The investment banking technical interview is one of the most well-defined challenges in all of recruiting. Unlike consulting case interviews, which can go many directions, IB technicals follow a predictable structure: accounting, valuation, LBO, and M&A. That predictability is good news — it means with the right preparation, you can walk into any superday and handle whatever gets thrown at you. This post gives you the complete checklist: every topic you need to know, how deep you need to go, and the questions banks actually ask most often.
Why Technical Prep Matters More Than Most Candidates Realize
Many candidates underestimate the technical interview and over-invest in behavioral prep. That’s a mistake. At bulge bracket and elite boutique banks, technicals can be the entire interview for some analysts — and even where behaviorals matter, stumbling on basic accounting or valuation questions signals you’re not ready for the job.
The good news is that IB technicals are learnable. You don’t need a finance background or an accounting degree. You need to understand a defined set of concepts deeply and be able to explain them clearly under pressure. Our Technical Cheatsheet covers the core concepts in a format designed for exactly this kind of prep — it’s one of the most-used free resources we offer, and for good reason.
Part 1: Accounting and the Three Financial Statements
Accounting is the foundation. Every valuation and modeling question builds on your ability to understand how financial statements work and how they connect to each other.
Income Statement Essentials
Know the structure cold: Revenue — COGS = Gross Profit. Gross Profit — OpEx = EBITDA (roughly). EBITDA — D&A = EBIT. EBIT — Interest = EBT. EBT — Taxes = Net Income. Be able to explain what each line means and what drives changes in it.
Common questions: “Walk me through the income statement.” “If revenue increases by $100, what happens to net income?” “What’s the difference between EBIT and EBITDA?”
Balance Sheet Essentials
Assets = Liabilities + Equity. Current vs. non-current assets. Goodwill and intangibles. Debt structure (revolver, term loans, bonds). Retained earnings as the link to the income statement.
Common questions: “Walk me through the balance sheet.” “What happens to the balance sheet when you raise debt?” “Why does goodwill appear after an acquisition?”
Cash Flow Statement Essentials
The CFS reconciles net income to actual cash. Three sections: operating (starts with net income, adds back D&A, adjusts for working capital), investing (capex, acquisitions), and financing (debt issuance/repayment, equity issuance, dividends).
Common questions: “Walk me through the cash flow statement.” “Why does D&A get added back in operating cash flows?” “What’s the difference between cash flow from operations and free cash flow?”
The Critical Linkage Question
One of the most common technical questions in any IB interview: “If depreciation increases by $100, walk me through the impact on all three financial statements.” Know this answer cold and be able to walk through it step by step. (Short answer: Income down ~$65 assuming 35% tax rate, cash flow from operations up ~$35 net, assets down by $100 on balance sheet via lower PP&E, retained earnings down ~$65 — it all ties.)
Part 2: Valuation — The Three Core Methods
Investment banking valuation comes down to three primary methods: Comparable Company Analysis (Comps), Precedent Transaction Analysis, and the Discounted Cash Flow (DCF). Know all three and be able to explain when you’d use each and why.
Comparable Company Analysis (Comps)
Comps values a company based on how similar public companies are valued by the market. You screen for companies with similar business models, size, and growth profiles, pull their EV/EBITDA, EV/Revenue, and P/E multiples, and apply those multiples to your company’s metrics.
Key concepts: enterprise value vs. equity value, why you use EV/EBITDA vs. P/E for different situations, how to screen for comps, and the main limitation (no two companies are truly identical).
Precedent Transaction Analysis
Similar to comps but looks at M&A transactions rather than public market prices. Precedent transactions typically show higher multiples than trading comps because they include a control premium — the buyer paid extra to acquire control of the business.
Key concepts: control premium, why precedents might be stale, how to screen for relevant transactions, and when precedents are most useful (in sell-side M&A processes).
Discounted Cash Flow (DCF)
The DCF is the most theoretically rigorous method — it values a company based on its intrinsic cash-generating ability. You project free cash flows over a 5-10 year period, calculate a terminal value (either via a Gordon Growth Model or an exit multiple), and discount everything back to the present at the weighted average cost of capital (WACC).
Common DCF questions: “Walk me through a DCF.” “How do you calculate WACC?” “What’s the difference between levered and unlevered free cash flow?” “What’s a terminal value and how do you calculate it?” “Why might a DCF give a different answer than comps?”
