If you are starting out prepping for Investment Banking interviews, it is overwhelming. You will hear about all sorts of war stories and the vast amount of knowledge you need to consume to be ready. It seems to be an impossible task. Information is abundantly available for free: countless eBooks, blog posts and message board threads with all sorts of tips and hacks. But what is truly critical to your interview performance vs. just noise and “nice to have”?
We are here to tell you that Investment Banking interviews are not rocket science. Having worked on the Street ourselves, we can assure you that Investment Banking interviews follow a very predictable pattern. We ask the same questions over and over again. We don’t have time to invent new questions. Every interviewer has their set of questions. This makes interviews more comparable.
To consistently pass Investment Banking interviews, you need to master a set amount of knowledge. You have to become comfortable reproducing (not memorizing) the content in a high-pressure interview situation. People tend to lose themselves in details. This overcomplicates your interview prep and you feel overwhelmed. This article will give you a good overview of the type of questions you can expect. We are talking of the main building blocks vs. mindlessly memorizing an endless number of questions. Questions can be changed and twisted. The main concepts remain the same. This article will give you a good feeling of what to expect in an Investment Banking interview.
Please keep in mind: this article is about Investment Banking interviews and what to expect from a high-level perspective. This is not the overall interview preparation process of how to prepare and win offers in detail.
If you are looking for an interview cheat sheet, here are the 42 most common interview questions.
Overall, there are two different types of questions:
Fit questions: These questions revolve around your story and “behavioral questions”. We want to figure out why you want to do Investment Banking and whether you are a hardworking individual. Fit questions are more about sales rather than clear-cut right or wrong answers. There is no right or wrong with fit questions. However, there are more convincing and less convincing answers
Technical questions: Here, we want to see whether you have a basic understanding of accounting, valuation and Investment Banking. These are hard right or wrong questions. Most people are more comfortable with these questions because there are clear right or wrong answers – similar to college exams. Either you know the answer or you don’t. There is no room to wiggle yourself out
Fit questions
Fit questions or “behavioral questions” are about figuring out whether you are a hardworking individual, whether you are a bearable person and whether we can imagine working with you for 16 hours a day. That’s the main point. Can we work with this person? Will that person fit into the team? We are looking for someone who understands what they are applying for and what they are getting themselves into. If you are unsure, veer more on the more compliant and non-combative side. The worst thing to happen is to hire somebody who just brings chaos into the team.
People tend not to take these questions seriously because there are no clear right or wrong answers. Since it’s not clear cut, they think they can just wing it or give a generic answer. Yes, there is some wiggle room, but there are more convincing and less convincing answers. So, don’t underestimate these types of questions. They require a lot of preparation before the actual interview. You can’t walk into an interview and just wing it. You can’t just ramble what comes to your mind. You need to have your stories laid out and prepared. In other words, you need to know what you are doing.
Your story
Fit questions usually start with “your story”. It breaks down into “why Investment Banking” and “why this specific bank”. You go from the broader industry down to the more specific bank itself. This is where you have to do your research and link all your recent experiences to Investment Banking related tasks. Variations of these questions might be “walk me through your CV”, “why should we hire you”, “why Investment Banking” or “why us”. You can use the same content to answer those questions. Start with “why Investment Banking” as the broader industry. Then, move on to “why this specific bank”.
Strengths and weaknesses
Next, we will most likely talk about your “strengths and weaknesses” to check whether you are a humble, hardworking and non-combative candidate. This question is a pure sales exercise where you say what the interviewer wants to hear. Keep in mind, don’t explicitly tell that you are hardworking. Show that you are hardworking with a story. Again, everything you highlight should somehow tie into Investment Banking job tasks. Your top-ranked GPA might be proof that you are hardworking or that one group work where you had to cover the entire work because your teammates were slacking. Prepare a story on how you handled negative feedback to demonstrate that you are humble enough to admit mistakes and are willing to improve. The weaknesses that you highlight should not kill your entire application and should show humbleness and self-awareness. If you are still starting out, not having any industry experience (willing to learn) or wanting to improve your attention to detail are all valid points.
Leadership questions
Leadership questions are where you can show that you are a self-starter and that you figure things out by yourself. We might ask you whether you had any leadership role in the past or how you handled a conflict. You can use the same example with group work. First, you tried to convince your team members to contribute with more suitable items for them. But in the end, you had to take responsibility for your project work and re-do everything they did. That’s an example of how you show that you can take on responsibility and figure things out yourself. Don’t tell your interviewer that you don’t shy away from conflict to push your interest through. We don’t want a combative employee who will only agitate the team. You should demonstrate ownership and be able to work with the team.
