Paper LBO Interview Practice
By: Shelly Mittal (MBA 2023)
Paper LBOs are a common interview exercise in private equity recruiting. The interviewee usually receives a prompt with a description of a hypothetical company contemplating an LBO and some financial information. The candidate gets a pen and paper and has a short amount of time to derive the implied internal rate of return (IRR) and other key return metrics (e.g., MOIC).
John Gold, co-president of the PEVC club, along with Ricardo Phillips, James Motsinger, and Frank Luby, walked first- and second-year MBA students through an example explaining some of the key concepts of the transaction along the way.
John and the team walked around 50 students through the following process:
Calculate the purchase price and the consideration mix
Fill in the known operating assumptions
Build a debt schedule and backfill interest and adjust debt for paydown
Compute the exit and return metrics
The goal is to show hiring firms that candidates have a strong grasp of the logic of LBO transactions and that they can function under some amount of pressure. Many firms use paper LBOs to quickly screen potential candidates and are conducted at an early stage of the interview process (i.e., the first round).
Candidates who advance to the next stage of the interview process frequently have to complete a much more complex LBO modeling test. Unlike the Paper LBO, the LBO Modeling Test typically lasts 1-3 hours or even as a take-home case study.
We are holding an LBO Excel Modeling Bootcamp with Elevate on Nov. 6th from 9:00 am - 1:00 pm EST at the Fuqua School of Business. This half-day bootcamp costs $50 and is available to current Fuqua students. More information and registration can be found here.
Fuqua PEVC is one of Duke University's most active student professional organizations. We provide students interested in private capital investing with information, networking, and recruiting opportunities. The PEVC Club is a growing partner in the Fuqua network and the global investing community with a track record of facilitating career opportunities, engaging with investors, and leading professional development and community initiatives.
