Feb 2025

Technical interview question about LBO Risks for Mid-Level Investment Banking

What are the key risks in a leveraged buyout (LBO) transaction, and how would you mitigate them?

Investment Banking

Technical

Asked at

Lazard

Difficulty :

Hard

Explanation

This question tests your understanding of LBO structures, particularly the risks involved and how to manage them. Recruiters are looking for your ability to identify financial, operational, and market risks and propose practical mitigation strategies. Common pitfalls include providing superficial answers or ignoring key factors like debt servicing. A strong response demonstrates a deep understanding of LBO mechanics and risk management techniques. Preparation involves studying LBO models and analyzing real-world examples.

Answer Example

The key risks in an LBO include high leverage leading to debt servicing challenges, operational underperformance, and market volatility affecting exit valuations. To mitigate these risks, I would structure the debt with manageable covenants, focus on operational improvements to drive cash flow, and consider hedging strategies to manage market risks. For example, in a case study, I proposed reducing leverage to 4x EBITDA and implementing cost-saving measures, which improved debt coverage ratios and ensured a smoother exit within five years.

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Feb 2025

What are the key risks in a leveraged buyout (LBO) transaction, and how would you mitigate them?

Technical

Asked at

Lazard

Difficulty :

Hard

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Explanation

Answer Example

Also check out

Can you describe a time when you designed a feature that improved player retention?

Situational

Asked at

Ubisoft

Difficulty :

Medium

How do you manage and mentor junior analysts in your team?

Leadership

Asked at

UBS

Difficulty :

Easy

How would you develop a risk management framework for a financial institution expanding into a new market?

Strategic

Asked at

Bank of East Asia

Difficulty :

Hard

How do you build and maintain long-term client relationships?

Communication Skills

Asked at

Ogilvy

Difficulty :

Medium

How do you manage competing priorities when covering multiple sectors or companies?

Situational

Asked at

Bank of America

Difficulty :

Hard

Designed to be stress-free.

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Step 2: Paste Job Description

Step 3:Download and Apply

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