Ross Case Book 2019

ROSS CASEBOOK 2019
1
Table of Contents - Overview
# Content Page
1 Note from the Board 4
2 Consulting Club @ Ross Board Members 5
3 Acknowledgements 6
4 Administering Cases 7
5 Case Structure 8
6 Key Formulas Review 9 – 10
7 Industry Overview 11 - 23
2
Table of Contents - Cases
# Case Industry Type Page
1 American Bank ATM Dilemma Financial Services Profitability Improvement 24
2 Harrison Energy EV Goals Power & Utilities Market Entry 40
3 Bailey Brothers Bancorp Financial Services Profitability Improvement 52
4 Orange Bank Co Financial Services M&A 60
5 ShopOn Retail Profitability Improvement 68
6 Ferris Wheel Entertainment New Investment Analysis 76
7 6PAQ P.E. Firm Entertainment Private Equity & 83
Profitability Improvement
8 Hamm’s University Higher Ed / Non-Profit Profitability Improvement 94
9 Allsafe Insurance M&A 102
10 Mega Pharma Retail M&A 108
11 Mike Apparel Consumer Goods Market Entry 119
12 PharmaDeliver Pharma Growth Strategy 127
13 Single Cup of Coffee Consumer Products Market Sizing 139
14 Cheesy Situation Food and Beverage Growth Strategy 147
3
Note from the Board
Dear CC@R Member,
If you are reading this, then you are interested in pursuing a consulting career upon graduating from business school. In order to increase
your familiarity with the consulting interview format, the Consulting Club at Ross has established a robust wrap-around training program
focusing on the different parts of the recruiting and interviewing process. This book focuses on the ‘case-interview’ portion of the
consulting interview and is to be used in conjunction with other case-oriented club training materials.
The elements tested in a case interview are core to firms’ hiring decisions. These cases, or mini-business problems, are a glimpse into a
consultant’s (and often the interviewer’s) life and are frequently drawn from real client experiences. Given practice and experience, cases
become a natural way of thinking about how you would structure approaches and solutions to nearly any type of problem. Along the way,
we hope you will find that you enjoy solving problems in this manner, and that you would find this type of work gratifying.
In order to facilitate your preparation, your fellow club members have recorded their real-life case interview experiences and their
customized frameworks and solution elements. These cases act as a strong reference point for what to expect during a consulting interview
but are in no way all-encompassing. Each case comes down to a conversation between the interviewer and the candidate, so it is very
possible that two candidates could have two very different conversations about the same business problem. In fact, we encourage this.
Finally, you may have noticed that you are reading this compilation in landscape format. This is intentional. Consultants think in terms of
PowerPoint slides much more often than essay-style documents. You will find this format dovetails well with how you write your notes in
cases, and how you will convey information as a consultant.
Remember that regardless of how you perform on individual cases or in recruiting writ large, you are smart, capable, and you’d be an asset
to any firm, consulting or otherwise. Good luck and remember your fellow club members are always here to help.
Sincerely,
2019-2020 Board
Consulting Club @ Ross
4
Consulting Club @ Ross Board Members
Jordan Morris – Co-President AVPs:
Ashley Perkins – Co-President
Alex Lowy, Liz Kane, Elise Goodhue, Julie
Nick Campbell – SVP Finance & Tech
Sohn, Amirah Aziz, Arvind Sivakumaran,
Mitch Polelle – SVP Education Taylor Li, Mohit Kabra, Marites Seitz,
Erin Ford – SVP Sponsorship & Firm Esenam Dogoe, Arshaq Razack, Jacob
Relations Supron, Eric Hoffman
Eric Wang – VP Technology
Christine Barringer – VP Education
Sankalp Damani – VP Education
Justin Long – VP Peer Coaches
Maneel Grover – VP Casebook
Peiqin Wu – VP International Recruiting
Chaitanya Balla – VP Part-time Recruiting
Sara Oliphant – VP Women’s Recruiting
Jake Corness – VP Forum
Tyler Chaitoff – VP Firm Relations
Tim Bier – VP Firm Relations
5
Acknowledgements
Pulling together the casebook was a huge undertaking and we are grateful to everyone who
contributed, especially our case writers and editors.
Case Writers: Case Editors:
Christine Barringer – PharmaDeliver Jake Corness, Justin Long, Jordan Morris,
Jordan Morris – 6PAQ PE Mitch Polelle, Sankalp Damani
Junior Louis – Single Cup of Coffee
Manas Kulkarni – Ferris Wheel
Maneel Grover – Mega Pharma, Mike Casebook Editors:
Apparel Maneel Grover & Alex Lowy
Mitch Polelle – Hamm’s University
Nick Campbell – Bailey Brothers Bancorp
Rajat Goel – Orange Bank Co.
Sankalp Damani – American Bank ATM,
Harrison Energy
Sarah Blythe – Cheesy Situation
Sara Oliphant – Allsafe
Shivani Gupta – ShopOn
6
Administering Cases
Great case experiences are not determined solely by strong candidates cranking out detailed issue and financial-based
analyses. The interviewer-interviewee interaction and the candidate’s ability to convey information can very easily change
the style of a case. Given the interviewer’s position of power in the discussion, there are several things to keep in mind
prior to, during, and after a case interview.
Preparing for
During Interview After Interview
Interview
• Read the case over 2-3 times, • Track time (about 25 minutes is average)- • Provide feedback
familiarizing yourself with the balance finishing case and letting
relevant numbers and details candidate struggle • This is possibly the most
critical step of the case
• Understand what candidate • Candidates can often think of very interview process
wants to improve different approaches to the same case.
Before discounting questions as wrong, • Honestly let the candidate
• Determine your ‘character’ e.g. know strengths, but more
ask the candidate for their thinking... If it
rushed partner or importantly areas for
makes sense, go with it
disinterested client rep improvement
• Consider what a consultant would be
• Prepare for how you will • Without honest feedback and
looking for in the candidate
address irrelevant questions or constructive criticism, it is
requests for data you do not • Presentation: can I put this person in very difficult to improve
have, i.e. will you make up front of a client?
fake data and let candidate go
• Aptitude: Can this person do the work?
fishing, or let them know it is
irrelevant? • Interest: Does this person like what they
are doing?
7
Case Structure
How to Case
Understand the Develop Form

