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Houlihan Lokey Interview Questions
These are real technical questions asked in recent Houlihan Lokey interviews, sourced directly from candidates who went through the process — not a generic guide. Below: what to expect, worked answers to the most representative questions, and common mistakes that trip candidates up.
What Houlihan Lokey's interview process actually looks like
Houlihan Lokey's restructuring and distressed M&A practice is reflected directly in its technical rounds — expect questions on distressed valuation, PIK interest mechanics, and how actual recovery can deviate from strict absolute priority in a negotiated restructuring.
Real questions asked in recent Houlihan Lokey interviews
Question: How does valuing a distressed company differ from valuing a healthy one?
How to answer it: In a healthy company, valuation centers on a going-concern DCF and trading comps built on stable projected cash flows, but a distressed company's near-term cash flows are often negative or highly uncertain, so more weight shifts to asset-based approaches, liquidation value, and scenario-weighted outcomes that explicitly account for the probability of a restructuring or bankruptcy. The discount rate itself becomes harder to pin down, since a standard WACC assumes an ongoing, sustainable capital structure, while a distressed company's actual cost of capital is elevated and its capital structure is likely to change through the restructuring process itself. Analysts also have to separate enterprise value from where that value actually accrues in the capital structure, since in a distressed situation equity is often worth zero or near-zero and the real valuation question is how far up the debt stack recovery reaches, which barely factors into healthy-company valuation at all.
Common mistake: Applying a standard going-concern DCF with a normal WACC without adjusting for the elevated risk and uncertain capital structure of a distressed company
Question: A distressed company raises new debt to buy $50 of inventory, sells that inventory for $70 at year-end, and the new debt carries a PIK interest rate of 10% with no cash amortization in year one. Walk through the cash and income statement impact.
How to answer it: The $50 debt raise funds the inventory purchase with no immediate income statement impact; when the inventory is sold for $70, the income statement records $70 of revenue and $50 of cost of goods sold, for $20 of gross profit before other costs. Because the debt is PIK, or payment-in-kind, the 10% interest expense, $5 in this case, accrues and increases the debt balance rather than being paid in cash, so it hits the income statement as an expense but does not reduce cash and does not require a corresponding cash flow statement outflow in the financing section. On the balance sheet, cash increases by the $70 sale proceeds less any cash costs, inventory clears out, and debt grows by the accrued $5 of PIK interest rather than shrinking, which is the detail interviewers are testing: PIK interest makes leverage rise over time even while the company is technically current on its obligations, since nothing is actually being paid in cash.
Common mistake: Treating PIK interest like cash interest and deducting it from the cash flow statement's financing section
Also reported from recent interviews at this firm:
- In a restructuring, why might second lien lenders end up receiving less recovery than the enterprise value would suggest they're entitled to, even though they're technically 'in the money'?
- What's the core difference between a Chapter 11 and a Chapter 7 bankruptcy filing, and why do most restructuring advisors push for Chapter 11 even for a company that ultimately needs to sell its assets?
Full explanations and common mistakes for these — plus the rest of our Firm Specific bank — are in the app.
Houlihan Lokey vs. Lincoln International
Candidates often weigh Houlihan Lokey against Lincoln International, since both are strong in the middle market and both are known for valuation work. The difference is mostly in what each firm is best known for, and that shows up in the interviews.
- Houlihan Lokey is a publicly traded firm best known for restructuring, where it is consistently one of the most active advisors, alongside a large M&A practice and a well-known financial and valuation advisory group. Expect distressed and capital-structure questions like the ones above.
- Lincoln International is privately held and focused on middle-market M&A, especially for private equity sponsors, with its own valuations and opinions group. Expect more standard M&A, LBO, and sponsor-focused questions and fewer distressed ones.
Neither is simply "better": Houlihan Lokey is the stronger fit if restructuring interests you, and Lincoln if you want sponsor-driven middle-market M&A. Prepare for the questions each firm actually asks rather than one generic set.
How to prepare specifically for Houlihan Lokey
Generic IB prep guides cover the fundamentals every bank tests, but firm-specific patterns like the ones above only show up when you're practicing against real, recently-reported questions rather than a static 400-question PDF everyone else is also using. ApexIB's Firm Specific question bank is built directly from questions candidates report after their actual interviews — including Houlihan Lokey — with AI grading and full explanations, not just a list.
Frequently asked questions
Is Houlihan Lokey's interview mostly restructuring-focused?
Heavily, yes — given the firm's reputation in restructuring and distressed M&A, expect a meaningfully higher share of distressed-valuation and capital-structure questions than at a standard generalist bank.
Is Houlihan Lokey or Lincoln International better?
It depends on the work you want. Houlihan Lokey is best known for restructuring and valuation advisory, while Lincoln International focuses on middle-market M&A for private equity sponsors. Their interviews lean the same way: more distressed questions at Houlihan Lokey, more M&A and LBO questions at Lincoln.
Where do these questions come from?
Directly from candidates who interviewed at Houlihan Lokey and reported their questions afterward, not from a generic template applied to every firm.
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