Be ready to discuss WACC components: cost of equity (via CAPM), cost of debt, and how you weight them by capital structure. Know how to calculate beta using the Hamada equation if you’re going into a highly technical group.
Part 3: LBO Basics
Leveraged buyout (LBO) questions come up in most technical interviews, even for investment banking (not just PE) roles. Banks work on LBO transactions on the sell-side and run LBO analyses as part of deal work, so you’re expected to understand how they work.
The Core LBO Concept
An LBO is an acquisition financed primarily with debt. A private equity firm buys a company using a combination of equity (20-40%) and debt (60-80%), with the acquired company’s assets and cash flows used as collateral for the debt. The PE firm aims to repay debt over a 3-7 year hold period, grow the business, and sell it at a higher multiple — generating a strong return on their equity investment.
LBO Returns Drivers
There are three main ways PE firms make money in an LBO: EBITDA growth (the business gets more valuable), multiple expansion (they sell at a higher EV/EBITDA multiple than they bought), and debt paydown (less debt means more equity value). In a good LBO, all three work together.
Common questions: “Walk me through an LBO.” “What makes a good LBO candidate?” “How does leverage affect returns?” “If entry and exit multiples are the same but the company pays down debt, how does that create value?”
What Makes a Good LBO Candidate
Banks love this question. Good LBO candidates have: stable, predictable cash flows (to service debt), low capex requirements, a strong market position with defensible competitive moats, an experienced management team, and ideally a clear exit path. Classic examples: mature consumer staples businesses, healthcare services, software companies with recurring revenue.
Part 4: M&A Concepts
M&A questions test your understanding of why companies buy each other and what happens financially when they do.
Accretion/Dilution Analysis
When a company acquires another, the question is whether the deal is accretive or dilutive to earnings per share (EPS). If the combined company has higher EPS than the acquirer did standalone, the deal is accretive. If lower, it’s dilutive.
The key driver is the comparison between the cost of acquisition (the deal multiple paid) and the return (the target’s earnings yield). Stock deals funded below the target’s earnings yield will typically be accretive.
Deal Structures: Cash vs. Stock
Cash deals are simpler — the acquirer pays cash, goodwill is created on the balance sheet, and there’s no share issuance. Stock deals involve issuing new shares, which dilutes existing shareholders but doesn’t require cash. Mixed consideration deals combine both. Tax treatment differs: cash deals are typically taxable to the seller; stock deals can be structured as tax-free reorganizations.
Synergies
Synergies are the value created by combining two companies that wouldn’t exist independently. Revenue synergies (cross-selling, expanded distribution) are harder to achieve; cost synergies (eliminating duplicate functions, procurement savings) are more reliable. Bankers model synergies carefully because acquirers often pay a premium based on synergy expectations.
Part 5: Enterprise Value vs. Equity Value
This topic trips up more candidates than almost any other. Get it exactly right.
Enterprise value (EV) represents the total value of the business to all capital providers — equity holders and debt holders combined. EV = Market Cap + Debt + Preferred Stock + Minority Interest — Cash.
Equity value (market cap) is what’s left for equity holders after subtracting net debt. If EV = $500M and net debt = $200M, equity value = $300M.
When to use each: EV multiples (EV/EBITDA, EV/Revenue) are used for metrics above the interest line. Equity value multiples (P/E) are used for metrics below the interest line (like net income). Why? Because EBITDA is available to all capital providers; net income is only what’s left for equity holders.
Part 6: How to Structure Your Prep
Here’s the checklist most candidates should follow over a 4-6 week prep window:
- Week 1-2: Master accounting. Be able to walk through all three statements cold, link them together, and answer the classic “what happens if X changes” questions.
- Week 2-3: Learn all three valuation methods. Build a sample DCF from scratch so you understand every cell. Practice explaining each method out loud.
- Week 3-4: Add LBO and M&A concepts. Run through accretion/dilution scenarios. Practice the LBO interview framework.
- Week 4-6: Mock interviews. The gap between knowing the content and being able to articulate it smoothly under pressure is real — you have to practice out loud.
Download our Technical Cheatsheet as a reference throughout this process. Use our Free Resources page for additional guides, and check out the free course if you want a structured walkthrough of the entire recruiting process from start to finish.
You can also browse our blog for deep dives on specific technical topics, and watch prep content on our YouTube channel.
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One Response
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