Analyze
Question Framework Recommendation
(~20 minutes)
(~1-2 minutes) (~1-2 minutes) (~1-2 minutes)
• LISTEN • Ask for a moment to • Refer to the • State your

plan your structure framework as you recommendation as a
• Summarize the
move through each of direct response to the
problem statement • Develop 3-4 areas to
the main areas problem/objective –
to make sure you analyze along with a few
it should not come as
understand the tailored sub-topics • Use one sheet of
a surprise to the
situation and paper per topic – think
• Structure the framework interviewer
objectives of the case as a
in a logical fashion – it
PowerPoint deck • Incorporate key
• Ask 1-2 clarifying should open with the
metrics/findings as a
questions around most important topic • Relate each piece of
part of your
the topic and/or and provide the analysis to the main
recommendation
metrics to be used interviewer with a objective/problem
for the analysis roadmap of where you statement • Include risks and next
plan to take the case steps
• The questions • Walk through
posed should • Engage the interviewer calculations /analysis
necessitate a short by turning the
• Drive first and second-
response framework towards
level insights whenever
them
possible!
8
Key Formulas Review
Topic Formula
NPV or Valuing Money Over Time 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝐴𝑠𝑠𝑒𝑡
𝑉𝑎𝑙𝑢𝑒 𝑡𝑜 𝑃𝑒𝑟𝑝𝑒𝑡𝑢𝑖𝑡𝑦 =
𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 𝑅𝑎𝑡𝑒
𝑛
𝐴𝑛𝑛𝑢𝑎𝑙 𝐶𝑎𝑠ℎ 𝐹𝑙𝑜𝑤
𝑁𝑃𝑉 = ෍
(1 + 𝑟)𝑡
𝑡=0
Rule of 72 72
𝑇𝑖𝑚𝑒 𝑓𝑜𝑟 𝐼𝑛𝑣𝑒𝑠𝑡𝑒𝑑 𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑙𝑒 =
𝑟
r = Rate of Return
Little’s Law 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 = 𝑇ℎ𝑟𝑜𝑢𝑔ℎ𝑝𝑢𝑡 × 𝐹𝑙𝑜𝑤 𝑇𝑖𝑚𝑒
Inventory 𝐶𝑂𝐺𝑆
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑇𝑢𝑟𝑛𝑠 =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
Days of Inventory = Inventory Turns * 365
Profitability 𝜋 = 𝑄 𝑃 − 𝑉𝐶 − 𝐹𝐶
Breakeven 𝐵𝑟𝑒𝑎𝑘𝑒𝑣𝑒𝑛 = 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 𝑃𝑟𝑖𝑐𝑒 − 𝐶𝑜𝑠𝑡
𝑅𝑒𝑣𝑒𝑛𝑢𝑒−𝐶𝑜𝑠𝑡 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒

Margin 𝐺𝑟𝑜𝑠𝑠 𝑀𝑎𝑟𝑔𝑖𝑛 = 𝑁𝑒𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 =
𝑅𝑒𝑣𝑒𝑛𝑢𝑒 𝑆𝑎𝑙𝑒𝑠 𝑅𝑒𝑣𝑒𝑛𝑢𝑒
Markup 𝑃𝑟𝑖𝑐𝑒 − 𝐶𝑜𝑠𝑡

𝑀𝑎𝑟𝑘𝑢𝑝 =
𝐶𝑜𝑠𝑡
9
Key Formulas Review
Topic Formula
Return on Assets (ROA) 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝑅𝑂𝐴 =
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
Return on Equity (ROE) 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝑅𝑂𝐸 =
𝑇𝑜𝑡𝑎𝑙 𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠 ′ 𝐸𝑞𝑢𝑖𝑡𝑦
𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝑆𝑎𝑙𝑒𝑠 𝐴𝑠𝑠𝑒𝑡𝑠

DuPont Analysis 𝑅𝑂𝐸 = × ×
𝑆𝑎𝑙𝑒𝑠 𝐴𝑠𝑠𝑒𝑡𝑠 𝐸𝑞𝑢𝑖𝑡𝑦
ROE = Operating Efficiency * Asset Utilization * Leverage

Working Capital 𝜋
𝑅𝑂𝐼 =
𝐾
K = Capital Invested (Assets, Working Capital, etc.)

Working Capital = Assets - Liability
Income Statement Sales – COGS
= Gross Profit
- SG&A
= EBITDA
- Depreciation/Amortization
= Operating Profit
- Interest Expense
= EBIT
- Tax Expense
= Net Income
10
INDUSTRY OVERVIEW
11
Airlines
Key Ideas Revenue Streams Cost Drivers
▪ Consolidation in industry ▪ Ticket sales to economy and ▪ Fuel
▪ Low cost carriers and fare business passengers
▪ Labor
competition on competitive ▪ Charges for baggage and on-
routes board services (up-selling) ▪ Marketing
▪ Online booking and check-in ▪ Cargo transportation ▪ Terminal fees and hangar rentals
▪ Expansion of domestic and ▪ Credit cards ▪ Insurance/legal fees
international routes
▪ Capacity optimization (Load
Factor)
Customer ▪ Leisure travelers – (generally price sensitive)

