What do you do when your model shows the deal doesn't work?
A core Private Equity interview question — asked in analyst and associate interviews across IB, PE, and the Big 4.
THE SHORT ANSWER
If the base case shows below 15% IRR, I'd first pressure-test my assumptions — am I being too conservative on growth, margins, or exit? Then I'd explore structural improvements: can we increase leverage? Is there a bolt-on that improves the thesis? Can we negotiate price down? If none of these get us to hurdle, I'd present the analysis honestly: this deal doesn't work at this price. Walking away is a skill, not a failure.
WHAT INTERVIEWERS LISTEN FOR
- ✓Pressure-test assumptions for conservatism
- ✓Explore structural improvements (leverage, bolt-on, price)
- ✓Present honest analysis and be willing to walk away
COMMON MISTAKES
- ✗Forcing the deal by manipulating assumptions
- ✗Ignoring base case and focusing only on upside scenarios
- ✗Failing to communicate findings clearly to the team
Reading isn't the same as answering under pressure.
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