. You are seated in a room with a computer, given the case study, and allowed between one hour to four hours to complete your analysis and Excel model.

Can you give me an example of a Private Equity case study?

The ingredients of a case study are always the same, irrespective of the format:

1. Description of a company and sector. This can be a few summary lines or slides, or in full-blown case studies, they could either give you a company annual report or an Information Memorandum ("IM")

2. Financials. These can be a few key items (i.e. revenue, EBITDA, Capex) or you can get a full annual report or IM.

Based on this information, you should be able to analyse the company, build an LBO model, and answer the following questions:

  • Is the company an attractive investment or not?
  • How much should we pay for it?

For case study practice please refer to our private equity case study here.

List of London Private Equity Firms

Below is a list of Private Equity funds that have offices in London and have a significant European presence. We broke down the list in "generalist" funds that cover all sectors across difference geographies, "sector specialists", "specific region-focused" funds and finally Private Equity funds within investment banks. Note that the list below covers only the major funds and doesn't include venture capital funds and other Private Equity funds that have less than £500 million of assets under management.

Generalist Funds with London-based operations

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Today, we’re going to (finally) wrap up that Dell LBO case study that began months ago.

But more importantly, I’m also going to give you a private equity case study interview presentation template you can copy, paste, and re-use.

You’re also going to learn why you cannot believe much of what the mainstream media says when it comes to deal analysis and finance-related topics.

With this Dell deal, for example, 95% of the commentary in the media focused on the decline in the desktop / laptop markets, the unusual deal structure, Michael Dell’s sweet deal to claim ~75% of the company post-buyout, and so on.

However, those factors – particularly the market declines – make much less of a difference in this deal compared to points that few other people were even talking about.

It’s a classic example of everyone thinking one way about a deal or company when something else altogether mattered more.

Recapping This Case Study

In Part 1, we went through how to find data on the deal and set up the basic model.

Part 2 was about making revenue and expense projections, Part 3 was about how to set up the debt schedules, and Part 4 was about how to model post-buyout add-on acquisitions.

You can understand this article and tutorial without having read any of those, but you’ll get more of it if you’ve been through the first 4 parts.

The Deal is Done!

The main update since last time is that shareholders (amazingly) approved the deal in September.

Many firms already lost so much on Dell that they figured it was probably better to cut their losses at this stage.

Carl Icahn, of course, was pissed, but that always seems to be the case.

The Presentation, the Template, and the Video Tutorial

Here you go:

And here are all the files you’ll need:

I highly recommend full-screening this video in 720p so you can see everything better.

If you’re reading this via email, click here to view the video and this post.

Table of Contents

  • 0:00:Introduction & Case Study Structure Overview
  • 4:47: Overview of Private Equity Case Study Template Presentation
  • 5:48:Executive Summary
  • 7:47:Market Overview and Qualitative Factor Slides
  • 11:09: Discussion of Operating Scenarios
  • 13:09:LBO Model Output and Sensitivities
  • 17:10:What If We’re Wrong? What Factors Could Make the Deal Work?
  • 20:07: Conclusions and Summary

Previously in Private Equity Interviews…

You may have seen previous articles here on private equity interviews and case studies – this one is different for 3 big reasons:

  1. I’ve changed my mind about the most effective way to make case study presentations over the years.
  2. The recommendations I’ve given before are fine for relatively short/simple case studies, but they would not work as well for something as complex as this one.
  3. Oh yeah, and this is a real example + a template you can use and re-use.

My Recommended Structure

If you have a 20-slide presentation, you might divide it as follows:

Slide 1 – Executive Summary / Investment Recommendation

Slides 2 – 6 – Qualitative Factors That Support Your Conclusion

  • The Market
  • Competition
  • Growth Opportunities
  • Risks
  • Deal/Company-Specific Factors

Slides 7 – 16 – The Numbers

  • Valuation vs. Asking Price and/or Current Market Value
  • Revenue, Expenses, and the Scenarios You’ve Built
  • LBO Model Output
  • Commentary on the Numbers – Which cases are most / least likely? Why?
  • The Downside Scenario(s) – VERY important for buy-side modeling and analysis because you will lose your money if you’re wrong

Slides 17 – 19 – The Counter-Factual – Would anything cause your opinion to change? What could cause your recommendation to be incorrect? How can you hedge yourself?

Slide 20 – Conclusions – Similar to the first slide, but now you can reference more of the numbers and specifics you highlighted in the preceding slides.

You can see an example of this structure in the blank presentation template file right here.

If you only have 10 slides or 5 slides or some other smaller number, you could compress this and cut down on the number of slides in each section.

In this case study, we’re skipping over the valuation aspect because we’re analyzing a real deal that actually happened and we’ve been asked to offer our thoughts on it as-is.

You would have to do more work on that in case studies based on potential deals.

The Crux of the Deal: Who Cares About Market Growth – Got Margins?

In a “Base Case” scenario, this deal looks reasonable. We get fairly high IRRs with our baseline assumptions, ranging from 20% all the way up to 50% in the mid-range of the table:

But the “Base Case” scenario here is very rosy since we assume that the Operating Margin increases by almost 2% over 5 years… and that’s starting from a 3.5% margin, so 2% is an increase of over 50%.

The deal looks worse in other cases, including one where margins stay the same and one where margins decline by 1.5% instead:

And then things get really fun in both our own “Downside” case and the Street Consensus Downside case:

In contrast to margins, the decline of the PC and laptop markets barely makes a difference (see the Excel files and presentation for more on that).

