Hg Capital Interview Questions & Answers
A detailed guide to software buyouts, SaaS economics, investment case studies and Hg’s technology-focused investment strategy.
Last updated: · 78 practice questions · 3 worked cases
Book Mock Interview ↗How to prepare for an Hg interview
Hg is a specialist technology and services private equity investor, with particular expertise in mission-critical software, recurring revenue and operational value creation. Strong candidates combine LBO fluency with the ability to assess product quality, customer retention and commercial durability.
Scaling champions
Larger equity investments, platform development and transatlantic expansion.
Building leaders
Established technology businesses with scope for operational and strategic growth.
Founder-built businesses
Smaller platform investments and transformation opportunities.
Hg identifies eight specialist investment clusters, including ERP and payroll, healthcare IT, insurance, automation and engineering, and technology services. It also describes a portfolio-wide AI transformation capability. See official sources below for current figures.
What an Hg investment interview may involve
Hg’s published recruitment privacy information for relevant investment roles describes a first interview assessing technical and commercial judgement, followed by a case study for successful candidates and later-stage assessments. The process may differ by office, seniority and vacancy.
Technical interview
Valuation, accounting, software metrics and commercial investment reasoning.
Case study
Assess business quality, valuation, risks and investment recommendation.
Final discussion
Defend assumptions, demonstrate judgement and discuss motivation.
Hg’s published material also mentions Hogan assessments in the relevant process. Candidates should follow the instructions for their specific role.
78 Hg Capital interview questions and answer guidance
Choose a category, expand a question and practise answering it aloud before reviewing the framework. Include numerical evidence and a clear investment recommendation wherever possible.
1. Why Hg instead of a generalist buyout fund? · Hg strategy & fit
Answer framework: Connect its deep software and services specialisation to recurring revenue, workflow criticality, data advantages and operational expertise.
2. Explain the difference between Saturn, Genesis and Mercury. · Hg strategy & fit
Answer framework: Saturn targets larger equity investments, Genesis established mid-market businesses and Mercury smaller founder-built businesses; cite current official fund descriptions rather than assuming fixed deal sizes.
3. What makes mission-critical software attractive to Hg? · Hg strategy & fit
Answer framework: High switching costs, embedded workflows, regulatory complexity, retention, pricing power and durable cash flow.
4. Which software vertical would you investigate? · Hg strategy & fit
Answer framework: Select a vertical such as payroll or healthcare IT; define demand, competitive dynamics, customer economics and risks.
5. How does Hg create value after acquisition? · Hg strategy & fit
Answer framework: Discuss pricing, go-to-market, product, AI, M&A, talent and internationalisation; connect to measurable KPIs.
6. Why do you want to invest in private equity? · Hg strategy & fit
Answer framework: Show ownership mentality, commercial judgement, modelling capability and interest in multi-year business building.
7. Describe a company you would not invest in. · Hg strategy & fit
Answer framework: Explain structural churn, weak product differentiation, poor unit economics or unsustainable customer acquisition.
8. How would you research an Hg portfolio company? · Hg strategy & fit
Answer framework: Read product, customers, market structure, competitors, pricing, retention proxies and public announcements.
9. What is Hg Catalyst? · Hg strategy & fit
Answer framework: Describe Hg’s AI incubator and product-building initiative as presented in official materials, avoiding invented project claims.
10. How do you build conviction despite limited diligence time? · Hg strategy & fit
Answer framework: Prioritise decision-critical unknowns, triangulate sources, quantify downside and identify deal breakers.
11. Walk through the three financial statements. · Accounting & valuation
Answer framework: Net income connects income statement to cash flow and retained earnings; noncash expenses and working capital bridge to cash.
12. Why can EBITDA differ from cash flow? · Accounting & valuation
Answer framework: Capital expenditure, working capital, cash taxes, interest and one-off costs.
13. How do you calculate enterprise value? · Accounting & valuation
Answer framework: Equity value plus net debt, preferred equity and non-controlling interests, with relevant adjustments.