Commitment questions
Commitment questions are rather tricky questions that can throw you off-guard and potentially kill the entire application at the end. That’s when a Managing Director out of nowhere pops out “would you accept an offer?”, “what would you do with an offer from Goldman” or “why not bulge bracket”? These are all trick questions and another sales exercise. Until you have an offer, you have to signal commitment. You can still ask for a couple of days of consideration and push signing back a little bit. But on the spot, you have to signal commitment and explain why the option you are interviewing for is the best option for you.
“Do you have any questions?”
“Do you have any questions?” is how interviews are usually wound down. You have almost made it. It’s a formal way to end the interview and your opportunity to position yourself as a compelling candidate. You can build rapport by asking Senior Bankers about a memorable deal and how they want to grow their business. On the other hand, you can ask Junior Bankers about their career choices or quality of life. Anything you ask should be related to the interview. So, pay attention to the interview and take notes. It’s your opportunity to build rapport, escalate the interview into a more casual conversation and end the interview on a positive note. The worst case is not having any questions and just leaving. That signals disinterest and that you are more interested in other options. In other words, you always have questions.
Technical questions
Technical questions revolve around a basic understanding of accounting, valuation and Investment Banking. These are hard right or wrong questions. Most people are more comfortable with technical questions because there is a clear right or wrong answer. It’s more similar to university exams. Either you know the answer or you don’t – no wiggle room for errors.
Now, you might think to yourself; I can wing it. I’ve already had accounting and valuation classes and passed them with flying colors. So, this should be a walk in the park, right? Don’t be so sure. What you are being taught at university is academia. An interview situation is entirely different. It’s more “applied” accounting and valuation. You have to be able to reproduce a lot of content in a much shorter time span. If we hit you up with “walk us through a DCF analysis” you have 3 to 5 minutes to describe a DCF analysis without any hiccups. This is a lot different compared to college course content or exams. An interview situation is a lot more condensed and there is a lot more at stake.
Accounting
Technical questions usually start with accounting questions. These are the basics. You should know how the three statements (P&L, Balance Sheet and Cash Flow Statement) work and link together. We usually start by simply describing the three statements. That’s usually a good starter. After that, you would have to walk through different cases and how they impact the three statements. The most common question is how a EUR 1k depreciation of a truck impacts the three statements. This question triggers all three statements and is a pretty good case example. You have to understand how each business transactions affect the three statements. That’s what accounting is all about.
Valuation
Next, we are moving to valuation concepts. Valuation has three parts: Enterprise Value, multiple valuations and Discounted Cash Flow (DCF) analysis. Those are the most common questions for M&A Investment Banking interviews at entry-level.
Enterprise Value vs. Equity Value is about purchasing price and what the buyer really pays. Enterprise Value is the entire company value, including debt and cash. Enterprise Value = Equity Value + Debt – Cash. However, the buyer only pays the Equity Value – not the Enterprise Value. The Enterprise Value is only for valuation purposes. It makes valuations more comparable among different target companies by excluding capital structure. Rearranging the equation, you get Equity Value = Enterprise Value – Debt + Cash. You subtract debt and add cash to get what the buyer really pays. Debt is liabilities that will be transferred to the new owner, so the buyer subtracts debt. On the other hand, cash is added to the Equity Value because the new owner also owns that cash.
Valuation methods are about knowing how the most common valuation methods work. You have the multiple valuation method and the Discounted Cash Flow (DCF) method. With multiples, you source a multiple from publicly listed comparable companies or recent comparable transactions. At what valuation are similar companies currently trading? How much did investors pay for similar companies in the past? That’s the high-level intuition. You get your EBITDA multiple and multiply it with your target company's EBITDA. And there you have your Enterprise Value. The other method is the DCF method. This is where you look into the company’s business plan and discount all future cash flows to the present to see what the entity is worth today. This method depends a lot on the validity of the business plan.
Understanding Investment Banking
Last, we would talk about M&A Investment Banking itself to see how much you know about the industry. What do you think M&A is? What’s a company profile? What’s a pitch book? Describe a sell-side process. Describe a buy-side process. Why do you think Investment Bankers work so long? This is just to test whether you know what you are getting yourself into and understand what Investment Banking is about. It’s not rocket science, but a point that can be easily forgotten with all the fit and technical questions you need to figure out.
How good do you have to be?
Now comes the big question. How good do you have to be to pass interviews consistently? Can you wing it and skip some questions? Sure. You may get lucky and pass one interview round. But your luck will most likely end by the second or third interview round. We can figure out pretty quickly how well you have prepared and how serious you are about Investment Banking. We are dealing with these concepts 16h per day. It’s a simple game of accumulating knowledge and being prepared for the most common questions. Especially with all the interview content out there, a well-prepared candidate will know how to answer all of them.