▪ Business travelers – (very important to airlines due to margins and services purchased)
Segments ▪ Freight/Cargo Transportation
▪ Internet - online travel sites, airline websites
Channels ▪ Airline sales team: call centers, online, or kiosk
▪ Travel management companies (TMCs) serving corporate clients, travel agents
▪ Government regulation and dramatic risk of equipment failure (e.g. Boeing 737 MAX)
Risk ▪ Labor unrest, strikes and work slowdowns
▪ An intensely competitive market with many foreign airlines partly government subsidized
Key ▪ World Price of Crude Oil ▪ Optimization of capacity
Economic ▪ Trips by US residents ▪ Per capita disposable income
Drivers
12
Automotive/Manufacturing
▪ Automakers, Original Equipment ▪ New car sales ▪ Labor
Manufacturers (OEMs), ▪ Auto part sales ▪ Materials
Replacement Parts Production,
Rubber Fabrication ▪ Services offered with vehicle ▪ Advertising
purchase ▪ Financing costs
▪ Highly capital and labor intensive
▪ Financing ▪ Recall costs
▪ Extensive competition due to
foreign automakers ▪ Extended warranties ▪ Research & Development
▪ Unions ▪ Leasing
▪ Commitment to Electric Vehicles
Customer ▪ Cars, vans, pickup trucks and SUVs ▪ Commercial purchasers

▪ Personal car buyers ▪ Government purchasers
Segments ▪ Rental car companies
▪ Automobile dealers
Channels ▪ Secondary automobile market
▪ Automotive parts/services outlets
▪ Globalization of the industry enables more ease of foreign competition
Risk ▪ New entrants in the electric vehicle or mobility as a service sectors
▪ Changes in consumer trends and tastes
Key ▪ GPD growth ▪ Steel prices
Economic ▪ Income growth/disposable income ▪ Consumer confidence index
Drivers ▪ Price of crude ▪ Yield on Treasury note
13
Commercial Banking
▪ Consolidation/acquisitions ▪ Loan interest ▪ Wages
▪ Increased mobile banking ▪ Loan types ▪ Bad debt expense
▪ Channel innovation in digital and ▪ Real estate ▪ Interest rates on deposits
physical channels ▪ Auto ▪ Branch and compliance costs
▪ Customer attrition rate ▪ Personal ▪ Overhead costs - paper fee; error
▪ Offshoring of call centers, back ▪ Education rate costs for manual processing
office functions ▪ Service Fees
▪ Digitization of processes ▪ Spread between interest rate
▪ Cross-selling charged and Fed rates
▪ Credit cards
Customer ▪ Wealth: deposit balances, income ▪ Size: small businesses and consumers
▪ By lifestyle: buying behavior ▪ Age: under 35 adapt to technology better
Segments
▪ Savings and loan ▪ Traditional checking ▪ Microfinance

Channels ▪ Credit union ▪ Online banking
▪ Change in savings behavior

Risk ▪ Loan default, interest rates and federal funds rates
▪ New entrants from non-banks and FinTech companies (i.e. Robinhood, SoFi, etc)
Key ▪ Consumer confidence ▪ Urbanization ▪ Interest rate
Economic ▪ Household debt ▪ Home and car buys ▪ Government Regulation
Drivers ▪ Employment statistics ▪ Disposable income
Health Care
▪ Affordable Care Act ▪ Hospital care ▪ Dependent on segment
▪ Highly fragmented care networks ▪ Physician and clinical services ▪ Significant costs related to new
▪ Employers pushing health care ▪ Prescription drugs technology implementation
costs onto employees ▪ Nursing ▪ Often inefficient organizational
structures
▪ Aging Baby Boomer population ▪ Dental services
driving increased revenues
▪ Research, Equipment, Investment
Customer ▪ Patients/consumers
▪ All generations and segments of the population require different products/services
Segments
▪ Hospitals ▪ Nursing homes ▪ Pharmacies

Channels ▪ Doctors offices ▪ Outpatient surgery centers ▪ Medical equipment
▪ New legislation and shifting regulations

Risk ▪ Funding availability
Key ▪ Regulation for health & medical insurance ▪ Aging population

Economic ▪ Federal funding for Medicare and Medicaid ▪ Advances in medical care and technology
Drivers
15
IT / Infrastructure
▪ Cloud based platforms vs on- ▪ Hardware sales ▪ Labor
premise infrastructure ▪ Maintenance contracts ▪ R&D/Engineering of
▪ User centric IT solutions – IT ▪ Implementation consulting products
depts want to enhance usage and services ▪ Sales/Marketing teams -
productivity huge front-end expense
▪ SaaS
▪ Open platforms / integrating and ▪ Hardware manufacturing
partnering with other providers
▪ Cybersecurity
Customer ▪ Enterprise (SME / Large)

▪ Consumer
Segments
▪ Third party resellers (SHI, CDW)
▪ Direct
Channels ▪ Partnership
▪ Reseller
▪ Startups and new entrants
Risk ▪ Bring your own device initiatives
▪ Tariffs
Key ▪ Cyber security ▪ Mobility
Economic ▪ Demand for enterprises to go digital ▪ Data & Analytics
Drivers
16
Non-profits
Intended Impact ▪ Consider tradeoffs
▪ Define success criteria ▪ Depth vs. breadth of reach
▪ Think big picture (e.g., society, people you are ▪ Quality vs. quantity of program initiative
working for/with ▪ Intended impact should align with strategic goals
Theory of Change ▪ Define timelines, initiative priorities and ownership

responsibilities
▪ Define specific actions steps to achieve the intended
Key Ideas
impact
Implementation Feasibility ▪ New infrastructure cost – IT systems, office space