14. Why use EV/EBITDA versus EV/revenue? · Accounting & valuation
Answer framework: EV/EBITDA reflects operating profitability; revenue multiples are useful where margins are immature but require margin and growth context.
15. How does deferred revenue affect SaaS financials? · Accounting & valuation
Answer framework: Cash can be collected before revenue recognition, creating a liability and supporting working-capital dynamics.
16. What happens when a company capitalises development costs? · Accounting & valuation
Answer framework: Current-period operating profit may increase, assets rise and future amortisation occurs; assess comparability and cash conversion.
17. How do you normalise EBITDA? · Accounting & valuation
Answer framework: Remove genuine non-recurring items but challenge recurring restructuring, stock compensation and aggressive add-backs.
18. What drives the valuation multiple of a software business? · Accounting & valuation
Answer framework: Growth durability, NRR, gross margins, churn, profitability, market size, competition, rule of 40 and rates.
19. How would a £10m rise in debt affect equity value? · Accounting & valuation
Answer framework: At unchanged enterprise value and cash, equity value falls £10m.
20. How do working-capital changes affect free cash flow? · Accounting & valuation
Answer framework: An increase in operating net working capital consumes cash; a decrease releases cash.
21. Explain cash-free debt-free pricing. · Accounting & valuation
Answer framework: Enterprise value adjusted for net debt, debt-like items and agreed working-capital normalisation to derive equity proceeds.
22. Why might two SaaS firms with equal ARR trade at different multiples? · Accounting & valuation
Answer framework: Retention, margins, customer concentration, product moat, growth efficiency, and exposure to disruption.
23. Build a paper LBO in five minutes. · LBO modelling & returns
Answer framework: Entry EV, sources and uses, debt schedule, operating projections, exit EV, equity proceeds, MOIC and IRR.
24. What are the primary LBO return drivers? · LBO modelling & returns
Answer framework: EBITDA growth, multiple change, debt paydown, entry leverage and interim distributions.
25. How do you calculate MOIC? · LBO modelling & returns
Answer framework: Total equity proceeds divided by initial sponsor equity.
26. How do you calculate five-year IRR for a 2.5x MOIC? · LBO modelling & returns
Answer framework: 2.5^(1/5)-1≈20.1%, assuming one investment and one exit.
27. What happens if exit multiples contract? · LBO modelling & returns
Answer framework: Exit EV falls at fixed EBITDA, reducing equity value and sponsor returns.
28. Why is debt capacity important? · LBO modelling & returns
Answer framework: Debt improves equity returns but increases default risk, covenants, interest expense and financial inflexibility.
29. What is a debt sweep? · LBO modelling & returns
Answer framework: Excess cash flow applied to repay outstanding debt under the financing agreement.
30. How would you stress-test an LBO? · LBO modelling & returns
Answer framework: Test revenue growth, margins, churn, rates, exit multiple, capex and covenant headroom.
31. What is a dividend recapitalisation? · LBO modelling & returns
Answer framework: New debt funds a shareholder distribution, potentially improving interim returns while increasing leverage.
32. How do management equity incentives affect returns? · LBO modelling & returns
Answer framework: Dilution reduces sponsor proceeds but may improve alignment and operating performance.
33. What is the difference between gross and net IRR? · LBO modelling & returns
Answer framework: Gross measures investment returns before fund fees and carry; net reflects investor-level deductions.
34. When would a lower-leverage LBO be preferable? · LBO modelling & returns
Answer framework: Where growth investment, cyclicality, refinancing risk or customer concentration demands flexibility.
35. Define ARR and MRR. · SaaS & software economics
Answer framework: Annualised and monthly recurring revenue; explain exclusions and treatment of usage-based revenue.
36. What is net revenue retention? · SaaS & software economics
Answer framework: Opening cohort revenue plus expansion less contraction and churn, divided by opening cohort revenue.
37. How is gross revenue retention different? · SaaS & software economics
Answer framework: GRR excludes expansion, measuring how much starting revenue survives churn and contraction.
