What to expect from modelling tests in buy side interviews

Competition for buy-side investment roles remains high, particularly across private equity, hedge funds and specialist asset managers. As firms look beyond academic credentials and transaction experience, technical assessments have become an increasingly important part of the interview process. Financial modelling tests allow hiring managers to evaluate not only technical capability, but also commercial judgement, investment thinking and how candidates perform under pressure. 

Whether you’re interviewing for a role in private equity, hedge funds or asset management, modelling exercises give hiring managers an insight into how candidates approach problems, interpret financial information, make commercial judgements, and perform under time pressure.

Types of modelling tests candidates may face 

Most buy side firms will tailor the modelling assessments to best suit the role they’re hiring for, as well as their own corporate culture, so no two exercises will be exactly the same – but there are a few common formats that candidates are likely to encounter. 

Leveraged buyout (LBO) models 

In an LBO, candidates may be asked to build a model from scratch or complete an existing template, assessing a target company's financial performance, financing structure, debt repayment profile, and projected investor returns. LBO modelling tests are particularly common in private equity recruitment. 

Interviewers will often evaluate not only whether the model functions correctly, but also whether the assumptions are realistic and the outputs are presented clearly and logically. 

Discounted cash flow (DCF) analysis 

DCF exercises test a candidate's understanding of valuation fundamentals – candidates will be expected to forecast free cash flows, calculate terminal value, determine an appropriate discount rate, and arrive at an enterprise valuation. 

Strong candidates will be able to demonstrate an understanding of the commercial assumptions that underpin the valuation, rather than simply applying the formulas. 

Merger and acquisition models 

These models often test both technical knowledge and the ability to interpret how strategic decisions affect shareholder value. Some firms will use merger modelling exercises to test a candidate's understanding of acquisition analysis, transaction synergies, accretion and dilution, financing structures, and combined financial performance. 

Operating models 

Operating models focus on forecasting a company's future financial performance based on operational assumptions. Candidates may need to build revenue forecasts, project margins, model capital expenditure, or assess working capital movements. 

These exercises are particularly common in investment teams that provide detailed company analysis for their clients. 

Investment case studies 

Many buy side firms combine financial modelling with broader investment case studies, so candidates may receive an example company information pack and be asked to build supporting analysis before they have to present an investment recommendation. 

In many firms, the recommendation is weighted just as heavily as the model itself. 

These assessments evaluate commercial thinking alongside technical modelling ability, requiring candidates to justify assumptions and communicate conclusions clearly. 

Different assessment formats 

As mentioned above, different firms will structure their modelling assessments differently, but common formats include: 

• Timed Excel exercises completed during interviews 
• Take-home modelling assignments with deadlines 
• Live modelling sessions where interviewers observe the candidate's approach 
• Walkthrough exercises where candidates explain an existing model and discuss their assumptions

Key skills being assessed 

While financial modelling sits at the obvious centre of these exercises, interviewers are evaluating a much broader range of capabilities. 

Financial analysis 

Candidates are expected to understand accounting relationships, valuation methodologies, financial statements, and key investment metrics.  

Attention to detail 

Interviewers often assess whether candidates check formulas carefully, maintain consistent assumptions, and identify inconsistencies before submitting their work. 

Commercial judgement 

Candidates should demonstrate thoughtful assumptions, realistic forecasts, and an ability to identify the key drivers influencing investment performance. 

Efficiency 

Many modelling tests are completed under time limits; interviewers use these time constraints to look for candidates who can build robust models efficiently without sacrificing accuracy. 

Organisation and presentation 

A well-structured model is easier to review and reflects disciplined thinking – logical tab structure, consistent formatting, clearly labelled assumptions, and transparent calculations all contribute to a stronger assessment. 

Communication 

Candidates are often asked to explain modelling decisions, defend assumptions, or discuss alternative scenarios. Being able to articulate the reasoning behind a model is often just as important as producing accurate outputs. 

How professionals can prepare 

Preparing for the modelling tests helps candidates develop both technical capability and confidence in interview conditions. 

