Investment Banking vs Private Equity: Roles, Recruiting, Interviews
Choose investment banking if you are breaking into finance and want broad deal exposure across M&A, financing, and valuation. Choose private equity if you already have deal or modeling experience and want to invest capital as a principal, since most PE interviews assume banking-level technicals and add a timed LBO and an investment case on top.
Investment Banking vs Private Equity at a glance
| Dimension | Investment Banking | Private Equity (LBO) |
|---|---|---|
| Core role | Advises companies on M&A, capital raising, and restructuring, earning fees as an agent | Buys and owns companies, usually with leverage, and earns returns as a principal investor |
| Side of the deal | Sell-side or buy-side advisor to a client | Buyer and owner, often the counterparty a bank is advising |
| Typical entry point | Undergraduate and MBA analyst and associate programs | Mostly experienced hires, commonly former banking analysts or consultants |
| Core technicals | Accounting, 3-statement linking, DCF, comparables, precedent transactions, accretion/dilution | Everything in banking plus LBO structuring, returns math (IRR and MOIC), and value creation |
| Signature interview test | Technical questions and walk-throughs of valuation and merger math | Paper LBO, timed LBO modeling test, and a written or verbal investment case |
| Judgment being assessed | Can you execute accurately and explain the mechanics | Would you invest in this business, at this price, with this capital structure |
| Day-to-day work | Pitch books, models, process management, client materials | Sourcing, diligence, financing, portfolio monitoring, exit planning |
| Time horizon | Deal by deal, months per transaction | Multi-year holding periods per investment |
Choose Investment Banking if
- You are early in your career and want the most common entry route into high finance
- You want exposure to many industries, deal types, and financing structures
- You prefer advisory and execution work over making the final investment decision
- You want to build the accounting and valuation foundation that PE interviews assume
Choose Private Equity if
- You already have banking, consulting, or transaction experience
- You want to make and defend investment decisions with your own judgment
- You enjoy long-term ownership work: operations, value creation, and exits
- You are comfortable with timed LBO modeling tests and case-based interviews
Is private equity harder to get into than investment banking?
Private equity usually hires fewer people and expects prior experience, so the bar is typically higher. Most candidates arrive with banking or consulting experience, and interviews test both technical fluency and investment judgment. Investment banking has more entry-level seats through structured analyst programs.
Do PE interviews ask investment banking technical questions?
Yes. PE interviewers assume you know accounting, 3-statement linking, and valuation, and they often ask the same technical questions a bank would. They then go further with LBO mechanics, returns math, deal discussions from your experience, and an investment case.
What is a paper LBO?
A paper LBO is a simplified leveraged buyout you solve by hand or mentally in a few minutes, using round numbers. You estimate the purchase price, debt and equity funding, EBITDA growth, debt paydown, exit value, and the resulting IRR or multiple of money. It tests whether you understand the drivers of returns, not spreadsheet speed.
Should I learn LBO modeling before an investment banking interview?
A basic understanding helps, because banks may ask how an LBO works and why sponsors use leverage. Banking interviews focus more on accounting, DCF, comparables, and merger math. If you plan to recruit for PE later, building LBO skills early is a worthwhile use of study time.
Can I prepare for both IB and PE interviews on KomFi?
Yes. KomFi has separate Investment Banking and Private Equity (LBO) topics with practice questions that include full explanations, plus flashcards and a glossary. The free Basic tier lets you start drilling, and Pro unlocks the full question banks.