38. Why is 120% NRR attractive? · SaaS & software economics
Answer framework: Existing customers expand 20% net before new-logo additions; check concentration and cohort composition.
39. How do you calculate customer acquisition cost? · SaaS & software economics
Answer framework: Sales and marketing acquisition spending divided by new customers, with consistent time lags and definitions.
40. What is LTV/CAC? · SaaS & software economics
Answer framework: Estimated lifetime gross profit per customer divided by acquisition cost; assess churn assumptions and payback.
41. What is CAC payback? · SaaS & software economics
Answer framework: Months to recover acquisition spend from incremental gross profit.
42. Explain the Rule of 40. · SaaS & software economics
Answer framework: Revenue growth rate plus profitability margin; define whether using EBITDA or FCF margin.
43. What are signs of low-quality ARR? · SaaS & software economics
Answer framework: Discounted multi-year contracts, service-heavy revenue, non-recurring implementation, high churn or weak collections.
44. How does customer concentration change your underwriting? · SaaS & software economics
Answer framework: Stress loss of top accounts and assess contractual terms, usage, switching costs and renewal history.
45. How would you diligence vertical market software? · SaaS & software economics
Answer framework: Workflow embedding, regulation, addressable market, competitive replacement risk and upgrade cycles.
46. What does a cohort analysis reveal? · SaaS & software economics
Answer framework: Retention, expansion, product adoption and customer quality by acquisition vintage.
47. How would you assess AI disruption risk to a software asset? · Commercial diligence & AI
Answer framework: Separate automation of product features from control of workflows, distribution, data rights and customer trust.
48. Could generative AI reduce SaaS pricing power? · Commercial diligence & AI
Answer framework: Yes for commoditised functions; defensibility may remain in systems of record, compliance and embedded workflows.
49. What questions would you ask customers? · Commercial diligence & AI
Answer framework: Criticality, alternatives, switching costs, usage, renewal intent, pricing tolerance and unmet needs.
50. How would you size a payroll software market? · Commercial diligence & AI
Answer framework: Target employers × addressable spend, segmented by company size, country and product category.
51. What makes an attractive buy-and-build platform? · Commercial diligence & AI
Answer framework: Repeatable integration, fragmented targets, shared tech and distribution, credible synergies and disciplined prices.
52. How would you underwrite cross-selling synergies? · Commercial diligence & AI
Answer framework: Estimate addressable overlap, attach rate, implementation constraints, incremental margin and timing.
53. What KPIs would you track for AI products? · Commercial diligence & AI
Answer framework: Adoption, active usage, conversion, bookings uplift, gross margin, inference costs, reliability and retention.
54. How would you test an AI EBITDA improvement claim? · Commercial diligence & AI
Answer framework: Define baseline, isolate incremental impact, account for implementation costs and verify cash realisation.
55. What is the risk of an AI-driven product roadmap? · Commercial diligence & AI
Answer framework: Model costs, hallucinations, security, regulatory compliance, customer trust and incumbent competition.
56. What are the key issues in international expansion? · Commercial diligence & AI
Answer framework: Localisation, regulatory differences, distribution, pricing, product fit and execution capacity.
57. What would make you walk away from a software deal? · Commercial diligence & AI
Answer framework: Evidence of structural churn, deteriorating cohorts, unfixable security issues or misleading recurring-revenue metrics.
58. How would you challenge a consultant’s market-growth estimate? · Commercial diligence & AI
Answer framework: Reconstruct bottom-up assumptions, compare independent evidence and stress sensitivities.
59. What would you do in the first 100 days after acquisition? · Portfolio operations & value creation
Answer framework: Agree KPI baselines, management priorities, pricing opportunities, product roadmap and value-creation owners.
60. How do you improve pricing without increasing churn? · Portfolio operations & value creation
Answer framework: Segment willingness to pay, test packaging, protect vulnerable cohorts and measure net retention.
61. How would you improve sales productivity? · Portfolio operations & value creation
Answer framework: Track pipeline conversion, sales cycle, win rates, territory design, quota attainment and payback.
