Key concepts

Investment Banking interviews follow a predictable pattern of 1) fit and 2) technical questions

1) Fit questions revolve about “your story” and behavioral questions. This is primarily a sales exercise where you demonstrate knowledge about the job and humbleness

• You story – Why Investment Banking? Why us?
• Strengths and weaknesses – Are you humble enough to realize you are not the smartest guy on the floor?
• Leadership questions – Can you work autonomously? How do you handle conflict?
• Commitment questions – Why us and not them? Would you accept an offer?
• “Do you have any questions?” – [At the end of the interview, you’ll get the change to ask your questions. And you should always have questions!]

2) Technical questions mainly cover accounting and valuation concepts. If you have some experience in Investment Banking, you may be asked to talk about your work

• Accounting – understanding of the three statements and how they are linked together
• Valuation – Enterprise Value, multiples (comps & transactions), DCF, LBO (more advanced)
• Understanding Investment Banking – company profile, pitch books, M&A process

To consistently pass interviews, you must run smoothly. Cover all bases and present yourself as a friendly, happy and humble candidate. Do not cut any corners!

• You are not allowed miss any of your technical questions (aka not knowing the answer or outright answering them wrong). This is an automatic rejection
• Once you have a strong grip on technical knowledge (aka ready for interview day), get your story together
• If you are starting out, things might look overwhelming. But on the flipside, it’s a finite amount of knowledge you need to be able to confidently reproduce during an interview situation

Overview of most common interview questions

Fit questions

Your story

• Walk me through your CV. Why should we hire you?
• Why our bank? Why us?
• What do you think we do all day? What is Investment Banking?
• You worked in [e.g. Management Consulting / etc.). Why the switch? Why not them?

Strengths & weaknesses

• Tell me about negative feedback you’ve received. How did you handle it?
• Tell me about a failure
• How would you describe yourself in three words?

Leadership questions

• Tell me about a leadership role you’ve had
• Why do you believe Investment Bankers work so long hours?

Commitment questions

• What would you do with an offer today?
• Where do you see yourself in five years?

“Do you have any questions?”

• [Do you have your questions prepared for the end of the interview?]

Accounting

Understanding of the three statements

• Walk me through the three statements
• Walk me through the Income statement
• Walk me through the Balance Sheet
• Walk me through the Cash Flow Statement

How the three statements work together

• How would a EUR 1k depreciation on a truck impact the three statements? (assume a 30% tax rate)
• A company generates EUR 100m revenues. What happens to the Income Statement? Assume 40% gross margin, no changes to OPEX, 30% tax rate
• How does Inventories impact the Income Statement?
• What happens to the three statements if a company initiates a Dividend?
• What happens to the three statements if a company initiates a share repurchase program? (more advanced)
• What is EBITDA? Why do you we use it? What are its flaws?
• What is Working Capital? What happens if Accounts Receivables increase?
• If you could choose one financial statement to value a company, which one would you choose?
• If you could choose two statements, which would you choose?

Valuation

Enterprise Value

• What’s Enterprise Value and what does it mean?
• Why do we add Debt and subtract Cash?

Valuation methods

• What valuation methods do you know? What are the most common valuation methods you know?
• Which valuation methods yields the highest valuation?
• Who would pay more for a deal? A strategic investor or private equity investor
• Why would a company rather use stocks vs cash to fund the transaction?
• What are synergies in a transaction?
• What does it mean if a transaction is accretive?

Multiple valuation

• What are the most common multiples do you know?
• Estimate the Enterprise Value of a company. You have 3x LTM Sales and 10x LTM EBITDA and an LTM Income Statement
• What are the advantages and disadvantages of using multiples from comparable companies?

Discounted Cash Flow (DCF)

• Walk me through a DCF
• What are the flaws of a DCF?
• How do you calculate the discount rate?

Understanding Investment Banking

• What is Company Profile?
• What is a Pitchbook?
• Can you describe an M&A sell-side process? (more advanced)

This is an overview of the most common questions you will encounter in Investment Banking interviews. There are tons of variations, but this set of questions cover all the major concepts. This is a good starting point.

To consistently pass interviews, you need to cover all your bases. You need to be able to answer all of them fluently without any hesitations in an interview situation. Just winging it will most likely not work. There will always be candidates who ticks all the boxes.

In the next lessons of the Executive Summary we’ll give you best practices answers to these questions.