▪ Revenue Impact (Self sustaining model, grants) ▪ Indirect costs
▪ HR costs: creating new roles, hiring new staff, train ▪ Impact on culture of organization
existing and new staff, modify existing organization
structure ▪ Impact on scale on quality of outcomes
Performance Measures and Reporting Impact ▪ Monitor and modify plan accordingly
▪ Measure performance vs. peers ▪ Consider performance during and after
implementation of initiatives
▪ Set milestones for financial and operational goals
Case topics
• Growth through existing platforms • Thought sharing to strengthen the industry
• Growth through new partnerships • Growth using technology
• Growth driven by policy changes
17
Oil & Gas
▪ Upstream, midstream, ▪ Crude oil ▪ Exploration: seismic studies,
downstream ▪ Gasoline drilling rigs and labor
▪ PV-10 ▪ Natural Gas ▪ Production: refining
▪ Cost per gallon ▪ Refining products such as ▪ Pipelines
▪ OPEC lubricants ▪ Gas station: oil, labor, insurance,
licenses
▪ GDP growth ▪ Gas stations: gasoline, food
▪ Renewable energy market, car wash
▪ Fracking
Customer ▪ Petroleum refiners ▪ Domestic and commercial users

Segments ▪ Electricity generators ▪ Other industries
▪ Retail ▪ Commercial
Channels ▪ Wholesale
▪ Access to reserves ▪ Political pressures

Risk ▪ Energy policies ▪ Substitutes/renewable energy
▪ OPEC decisions ▪ Offshore drilling
Key ▪ Government regulation
Economic ▪ International oil production and demand
Drivers
18
Pharmaceutical
▪ Affordable Care Act ▪ Insurance payments ▪ Research & Development
▪ Aging population ▪ The federal government provides ▪ Manufacturing cost (the largest
▪ Patents and generics certain grants to subsidize R&D share of the industry’s costs)
▪ Research & Development ▪ Due to significant R&D lead ▪ Marketing costs

times revenue is highly volatile ▪ Wages
▪ Insurance
▪ Seasonality is high on certain ▪ Liability insurance and legal fees
▪ FDA products (vaccines and cold
▪ Market penetration medicine) and low on other ▪ Litigation
products (pain medicines)
▪ Contract v. in-house salesforce
Customer ▪ Medical patients ▪ Government insurance programs

Segments ▪ Prescribing doctors ▪ Health insurance companies
▪ Over-the-counter
Channels ▪ Prescription drugs: Hospitals, pharmacies
▪ Mail order pharmacy: Express Scripts, Walgreens
▪ Generic manufacturers pose a major competitive threat following patent expiration
Risk ▪ Tariff barriers are no longer a relevant form of protection
▪ Unfavorable government healthcare regulations and CMS rates
Key ▪ Median age of population ▪ Insurance and regulatory landscape
Economic ▪ Research and development expenditure ▪ Patent protection
Drivers
19
Private Equity & Hedge Funds
▪ Components of the revenue ▪ Wages and profit-sharing ▪ Value creation: sell under-
charge ▪ Administrative costs(regulatory performing assets, optimize price,
diversify customer base,
▪ Invested capital filings, record keeping, accounting
operations efficiency
▪ Transaction and advisory and travel)(sub-bullets)
▪ Exit: strategic or IPO
fees ▪ Outsourcing of capital intensive
IT functions for algorithmic ▪ Synergies
▪ Carried interest
trading ▪ Stability of cash flows(IRR, NPV)
▪ Divestures
▪ Targeted returns ~ 40%+
▪ Un-invested capital vs. invested
▪ Pension funds (largest share)
Investors ▪ Private investors (e.g. High net-worth individuals)
▪ Banks, sovereign funds and life insurance companies
▪ Large firms focus on deals ~ $1.0B; middle market firms cover deals between $15.0M- $1.0B
Averages in ▪ Average holding period before sale has increased from 3 years to 6 years in the past 15 years
industry ▪ Borrowing can typically range from 65.0% to 85.0% of the purchase price of the firm
▪ New regulation -> compliance costs, Rising competition -> decreasing industry fees
Risk ▪ Competition also exists with sovereign wealth funds and corporate buyers
▪ Changes in tax structure
Key ▪ Investor uncertainty/Pension demand ▪ Exit opportunities
Economic ▪ Access to credit/interest rates ▪ GDP/Investment returns
Drivers ▪ Regulations
20
Retail
▪ Same store sales ▪ Women’s apparel sale ▪ Cost of Goods Sold
▪ Sales per square foot ▪ Drugs & cosmetics ▪ Transportation
▪ Inventory turn-over ▪ Furniture & household appliances ▪ Wages
▪ Seasonality/recessions ▪ Children apparel ▪ Rent and utilities
▪ Trends ▪ Men's apparel ▪ Marketing
▪ Toys
▪ Footwear
▪ Misc. items
Customer ▪ The industry is consumer-oriented and, due to the spectrum of products, its markets are generally
segmented into different income, demographics and age
Segments
▪ Department Stores/Big box retailers ▪ Demographic retailers

Channels ▪ Discount retailers ▪ Shopping malls
▪ E-commerce ▪ Subscription boxes and services
▪ Changes in disposable income ▪ Easy entry invites competition
Risk ▪ Demand and supply issues ▪ Tariffs and trade disruptions
▪ Overstock
Key ▪ Consumer Confidence index ▪ Gross Domestic product/inflation
Economic ▪ Per capita disposable income ▪ Households > 100,000 income(luxury goods)
Drivers ▪ International Export/Import ▪ Commodity prices(e.g. : gold price for jewelry)
21
Telecommunications
▪ Deregulation led to spur of new ▪ Voice calls ▪ Infrastructure and line
companies ▪ Additional lines/family plans maintenance (5G investments)
▪ Bottlenecks: High capital, scarce ▪ Text and image communication ▪ Labor
operating skills and management ▪ Marketing and advertising
experience ▪ Data subscriptions
▪ Shift from telephones to internet ▪ Accessories
based services for mobile ▪ Additional add-ins (e.g. spam
▪ Bundling of services blocking)
▪ Residential and Small Business (Price sensitive)