62. How do you evaluate a bolt-on acquisition? · Portfolio operations & value creation
Answer framework: Strategic fit, stand-alone economics, integration costs, synergy timing and financing.
63. How would you prioritise AI initiatives across a portfolio? · Portfolio operations & value creation
Answer framework: Rank by value, feasibility, risk, data readiness and time to impact; start with measurable pilots.
64. What should a portfolio-company board pack include? · Portfolio operations & value creation
Answer framework: ARR bridge, churn, pipeline, cash, debt, hiring, product delivery, cyber risk and strategic milestones.
65. How would you respond to deteriorating NRR? · Portfolio operations & value creation
Answer framework: Segment by cohort and product, identify churn drivers, intervene with customer success and test product fit.
66. How can product investment create value? · Portfolio operations & value creation
Answer framework: Higher retention, new modules, pricing power, sales efficiency and improved competitive differentiation.
67. How would you manage a founder-led management team? · Portfolio operations & value creation
Answer framework: Build trust, align incentives, clarify governance and retain speed while adding discipline.
68. What is the difference between cost saving and sustainable EBITDA improvement? · Portfolio operations & value creation
Answer framework: Savings must be recurring and not impair growth, product quality or customer outcomes.
69. Pitch a software company in two minutes. · Investment committee & behavioural
Answer framework: Thesis, product, customer, economics, market, valuation, value creation, risks and recommendation.
70. How would you defend an investment at a high multiple? · Investment committee & behavioural
Answer framework: Show durable growth and cash conversion, downside case, scarcity and realistic exit assumptions.
71. What would you ask the CEO of a target? · Investment committee & behavioural
Answer framework: Competitive advantage, churn, pricing, roadmap, culture, capital allocation and AI strategy.
72. Describe a time you changed your mind. · Investment committee & behavioural
Answer framework: Use a specific example showing new evidence, revised probability and better decision.
73. How would you disagree with a partner on valuation? · Investment committee & behavioural
Answer framework: Present assumptions, sensitivities and disconfirming evidence respectfully.
74. How do you handle an error in a live model? · Investment committee & behavioural
Answer framework: Flag it promptly, quantify impact, fix the source, rerun sensitivities and document the change.
75. What does good investment judgement mean? · Investment committee & behavioural
Answer framework: Recognising uncertainty, identifying asymmetric risks and allocating effort to decision-critical facts.
76. Why is commercial diligence as important as modelling? · Investment committee & behavioural
Answer framework: A model is only as credible as the assumptions behind growth, retention and margins.
77. How would you assess a business with excellent retention but low growth? · Investment committee & behavioural
Answer framework: Analyse pricing, market maturity, upsell, customer acquisition, capital intensity and price.
78. What questions would you ask at the end of an Hg interview? · Investment committee & behavioural
Answer framework: Ask about team collaboration, investment judgement, value creation and how AI changes underwriting.
Can you defend your investment thesis under pressure?
Practise technical questions, deal judgement and investment committee challenges with Senna.
Book Mock Interview ↗Worked case 1: £450m enterprise software buyout
A hypothetical vertical software company generates £30m EBITDA. You acquire it for 15× EBITDA using £250m debt and £200m sponsor equity. Five years later EBITDA is £50m, the exit multiple is 14× and debt has fallen to £150m.
Calculate sponsor returns
Entry EV: £30m × 15 = £450m. Exit EV: £50m × 14 = £700m. Exit equity: £700m − £150m = £550m. MOIC: £550m / £200m = 2.75×. Five-year gross IRR: 2.75^(1/5) − 1 ≈ 22.4%.
Downside: At 12× exit EBITDA and £40m EBITDA, exit EV is £480m and equity is £330m, giving 1.65× MOIC and approximately 10.5% gross IRR. The model assumes no interim distributions, fees or additional dilution.
Investment committee follow-ups
Why pay 15×? How much growth comes from pricing versus new logos? Is the £100m debt paydown feasible after cash interest, tax and capex? What happens if NRR declines or AI commoditises the product?
