The private equity case study interview: what “would you invest?” is really testing
In a private equity case study interview the model is the entry ticket. Here's what “would you invest?” really tests and how to give a clear answer.
4 min read · RoundReady
Most private equity case studies end the same way. You've had a pack of information, built a model and worked out a return. Then someone across the table leans back and asks:
“So would you invest?”
A lot of candidates treat this as a formality. They've spent their prep on the model so they summarise the model: “The IRR is 22% so yes.” That answer misses the point of the question.
The model is the entry ticket
Funds care that your numbers are right. A wrong return, a missed debt balance or a broken formula will hurt you. But a correct model only shows you can do what a good analyst can do. It doesn't separate you from the other people in the process, most of whom will also get the maths right.
The question that separates people is the one at the end. The job is deciding where to put other people's money for five years. “Would you invest?” is the closest thing the interview has to the real job.
What the question is actually testing
Underneath it are four smaller questions:
- 01Can you say why this is a good business? Not a good spreadsheet. What does it do well and why will that last?
- 02Can you see what could go wrong? The risks that would actually change the outcome, not a list of every possible risk.
- 03Do you know what you'd need to believe? Which assumptions carry the return and how confident you are in each one.
- 04Will you commit? A clear yes or no with conditions, not “it depends”.
A weak answer and a strong one
Take a fictional case. Ashby Veterinary runs 40 clinics, earns £20m of EBITDA and is for sale at 11x. Your model, with growth from new clinics and some debt paydown, shows a 2.4x return over five years, about 19%.
It's not wrong, but it tells the interviewer nothing they didn't already know. The risks could apply to any company in any sector. And there's no sign of what would change the answer.
Same numbers. But this answer names the thesis, finds the one assumption that matters, puts a number on the downside and says what would change the decision. That's how an investment committee memo reads and it's what the interviewer is hoping to hear.
“No” can be the right answer
Some case studies are built so the honest answer is no, or not at this price. The return might only work with a higher exit multiple than the entry multiple, or the growth plan might be far ahead of anything the business has done before.
Saying “I wouldn't invest at 11x, but I would at 9x and here's why” is a strong answer. Funds turn down far more deals than they do. Showing you can walk away is part of showing judgement.
How to prepare for it
Leave time at the end of every practice case for the recommendation and say it out loud. Aim for under two minutes: decision, thesis, the assumption that carries the return, the biggest risk with a number on it and what you'd diligence first.
Then have someone push back. The first answer is rarely where the marks are. The marks are in how you hold or change your view when someone challenges it.