Customer ▪ Large multinationals (Price insensitive)
Segments
▪ Retail stores - carriers and mass retailers

Channels ▪ Online
▪ Rapid development of technology ▪ New low-cost entrants driving prices down

Risk ▪ High exit barriers ▪ Cord cutting
▪ Systems not reusable across industries
Key ▪ Investment in rising technology services
Economic ▪ Number of subscriptions to additional services
Drivers ▪ Number of broadband and mobile internet connections
22
Utilities
▪ Increase in energy consumption ▪ Transmitted electricity: base load ▪ Purchased power accounts (nearly
▪ High investment costs and and intermittent electricity half of total costs)
regulations ▪ Base load (95% of industry) ▪ Infrastructure
▪ Industry structure disintegrating ▪ Coal, natural gas, nuclear, other ▪ Wages
into smaller supplier segments ▪ Intermittent: renewable energy ▪ Marketing
▪ Seasonality ▪ Maintenance contracts
▪ Gov. incentives for sustainable
initiatives
▪ Bundling services w/renewable
▪ Commercial and Industrial
Customer
▪ Residential
Segments
▪ Transmission lines/pipelines
Channels ▪ Upstream electricity generators
▪ Clean energy threatens the future of traditional power generation methods

Risk ▪ Seasonal demand leads to uncertain estimates
▪ Energy efficient appliances decrease consumption
Key ▪ Economies of scale
Economic ▪ Industrial production index
Drivers ▪ Climate/seasonality
23
Case 1: American Bank ATM Dilemma
Financial Services | Profitability Improvement
24
Case Prompt
Our client, American Bank, is a national retail bank operating in the US. ATMs have
traditionally been a profitable channel, but the bank has started seeing declining operating
profits from its ATMs. The CEO has hired your firm to help her analyze the reasons for this
decline and solutions to improve usage.
How would you approach this problem?
Interviewer Guidance
This is an interviewee led case. Throughout the case, let the interviewee ask for specific data
points before presenting exhibits.
You should gauge the interviewee’s potential for going granular into the problem.
Concepts Tested Graph reading, Setting up calculations, Brainstorming
25
Clarifying Information Possible Framework

• Profits have been declining over the last 5 years Problem: Declining profitability of ATMs
• ATMs contribute to 12% of the bank’s revenues. • Revenues falling –
• ATMs operated in the US only - Average transaction (txn) price falling
- Overall txn prices decreased
• 12000 ATMs – no change in number of ATMs or - Transaction mix towards cheaper txns
operating structure in the last 5 years (2013 – 2018) - Fewer customers using ATMs
• The bank operates the ATMs itself or through - Decrease in overall volume of customers
vendors - three operating structures: - Higher revenue customers (Own
customers) not using
- Bank owned and operated
- Customers moving to competition /
- Bank owned and vendor operated substitutes such as online banking
- Vendor owned and operated (Bank gets - No newer sources of revenue from ATMs
commission on transactions) introduced apart from core transaction revenues
• Costs increasing –
• Up to 5 competitors observed in vicinity of any
- Avg variable cost of operating increased:
ATM
- Avg cost of operating ATMs increased
• Any person (Own bank customers and other bank - Shift towards expensive operated ATMs
customers) can use any American Bank ATM - Fixed costs increased:
- Cost of purchasing new ATMs increased
26
Interviewer Guidance for case flow
Drive Insight/Calculations → Candidate Data Request → Exhibit

Framework → Profitability numbers → 1
Ex.1: Revenue problem → Revenue breakdown → 2 and 3
Ex. 2 and 3: Northeast and West-Pacific facing problems. Reasons and breakdown for fall in
4 and 5
Both vendor-operated heavy → hits for vendor operated ATMs →
Ex. 4 and 5: Calculate extra possible hits in vendor
Revenue earned per hit → 6
ATMs →
Ex. 6: Calculate extra revenue
Ex 6: Brainstorm with candidate for other areas of
Improve ratio of “other” and fin.
improvement → drive insight for $0.5 extra in “other” 6A
transactions by benchmarking →
customers and financial transactions each →
Ex: 6A: Calculate additional revenue potential by taking
best-case competitor scenarios
Give interviewer led question on breakeven (optional)
Ask for final recommendation
27
Exhibit 1 – American Bank ATM usage, profits and revenues in last 5 years
# daily hits1 per ATM across US Total Profits and Revenue from ATMs
100 96 94 $2.0 $1.88
92 $1.83
Millions
89 87 $1.78
90 85 $1.8 $1.72
$1.67
$1.62
80 $1.6
70 $1.4
60 $1.2
$1.15
50 $1.0 $1.09
$1.04
$0.99
40 $0.8 $0.94
$0.89
30 $0.6
20 $0.4
10 $0.2
0 $0.0
2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018
Own Customer Other Customer Total daily hits Profit Revenue
Note: Own customers are customers of American Bank, while Other customers are not customers of American Bank
1. hits = number of unique times an ATM was used (the word hits is used interchangeably with the word transactions)
28
Exhibit 2 – American Bank ATM fall in hits across US (2018)
ME
WA
VT
NH MA
MT ND
OR
MN NY
Legend
ID WI RI
SD MI CT
WY PA MD NJ Fall in average daily hits1
DE
NE
IA OH per ATM (2013-2018)
IL IN WV VA
NV Washington D.C.
CA
UT
CO KY 30 hits
KS MO
NC
TN
SC 20 hits
OK AR
AZ NM
GA
AL
MS 10 hits
AK TX LA
FL 0 hits (Constant)
<0 hits (Increase in hits)
Region - States:
Northeast – CT, ME, MA, NH, RI, VT, NJ, NY, PA
HI Midwest – IL, IN, MI, OH, WI, IA, KS, MN, MO, NE, ND, SD
South - Atlantic – DE, FL, GA, MD, NC, SC, VA, DC, WV
South – Central – AL, KY, MS, TN, AR, LA, OK, TX
1. hits = number of unique times an ATM was used West - Mountain – AZ, CO, ID, MT, NV, NM, UT, WY
West - Pacific – AK, CA, HI, OR, WA
29
Exhibit 3 – Operating costs for American Bank ATMs (2018)