Practise timed modelling exercises 

 Time pressure is a defining feature of most modelling assessments. Completing full modelling exercises within strict time limits helps you develop a structured approach, prioritise high value tasks, and identify where your modelling process slows down. Reviewing completed models afterwards also highlights recurring errors and opportunities to improve efficiency. 

Refresh accounting and valuation fundamentals 

 Strong financial modelling relies on a solid understanding of accounting and valuation principles. Review the links between the three financial statements, enterprise value versus equity value, valuation methodologies, working capital, and financial forecasting. A stronger grasp of these concepts reduces the risk of errors and makes it easier to explain your assumptions during technical interviews. 

Improve Excel efficiency 

 Efficient Excel skills can make a significant difference in a timed assessment. Become comfortable using keyboard shortcuts, formula auditing tools, named ranges, and consistent formatting standards. Faster model construction leaves more time to sense check outputs, test assumptions, and refine your analysis. 

Complete mock investment case studies 

 Many buy side interviews assess investment judgement alongside modelling ability. Working through realistic case studies that require financial analysis, valuation, and an investment recommendation helps you develop the commercial thinking expected during these assessments. 

Research the firm's investment strategy 

Technical assessments often reflect a firm's investment approach. Research its investment focus, sector preferences, and transaction history before the interview. A private equity firm specialising in leveraged buyouts is likely to test different modelling skills from a long only asset manager, credit investor, or distressed debt fund. Tailoring your preparation helps you focus on the techniques most relevant to the role. 

Common challenges and mistakes 

Even experienced candidates encounter difficulties during modelling tests, but taking the time to recognise the common pitfalls can help boost their performance. 

Running out of time 

One of the most common mistakes is spending too long perfecting early sections of the model before reaching the final outputs. Candidates should try to maintain steady progress and leave time for reviewing formulas and checking assumptions. 

Overcomplicating the model 

Candidates sometimes introduce unnecessary complexity to try to impress interviewers. In most cases, a clean, accurate, and logically structured model is best. 

Formula errors 

Broken links, inconsistent references, hard-coded values, and circular calculations are all common issues – checking for these before submitting can make a big difference. 

Weak assumptions 

Technical calculations need to be accompanied by commercially reasonable assumptions – the figures aren’t enough on their own. 

Difficulty explaining decisions 

 A technically correct model loses value if the candidate cannot explain the thinking behind it. Interviewers want to understand why certain assumptions were used, how the candidate interpreted the information provided, and how they reached their final recommendation. 

Candidates should be prepared to talk through their approach clearly, including any judgement calls, simplifications, and limitations in the model. Interviewers often place as much emphasis on a candidate’s reasoning as they do on the final model itself. 

What happens after the test 

The modelling assessment is normally just one stage of a wider interview process. Successful candidates often progress to behavioural interviews that explore teamwork, leadership, and motivation, alongside technical questioning that examines accounting knowledge, valuation concepts, and investment judgement. 

Rather than evaluating modelling performance in isolation, firms consider how candidates combine  competence with sound judgement, professionalism, and the ability to think clearly under pressure. 

Strategic takeaways for candidates 

Modelling tests offer candidates an opportunity to demonstrate technical expertise, commercial thinking, and disciplined decision-making in realistic investment scenarios. 

While technical knowledge provides the foundation, successful candidates combine strong modelling skills with commercial judgement, clear communication and the ability to explain the rationale behind their assumptions. Preparation should therefore focus not only on building accurate models, but also on developing the confidence to discuss investment decisions under interview conditions. 

Looking for your next buy side opportunity? 

Preparing for interviews is one of the best ways to improve your performance, but nothing replaces real interview experience. The more interview processes you complete, the more comfortable you'll become with technical assessments, investment case studies, and discussing your approach under pressure. 

If you're actively looking for your next role in private equity, hedge funds, asset management, or investment management, submit your CV to our team. We'll match your experience with current vacancies and upcoming opportunities, helping you access roles that align with your background and career goals. 

Being involved in multiple interview processes not only increases your chances of securing the right position but also gives you valuable experience that can strengthen your performance in every subsequent interview.