This is not surprising: for a company with margins in the ~5% range, you would expect margin changes to make much more of a difference.

So this deal comes down to a very simple question: how certain are we that Dell will maintain its margins?

The answer is “not very” since 1) Margins have fallen in the most recent fiscal year, 2) It’s under a lot of pricing pressure in all markets, and 3) Even its acquisitions have traditionally had < 5% yields. There is very, very little evidence to support margins staying the same or increasing and a lot of evidence to support the opposite case.

As a result, we recommend against buying the company because those Downside cases represent too much risk, the company provides limited information on margins by segment, and there is almost no way to hedge against a risk like pricing pressure in the company’s core markets.

Slide 1: Executive Summary

Keep this simple – 5-6 bullets at the most. State a clear recommendation in the first bullet, followed by a few supporting factors (the numbers work / don’t work, the market is growing / shrinking and the company is well-positioned / not well-positioned, etc.).

Slides 2 – 6: Qualitative Factors That Support Your Conclusion

In these slides, you can focus on the overall market, the company’s competitors, potential growth opportunities, and deal/company-specific factors.

Here, we point out how Dell is in many different markets, each of which has different profile:

  • PCs and Laptops: Flat to negative growth, with a declining market share for Dell.
  • Servers & Networking: Growing modestly and Dell’s share is increasing.
  • Services: Unclear how big the market is, but Dell’s backlog is growing at a good clip and this has been an area of focus for them, especially overseas.
  • Software & Peripherals: Flat growth due to falling hardware sales but rising software sales.
  • Storage: Very small, but also essentially flat growth.

Dell has performed well against the competition in services and software, but it’s unclear how well it will do as an end-to-end IT provider against the likes of IBM and HP. And, of course, it’s a bit of a disaster against lower-priced desktop/laptop competitors and premium competitors (e.g. Apple).

Dell’s best growth opportunities are to increase its Servers/Networking market share, grow indirect sales (i.e. products sold via distributors rather than sales reps), increase Services revenue via bundling, and make large, solid acquisitions.

The biggest “deal” factor here is how Michael Dell’s ownership increases from ~15% to over 75%, invoking the rage of shareholders everywhere.

It’s also unclear exactly why Dell “needs” to go private to turn itself around, given that IBM and HP both did this as public companies.

Slides 7 – 16: The Numbers

The biggest problem here is that Dell doesn’t disclose much information on margins by business segment. Some older investor presentations have numbers, but there’s nothing very recent / helpful.

The most likely outcome is that their performance will be somewhere between the “Street Consensus” case and our “Base Case” – in other words, revenue will decline modestly and margins will also decline.

If Dell really earns very little Operating Income from its declining business segments, we might be more confident of its ability to maintain its margins over 3-5 years.

As it stands, though, the data is ambiguous at best.

Interestingly, the numbers “work” at first glance because:

  • The company still generates $3.0 billion+ of Free Cash Flow each year, even in more pessimistic scenarios.
  • It traded at an EV / EBITDA of 3.9x before the deal was announced, meaning it was very cheap for a tech company.
  • Dell is repatriating close to $10 billion of overseas cash to fund the deal.
  • Michael Dell is rolling over his equity.
  • And as a result of all that, Silver Lake barely contributes any of its own equity – $1.3 billion on a total deal size of $24 billion. It gets over 2x that equity contribution in FCF in just the first year!

Of course, the “Downside” cases here don’t look too pretty, which is the main reason we’re recommending against investing.

Yes, on a bright sunny day when leprechauns are dancing in the forest every deal looks great… but some deals fall apart in the Downside cases, while others hold up better.

This one falls apart even with very modest market share and margin declines.

Slides 17 – 19: The Counter-Factual

If we were making an “INVEST” recommendation, we might look at the risk factors in more detail here, explain why we might lose money on the deal, and how we could hedge against those risks.

Since we’re arguing against the deal, though, we list several factors that might make it work instead:

  1. If we were more certain of margins in future years;
  2. If we found out for sure that desktops/laptops contributed very little to the company’s margins;
  3. If it were a simpler company with a clear buyer (we might have to sell off business lines separately here, which adds to the exit risk);
  4. If there were other viable acquisition candidates with higher yields (15-20%) that weren’t incredibly expensive.

So it’s possible that our recommendation might be wrong – and you want to show interviewers and firms that you’ve thought through that possibility.

Slide 20: Conclusions

This slide restates the Executive Summary slide slightly differently.

We point out the crux of the deal: everyone was worried about the PC and laptop markets, when margins and margin contributions by business segment matter a lot more.

Without further insight into those, and more clarity around how its older acquisitions are now performing, this is a tough deal to recommend.

What Next?

Download all the documents above, including the template I gave you, and get to work picking this presentation apart and using it in your own case studies. The “blank template” file will also come in handy.

Oh, and subscribe to our YouTube channel to get even more tutorials and videos.

Between now and the end of the year, I’m going to add more shorter 5-10 minute clips for quick review of key topics.

That’s All For Now

With that, we’re done with this case study. The full 24-part case study that goes into more granular detail is already available on BIWS if you’ve signed up for one of the modeling courses there.

We’re gradually adding more YouTube videos to the M&I / BIWS channel, and I may do another case study like this one next year.

But it’s really up to you: articles/tutorials like this one tend to get a poor response rate since they’re so dense and packed with information.

Do you want to see more case studies? Shorter and simpler videos and examples? Or do you prefer to read about non-technical topics on this site?

Let me know when you have a chance.

The Rest of the Series:

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.