How investment banking interviews work
Investment banking interviews have two distinct components: technical questions and behavioral questions. Technical questions cover accounting, valuation (DCF, comparable companies, precedent transactions), LBO modelling, and M&A deal mechanics. Behavioral questions assess your motivation, your ability to work under pressure, and your fit with the team. Both carry significant weight and preparation must cover both equally.
The interview process typically runs from a HireVue or phone screen through to a Super Day of four to six back-to-back interviews. Technical questions are asked in every round, including Super Day. Candidates who prepare only behavioral answers and expect to wing the technical section are routinely screened out in early rounds.
Accounting and financial statement questions
"Walk me through the three financial statements and how they connect." Net income from the income statement flows into retained earnings on the balance sheet and into operating cash flow on the cash flow statement. Depreciation, a non-cash expense on the income statement, is added back in operating cash flows. Capital expenditure reduces cash on the cash flow statement and increases PP&E on the balance sheet. Know these linkages in both directions.
"If revenue increases by $100 with a 30% tax rate and 20% EBITDA margin, what happens to cash?" Walk through: $100 revenue, $80 costs gives $20 EBITDA. After tax: $20 x (1 - 0.3) = $14. Working capital changes and capex would affect cash further but the core operating cash impact is $14. Interviewers test whether you can move quickly through these calculations without a spreadsheet.
Valuation questions
"When would you use each of the three main valuation methodologies?" DCF is used when future cash flows are predictable and you have high confidence in the forecast. Comparable company analysis is used when there are public peers with similar business profiles. Precedent transactions is used when recent M&A activity in the sector provides relevant acquisition multiples. In practice, a pitch book shows all three and the implied ranges overlap to triangulate a fair value range.
"What is WACC and what are its components?" WACC (Weighted Average Cost of Capital) is the blended cost of a company's capital, weighted by the proportion of debt and equity. Cost of equity is estimated using CAPM: risk-free rate plus beta times the equity risk premium. Cost of debt is the after-tax yield on the company's debt. Discuss the inputs you would use for each component and the common debates (levered vs unlevered beta, equity risk premium estimates).
LBO questions
"Walk me through an LBO." An LBO is an acquisition financed primarily with debt, where the target's cash flows service the debt over the hold period. The equity sponsor contributes 30-40% of the purchase price. Returns come from three sources: deleveraging (debt paydown), EBITDA growth, and multiple expansion. The exit value minus residual debt is the equity return. Know how to calculate IRR and MOIC from basic inputs.
"What makes a good LBO candidate?" Stable, predictable cash flows (to service debt), strong market position (pricing power and defensible revenues), limited capex requirements, identifiable operational improvements, and a clear exit path. Asset-heavy businesses or those with cyclical revenues make poor LBO candidates because debt service becomes difficult in downturns.
M&A questions
"Is an acquisition accretive or dilutive to EPS?" Accretion or dilution depends on the relative P/E of the acquirer versus the target and the form of consideration. If the acquirer's P/E is higher than the target's, an all-stock deal is typically accretive. If the acquirer pays a premium in cash at a cost of debt lower than the target's earnings yield, it is typically accretive. Walk through the maths for a given scenario rather than giving a general rule.
"What synergies would you expect from a merger of two retail banks?" Revenue synergies: cross-selling products to the combined customer base, geographic coverage expansion. Cost synergies: branch network consolidation, back-office function mergers, technology platform rationalisation. Cost synergies are typically more reliable and quantifiable than revenue synergies. Discuss how you would estimate and assign confidence levels to each.
Behavioral questions
"Why investment banking?" This must be answered specifically and credibly. Reference the type of transactions you want to work on, the analytical skills the role develops, specific deals you have followed, or conversations with bankers that shaped your view of the work. Vague answers about "deal-making" and "fast-paced environments" are the most common and the least convincing.
"Tell me about a time you worked on a project under a tight deadline." IB hours are demanding and interviewers screen for candidates who can handle sustained pressure without breaking. Choose a genuine high-pressure example, describe how you managed your time and prioritised, show that quality was maintained despite the pressure, and be honest about what was difficult. Avoid stories where the deadline was easy to meet.