Worked case 2: SaaS cohort and retention diligence
A hypothetical SaaS company starts the year with £50m ARR from existing customers. It loses £3m to churn, £2m to contraction and adds £10m in expansion revenue. New customers add another £12m ARR.
Build the ARR bridge
| Metric | Calculation | Result |
|---|---|---|
| Gross revenue retention | (50−3−2)/50 | 90% |
| Net revenue retention | (50−3−2+10)/50 | 110% |
| Ending ARR | 50−3−2+10+12 | £67m |
| ARR growth | (67−50)/50 | 34% |
Interpretation: 110% NRR shows net expansion within the opening customer cohort, but 90% GRR indicates material churn and contraction. Investigate customer segmentation, cohort ageing, pricing, contract terms and the economics of acquiring new logos.
Ask whether ARR definitions include services, whether new-logo additions are repeatable and whether high expansion comes from a small group of customers.
Worked case 3: AI-driven value creation
A fictional Hg-style portfolio company is considering an AI workflow assistant. Management projects £8m of incremental annual revenue at 70% incremental contribution margin, £2m annual operating costs and £5m one-time implementation costs.
Evaluate the economics
Annual contribution: £8m × 70% = £5.6m. Incremental EBITDA: £5.6m − £2m = £3.6m. Simple payback: £5m / £3.6m ≈ 1.39 years, assuming full run-rate impact immediately and no taxes or discounting.
Key diligence: Pilot-to-production conversion, inference cost, customer willingness to pay, adoption, security, compliance, model reliability, cannibalisation and time to realise savings. Build a slower-ramp downside case before underwriting the full uplift.
Hg has publicly discussed deploying AI initiatives across its software portfolio. These example financial assumptions are entirely hypothetical and are not Hg forecasts.
14-day Hg interview preparation plan
Turn preparation into interview performance
Practise the investment thesis, technical calculations and case discussion with a mock interview.
Book Mock Interview ↗Frequently asked questions about Hg interviews
What does Hg invest in?
Hg focuses on technology and services businesses, particularly mission-critical enterprise software and recurring-revenue models.
What are Hg Saturn, Genesis and Mercury?
Three Hg fund strategies addressing different deal sizes and business maturity, as described on its official investor pages.
What should I study for an Hg interview?
LBO modelling, accounting, valuation, SaaS metrics, commercial diligence, sector theses and value creation.
Does Hg use investment case studies?
Hg recruitment information for certain investment roles describes a case-study stage. Exact stages vary by role.
Are the questions in this guide official?
No. They are original practice questions based on Hg’s public strategy and common private equity interview skills.
How important is AI to Hg?
Hg publicly describes significant AI product and operating initiatives across its portfolio; candidates should understand the investment opportunities and risks.
How do I prepare for a software LBO?
Practise ARR and EBITDA bridges, leverage, cash conversion, debt paydown, exit multiples and downside scenarios.
What makes a strong Hg investment thesis?
A defensible product, embedded workflows, durable retention, credible growth, attractive returns and actionable value creation.
What is the difference between NRR and GRR?
NRR includes expansion from existing customers; GRR excludes expansion and focuses on retained revenue.
How long should I prepare?
A 14-day schedule can structure revision, but the right duration depends on prior modelling and sector experience.
Is HgCapital Trust the same as Hg?
HgCapital Trust is a London-listed investment trust providing exposure to investments managed by Hg; it is not identical to the management firm.
What should I ask in a final interview?
Ask about sector conviction, investment debate, value creation and the balance between growth and downside protection.
Official sources and methodology
Research is grounded in Hg’s own investment approach, fund descriptions, recruitment disclosures and published AI transformation updates. Interview questions and cases are independently authored educational exercises.
Hg investment approach ↗Hg investors and fund strategies ↗Hg recruitment and privacy disclosures ↗Hg official AI data hub ↗HgT AI capital markets update, June 2026 ↗Independent guide by Senna, not endorsed by Hg. Review the canonical URL and publication date before publishing.