Search Fund Interview Questions

Free sample from the Deskcraft question bank

Search fund and independent-sponsor interviews test acquisition judgement and LBO fundamentals: what makes a good target, the returns math, and how you would run a deal. A real sample from the Deskcraft bank.

1. Walk me through the sell-side M&A process.

Model answer

Preparation of financials, the CIM and a data room; buyer outreach with a teaser and NDA; first-round indications of interest; management presentations and due diligence for selected buyers; final bids with a marked-up purchase agreement; negotiation and signing; then regulatory approval and closing. The banker runs a competitive auction to maximize price and certainty.

2. What makes a good LBO candidate?

Model answer

Stable, predictable cash flows to service debt; low capex and working-capital needs; strong margins; a defensible market position; room for operational improvement; a clean balance sheet with debt capacity; and a clear exit path. Mature, non-cyclical businesses are ideal.

3. Why is EV/EBITDA more common than P/E for comparing companies?

Model answer

EV/EBITDA is capital-structure neutral, since both numerator and denominator are pre-financing, and it is pre-tax and pre-D&A, so it compares operating value across companies with different leverage, tax and depreciation policies. P/E is distorted by capital structure and one-time items below EBIT.

4. How would you value the target in that deal?

Model answer

Name the methods (comps, precedents, DCF, LBO), say which matters most here and why, and note the control premium in an M&A context.