Operating Structure
Region BO-BO BO-VO VO-VO
# ATMs
Northeast 250 750 1000
Midwest 1000 800 200
South - Atlantic 1500 250 250
South - Central 1500 350 150
West - Mountain 1200 500 300
West - Pacific 0 500 1500
Daily Operating Cost to bank per ATM ($)
Operating Cost $100 $60 $0
Operating Structure: Region - States:

BO-BO = Bank Owned, Bank Operated Northeast – CT, ME, MA, NH, RI, VT, NJ, NY, PA
BO-VO = Bank Owned, Vendor Operated Midwest – IL, IN, MI, OH, WI, IA, KS, MN, MO, NE, ND, SD
VO-VO = Vendor Owned, Vendor Operated South - Atlantic – DE, FL, GA, MD, NC, SC, VA, DC, WV
Owner pays rent, utilities South – Central – AL, KY, MS, TN, AR, LA, OK, TX
Operator pays for maintenance, cash mgmt. West - Mountain – AZ, CO, ID, MT, NV, NM, UT, WY
West - Pacific – AK, CA, HI, OR, WA
30
Exhibit 4 – Reasons for reduction in hits in vendor operated1 ATMs
Price correlation2
$1.02 $1.01
Price per txn ($)

$1.01 $1.00
$1.00
$0.99
94 95 96 97 98 99 100 101
Number of daily transactions
Uptime3 correlation
100 100
Uptime (%)
90
80 80
70
70 80 90 100 110
Competition correlation
# Competitors 5
in vicinity 4 4
3
2
1. Vendor operated ATMs are ATMs where operations are outsourced to a vendor 1
2. American Bank cannot reduce transaction prices further from current levels 0 0
3. Uptime is the % of time the ATM is functional; Downtime = 100% - Uptime 85 90 95 100 105
31
Exhibit 5 – Downtime pattern and causes in vendor operated1 ATMs
Average Downtime Downtime Causes (2018)

100% 5%
90% 25%
80%
70%
60%
50% 50%
40% 20%
30%
20%
Cash-out (Operator)
10%
0%
Power outage (Owner)
2014 2015 2016 2017 2018 Machine tech problems (Operator)
Uptime Downtime Other technical issues (Operator)
1. Vendor operated ATMs are ATMs where operations are outsourced to a vendor (a vendor is the operator)
Note: Cash-out = Amount of time the ATM is out of cash to dispense ; Power outage = Amount of time the ATM does not have electricity to run
Note: (Operator) = Operator responsibility ; (Owner) = Owner responsibility
32
Exhibit 6 – Revenues from ATMs (2018)

Operating Structure
BO-BO BO-VO VO-VO
Customer Type
Fin. Non-fin. Fin. Non-fin. Fin. Non-fin.
Revenue for American Bank from each hit2
American Bank (Own) customer1 $2.0 $1.5 $1.5 $1.0 $1.0 $0.5
Other customer $2.5 $2.0 $2.0 $1.5 $1.5 $1.0
Own : Other Ratio 1:1
Region # Average Daily Hits (Own + Other)
Northeast 12 10 12 8 8 12
Midwest 127 173 97 73 48 62
South - Atlantic 43 57 22 48 56 34
South - Central 35 55 35 20 15 40
West - Mountain 32 48 21 16 19 11
West - Pacific 0 0 18 2 6 14
Operating Structure:
BO-BO = Bank Owned, Bank Operated | BO-VO = Bank Owned, Vendor Operated | VO-VO = Vendor Owned, Vendor Operated
Transaction type: Fin. = Financial transactions | Non-fin. = Non financial transactions
1. While American Bank does not charge its own customers, revenue is calculated as estimated savings because customer is not using the branch
2. For vendor-operated ATMs, revenue for American Bank is calculated after deducting vendor commissions on transactions
33
Exhibit 6A – Metrics comparison with competition (2018)
Proportion of Own : Other customers Proportion of Fin : Non-Fin transactions

1 1
0.9 0.9
0.8 0.8
0.7 0.7
0.6 0.6
0.5 0.5
0.4 0.4
0.3 0.3
0.2 0.2
0.1 0.1
0 0
American PNK Bank Townbank Bells Cargo American PNK Bank Townbank Bells Cargo
Bank Bank
Own Customers Other Customers Financial Non-Financial
34
Exhibit 1 Insights Exhibit 2 Insights Exhibit 3 Insights

1. Hits (txns) falling – main 1. Maximum decline in 1. Northeast and West-
problem for exploration average daily ATM hits pacific have high vendor
2. Other customers smaller in 2 regions - Northeast operated ATMs =>
portion of transactions and West-Pacific 2. Problem with Vendor
3. Costs are constant across Operated ATMs (BO-
all 5 years VO and VO-VO)
Exhibit 4 Insights Exhibit 5 Insights Exhibit 6/6A Insights

1. Downtime major reason 1. Downtime increased by 1. Ex.6 - $0.5 more revenue
2. Price increase is not 25% in last 5 years from other customers
helpful due to high 2. Operator contributing to 2. Ex.6 - $0.5 more revenue
demand elasticity 80% of downtime issues from financial txns
3. Competitors not 3. Vendor management and 3. Ex.6A – competition
affecting transactions contracts to be explored better at both metrics
35
Ideas for profitability improvement and revenue potential (1)

