This is one of the most common private equity interview questions. Deciding between company A and B requires a comprehensive analysis of both quantitative and qualitative factors. Assuming they are in the same INDUSTRY, you could start to compare the businesses based on:

• Business model – how they generate money, how the company works
• Market share/Size of the market – how defensible is it, opportunities for growth
• Margins & cost structure – fixed vs. VARIABLE costs, operating leverage and future opportunity
• CAPITAL requirements – sustaining vs. growth CapEx, additional funding required
• Operating efficiency – analyzing ratios such as inventory turnover, working capital management, etc.
• RISK – ASSESSING the riskiness of the business across as many variables as possible
• Customer satisfaction – understanding how customers regard the business
• Management team – how good is the team at leading people, managing the business, etc.
• Culture – how healthy is the culture and how conducive to success

All of the above criteria need be assessed in three ways: how they are in (1) the past, (2) the near-term future and (3) the long-term future. This will be the basis of a DCF model (which will have multiple operating scenarios), and the risk-adjusted NPV for each business can be compared against the price the business might be purchased at.

This is one of the most common private equity interview questions. Deciding between company A and B requires a comprehensive analysis of both quantitative and qualitative factors. Assuming they are in the same industry, you could start to compare the businesses based on:

All of the above criteria need be assessed in three ways: how they are in (1) the past, (2) the near-term future and (3) the long-term future. This will be the basis of a DCF model (which will have multiple operating scenarios), and the risk-adjusted NPV for each business can be compared against the price the business might be purchased at.