The exact formats interviewers use, five worked sample questions, and a drill plan that actually builds speed under the clock.
LBO modeling tests come in two flavors and you should know which one you're walking into before you sit down. The sponsor-style test hands you a one-pager — revenue, EBITDA margin, capex, working capital, an entry multiple, a debt package — and asks you to build a 5-year model and return IRR and MOIC. Expect 60–90 minutes for the case study version, 30 minutes for the screening version, and as little as 5 minutes for the "paper LBO" done on a whiteboard or napkin.
The operating-company test is rarer but shows up at PE firms with a heavy diligence culture (Berkshire-style, ops-focused mid-market). You're given a more detailed three-statement starter and asked to project the business, then layer on the LBO mechanics. The bar here is whether you can read a P&L, not whether you can wire up a debt schedule fast.
Every PE associate interview starts here. The interviewer says: "EBITDA is $100m, you pay 10x, you fund it 60% with debt at 8%, EBITDA grows 10% a year, you exit at the same 10x multiple in year 5. What's the IRR?" You have five minutes, no Excel, no calculator. Here's the mental model:
EBITDA $100m, entry 10x, 60% debt at 8%, EBITDA grows 10%/yr, exit at 10x in year 5. IRR?
Worked: Entry EV = $1.0bn. Debt = $600m. Equity = $400m. Exit EBITDA = 100 × 1.61 = $161m. Exit EV = $1.61bn. Assume modest deleveraging — call ending debt $400m. Exit equity = $1.21bn. MOIC ≈ 3.0x. IRR ≈ 25%.
Same deal, but 50% debt instead of 60%. What happens to IRR?
Worked: Equity check rises from $400m to $500m. Less debt to pay down, but you also gave up the leverage. Exit equity climbs maybe $80m. MOIC drops from 3.0x to ~2.6x. IRR drops ~3 points. Lesson: leverage compounds equity returns when EV grows.
Entry 10x, exit 8x. EBITDA still grows 10%/yr. What's the IRR?
Worked: Exit EV = $161m × 8 = $1.29bn. Exit equity ≈ $890m. MOIC ≈ 2.2x. IRR ≈ 17%. Lesson: a 2-turn multiple contraction can eat half your return. Always pressure-test exit multiple assumptions.
EBITDA flat, no growth, but FCF = $80m/yr and all of it pays down debt. IRR?
Worked: Exit EV = same $1.0bn. Ending debt = $600m − $400m = $200m. Exit equity = $800m. MOIC = 2.0x. IRR ≈ 15%. Lesson: pure deleveraging works but it's a slower, less attractive return profile than growth.
Year 3 you recap and pull $200m out. How does it change IRR?
Worked: You get $200m back in year 3, then exit equity in year 5. The midpoint dollar matters: NPV-weighted, IRR jumps 3–5 points. Lesson: time-weighted returns reward early distributions. This is why GPs love recaps.
Reading worked answers is not practice. Practice is doing the math under a stopwatch with no reference. A drill plan that works:
| Week | Drill | Time cap |
|---|---|---|
| 1 | Paper LBO, same numbers, every day until automatic | 5 min |
| 2 | Paper LBO, varied inputs (debt %, growth, multiple) | 5 min |
| 3 | 30-minute screening test in Excel — blank sheet to IRR | 30 min |
| 4 | Full 90-minute case study with debt schedule + sources/uses | 90 min |
FundSim runs a free interactive LBO simulator in your browser — no signup, no Excel. Plug in entry multiple, leverage, growth, and exit assumptions and see IRR/MOIC update live. Use it as a check on your paper math, or run drills against a 10-minute timer.
For finance clubs
10 minutes. Timed LBO. Weekly scenario. See who on your team would actually get the job.
Start the challenge →