Now that answer may not help you as much. So, here is a progression scale. We’ll give you an overview of how a beginner, intermediate and expert would perform. In short, being a simple beginner will not cut it. You will consistently get rejected. If you are at the intermediate level, it’s a 50/50 deal. Sometimes you may get lucky and sometimes you will get sacked. If you are advanced, it’s more yes than just maybe. There is not a 100% guarantee. This is sales and not an exam. Under normal conditions, you would pass, but the bank may have already filled up all their spots – who knows. This should give you a rough idea of how good you need to be to have a realistic chance in an Investment Banking interview.
Beginner
You’re completely new to the Investment Banking game. You have heard about “tough” Investment Banking interviews and interview guides. You have a vast collection of free content and PDFs in your “IB prep” folder. However, you haven’t consumed all the content. Your interview notes are basic to nonexistent. You are at 0% to 40%. You are most likely overwhelmed by the amount of content that you need to assimilate. You are most likely just “glancing” over your favorite summary, thinking, “I got this”. You most likely rely on memorizing a fixed set of static interview questions and answers, which gives you a false sense of confidence.
This is not good enough. You need to take more diligent notes. You are most likely missing out on a couple of major blocks. Go through the content, question by question, and think them through. Create your own “Executive Summary”. You need to start taking interview prep more seriously. Focus on yourself and your mission. Don’t get distracted by other people and the noise around you.
Intermediate
This is where probably most of you will be at. You know what to expect. You most likely have heard about all the major content blocks of an Investment Banking interview before. There is nothing new or groundbreaking. You have some notes, but you are not sure if it’s good enough. Before an interview, you’re always a bit nervous. You try to cram as much knowledge in your head as possible – like an exam. You know what to expect, but you most likely only have a firm grip on 60% to 80% of the content. The remaining 40% to 20% is either a hit or miss – you always discover that “odd” question that throws you off balance. You may struggle to reproduce convincing responses in a high-stakes interview setup.
Is this good enough? Maybe. If you were to force us for an outlook, it would be like flipping a coin. On a good day, you can weasel yourself into the next round or maybe even an internship offer. On a bad day, you get rejected because you missed one or two big technical questions or you couldn’t quite convince on some behavioral questions. Just keep zeroing in on your weaknesses, sort your notes, practice reproducing the content and you will eventually break through.
Advanced
You know all the major questions and have well-sorted notes. You also have a bit of interview experience under your belt. You know exactly what to expect in your next interview. Going through fit and technical questions, you have all of these questions figured out and CAN reproduce a competent answer to almost all of those items. In other words, you know your story by heart and have a strong grip on technical questions. More importantly, you learn by concepts and not by question memorization. You have a firm grip on 80 to 95% of the content.
What can go wrong, you might think? Well, you may suffer from rejections you can’t explain or you might be struggling with the Partners. You have done most of the heavy lifting regarding your interview preparation. You know what to expect and can consistently reproduce the necessary content blocks. Now, it comes down to “making a good impression” and building rapport with your interviewer (aka being happy, likable and agreeable). Interviewing is sales and not a college exam. Learn as much about the person/bank, figure out their opinions on professional topics and agree with them differently. For example, if you know they do many industrial deals, be excited about that segment – don’t bring up that Software and SaaS are way cooler. You are trying to sell yourself as their best possible candidate who will fit well into their existing team.
Where does it leave us?
We have touched on a lot of points in this article. The main point is simple: You cannot prepare for Investment Banking interviews last minute. You cannot prepare for technical questions last minute. You cannot give a detailed answer to questions about Enterprise Value or valuation methods if you don’t fully grasp those concepts. Yes, you can come up with a halfway decent story in a couple of hours, but it will not be as convincing as taking your time doing the work.
With that said, Investment Banking interviews follow a predictable pattern and are not rocket science. The topics and questions are always the same.
For fit questions you are looking at:
Your story
Strengths and weaknesses
Leadership questions
Commitment questions
“Do you have any questions?”
On the technical side you are looking at:
Accounting
Valuation – Enterprise Value
Valuation – Multiple valuations
Valuation – DCF
Understanding Investment Banking
That’s quite a lot of ground to cover. At minimum, you would have to start 2-3 months in advance to understand the fit and technical questions if you are starting from zero. You can’t just cram all the content in your head in a fire drill session and expect to be prepared. You have to perform in an interview situation. On the flip side, you need to assimilate and master a finite amount of knowledge to do well consistently. We think that everyone can master this body of knowledge with enough time and effort. It is not rocket science; it just takes effort.
Additional resources
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