1. Manage vendors in Northeast and West-Pacific regions to eliminate downtime:
• Vendor management will increase uptime by 80% (% operator responsibility) * 25% (uptime increase) = 20%
• 20% increase in uptime -> Increase in 20 transactions (hits) per ATM in both regions for –VO ATMs
• 20 additional daily hits to be allocated proportionally to financial and non-financial transactions:
Given info - Operating Structure (# hits) Calculation - Allocation of 20 new hits
Region BO-VO VO-VO BO-VO VO-VO
Fin. Non-Fin. Fin. Non-Fin. Fin. Non-Fin. Fin. Non-Fin.
Northeast 12 8 8 12 12 8 8 12
West - Pacific 18 2 6 14 18 2 6 14
Avg Rev. / hit $1.75 $1.25 $1.25 $0.75 $1.75 $1.25 $1.25 $0.75
• Calculating additional revenue from new hits –
• Northeast (BO-VO) increase = [12 (Fin)*$1.75 + 8 (Non-Fin)*$1.25] * 750 ATMs = $23,250
• Northeast (VO-VO) increase = [8 (Fin)*$1.25 + 12 (Non-Fin)*$0.75] * 1000 ATMs = $19,000
• West-Pacific (BO-VO) increase = [18 (Fin)*$1.75 + 2 (Non-Fin)*$1.25] * 500 ATMs = $17,000
• West-Pacific (VO-VO) increase = [6 (Fin)*$1.25 + 14 (Non-Fin)*$0.75] * 1500 ATMs = $27,000
• Total increase in revenue (and therefore profits) = $23,250 + $19,000 + $17,000 + $27,000 = $86,250
36
Ideas for profitability improvement and revenue potential (2)

2. Increase proportion of other customers using ATMs to Bells Cargo levels and proportion of financial transactions to
PNK bank levels
Extra Fin. txns
Refer % Other 20% * 80% of all hits 20% * 20% of all hits
Bank % Fin txns
Exhibit Customers $0.5 extra rev $0.5 + $0.5 = $1 extra rev
20%*80%*$0.5 = $0.08 20%*20%*$1 = $0.04
American Bank 6A 45% 50%
>
Best-in-class competitor 6A 65% 70% No-change in customer type Extra Other customers
80% * 80% of all hits 20% * 80% of all hits
Improvement potential - 20% 20% $0 extra rev $0.5 extra rev
80%*80%*$0 = $0 20%*80%*$0.5 = $0.08
Extra revenue per txn 6 $0.5 $0.5 No-change in txn type
• Additional average revenue per hit from new financial and “other” customer transactions =>
= $0.04 + $0.08 + $0.00 + $0.08 = $0.2
(Easier method: 20%*$0.5 + 20%*$0.5 = $0.2)
• Total Additional revenue potential = $0.2 * (85 hits {Exhibit 1} * 12000 ATMs {Exhibit 4}) = $204,000
Total revenue increase = (1) + (2) = $86,250 + $204,000 = $290,250
Since there are no cost implications, total profit increase potential from both ideas = $290,250
37
Interviewer question: What is the average break-even number of daily hits?

Calculation:
• Interviewer to ask interviewee to assume both financial : non-financial transactions and
own : other customer ratios as 1:1 for simplicity in calculations
• Interviewee must identify that this only applies to bank-owned ATMs, since operating costs to
American bank for vendor-owned ATMs is $0.
• BO-BO Breakeven = $100 (cost) / [0.5*0.5*($1.5+$2+$2+$2.5)] (avg. rev. per hit) = 50 hits
• BO-VO Breakeven = $60 (cost) / [0.5*0.5*($1.0+$1.5+$1.5+$2.0)] (avg. rev. per hit) = 40 hits
Follow-on question -> What can we do with loss making ATMs? (after all tries of improving hits):
• Add other transaction types to ATM (functionalities such as check deposit, cash deposit, etc.)
• Allocate intangible revenues to ATMs in prime locations (marketing of bank, etc.)
• Negotiate operating costs with vendor (if vendor operated)
• Relocate ATM to better spot
• Shut down ATM / Sell off ATM to vendor
38
Recommendations Risks Next Steps

Two recommendations to Risks include: American Bank should:
increase revenue (and profits):
1. Costs to manage vendors and 1. Start looking into vendor
1. Improve vendor management change transaction types contract structures in
practices and look into (marketing, etc.) can be very Northeast and West-Pacific
vendor contract structures in high regions
Northeast and West-Pacific
regions 2. More ATM usage might lead 2. Identify loss-making ATMs
to branch employees going and take appropriate action
- Impact of $86,250 out of work resulting in the
need for firing of employees 3. Study customer usage
2. Increase proportion of patterns to improve
financial and other customer 3. Investment in ATMs may transaction mix
transactions to best-in-class reduce attention on channels
competitor levels such as online banking which
are growing more rapidly
- Impact of $204,000
Total revenue (and profit)

potential = $290,250
39
Case 2: Harrison Energy EV Goals
Power & Utilities | Market Entry
40
Case Prompt
Our client, Harrison Energy, is one of the largest power & utilities companies in the US. You
are in the year 2018, and the CEO sees electric vehicles as an attractive market and wants to
enter the space. She needs help understanding how and when to enter the market, and the
associated ROI. She has hired your firm to help formulate a strategy.
This is an interviewee led case. Brainstorm with interviewee to answer the following questions:
1. What factors will you consider to formulate a market entry strategy? (framework)
2. When should we enter the market? (Hand Exhibit 1).
3. Which parts of the value chain should we enter and how? (Hand Exhibit 2). Brainstorm to
lead interviewee to ask for Exhibit 3.
4. What other considerations should the client have to prioritize market entry?
Concepts Tested Problem structuring, Brainstorming, Graph reading
41

• Goal/objective is to be present in a new market and Problem: Enter electric vehicle market
add more sources of revenue and eventually profits. • Market –
• Scope limited to the US market only - Market size across EV components
• Client is not currently involved in the EV market - Growth rate
- Maturity of EV market (Is tech still developing?)
• Client wants to know when to enter the market - Competitors and market share
• Harrison Energy does not know where in the EV - Regulations / policies in EV space
value chain it wants to play • Financials –
- Potential revenue (market size, share)
• Harrison Energy wants to break-even on any
- Potential costs (set up, operations)
investment in 5 years
• Proposition –
- Value chain components of EV
- Synergies with current business
- Customer segments – individual vehicle owners
/ business owners
- Supplier concentration (how difficult is it to
provide product/services?)
• Entry strategy (for different value chain elements) –
- Merge/Acquire smaller players
- Build from scratch (in-house/outsourced)
42
Brainstorm when to enter the EV Market

The EV market will be best to enter when:
A. Internal Readiness
i. Harrison Energy has developed capabilities in the segments it wants to enter
ii. Harrison Energy has been able to raise the capital needed to enter the market (internal
cash or external debt or equity)
B. External Readiness
i. The costs of owning EV vehicles is lower than that of regular (ICE1) vehicles
ii. There is adequate infrastructure such as charging stations, maintenance services for
electric vehicle models
iii. Large companies such as Harrison Energy would prefer to enter in the growth phase
vs. introduction phase (in the market maturity curve)
Once the interviewee arrives at these points, say that external readiness is the bottleneck and
hand Exhibit 1 to calculate the right time to enter the market.
1. ICE vehicle = Internal Combustion Engine vehicle (most commonly found type of vehicle today)
43
Exhibit 1 – Market maturity and Total Cost of Ownership
Total Cost of Ownership (TCO1) of EV EV Market Maturity Curve

vehicle for 10 years Introduction Growth Maturity Saturation
$120,000
$100,000
$100,000 $92,500
$85,000 $90,0002
$77,500 $75,000
$80,000
2010 2020 2030 2040 2050
$60,000
$40,000 Price ($ TCO) to demand (#) correlation

$50,000
$20,000
$40,000
$0
2010 2020 2030 2040 2050
Vehicles Batteries Maintenance
Electricity Total ICE Vehicle 2,000,000 4,000,000
1. Total Cost of Ownership (TCO) includes all costs of owning, running and maintaining a vehicle (includes vehicle cost, fuel/electricity cost, maintenance)
2. ICE vehicle = Internal Combustion Engine vehicle (most commonly found type of vehicle today)
44
Calculations / Working for when to enter EV Market

Time of entry:
Exhibit 1: TCO of ICE vehicle - $90,000. TCO of EV in 2020 is $92,500 and in 2030 is $85,000.
The demand will spike when total cost of owning an EV is less than the total cost of owning an ICE vehicle.
Doing a quick linear regression, TCO of EV = $90,000 in 2023, and goes further down after that.
Calculation:
2020 + ($92,500 - $90,000)/($92,500 - $85,000) * (2030 - 2020)
 2020 + ($2,500 / $7,500) * 10
 2020 + 10/3
 2023
This is when demand will spike and is the best time for entry. 2023 is 5 years from current date (2018).
Comparing with maturity curve, we see that 2023 lies in the growth phase and is the best time to enter the market.
The TCO – demand correlation curve also supports a high price elasticity, implying that it is best to enter when the price is
lower and the demand is high.
45
Interviewer Guidance for segment / proposition selection
• Brainstorm with interviewee on next steps -> drive interviewee to think about which
segment of the market should Harrison Energy enter. Hand Exhibit 2.
• After calculations on Exhibit 2, ask interviewee about other options for non-feasible value
chain elements. Once interviewee arrives at the conclusion that Harrison Energy could
acquire other players, hand Exhibit 3.
46
Exhibit 2 – Harrison Energy Capability Analysis

Harrison Energy Capability Analysis
Market Size $B (2023)
Capability Level Time to build inhouse Cost to build
$400 15 years $30B

Vehicles $80 10 years $5B
$25 10 years $1B
$10 10 years $600M

Batteries $3 2 years $50M
$3 4 years $100M
$12 2 years $500M

Charging Stations $2 Capable $0
$5 3 years $300M
$0 N/A N/A
Power Generation $10 Capable $0
$4 Capable $0
$3 1 year $300M
Software/Mgmt Services $0 Capable $0
$3 1 year $200M
Build Sell Operate

Note: Assume that in the best-case scenario, Harrison Energy can capture 10% market share and make 10% EBITDA margins on each value chain item.
Harrison Energy wants a 5 year payback period on any investment. Assume stagnant market from entry to 5-year period for calculations.
47
Exhibit 3 – Options for acquisition
Value Brand Option #1 (cheaper) Option #2 (faster)

Component
Chain Alignment
Cost ($) Time (years) Cost ($) Time (years)
Build $20B 10 $40B 5
Vehicles Sell
Operate
● $6B
$1.1B
8
7
$8B
$1.2B
6
5
Build $400M 8 $550M 5
Batteries Sell
Operate
● $100M
$50M
3
7
$150M
$150M
1
2
Build $400M 4 $800M 1
Charging Stations Sell
Operate
● $200M 4 $400M 2
Build
Power Generation Sell
Operate
●
Build $100M 3 $200M 2
Software / Mgmt.
Services
Sell
Operate
● $100M 3 $200M 2
● Low | ● Medium | ● High
Note: Assume that in the best-case scenario, Harrison Energy can capture 10% market share and make 10% EBITDA margins on each value chain item.
Harrison Energy wants a 5 year payback period on any investment. Assume stagnant market from entry to 5-year period for calculations.
48
Calculations / Working for where and how to enter the EV Market

1. First, calculate the expected annual profits from each value chain element (Mkt size * 10% * 10%)
2. Calculate maximum cost budget considering 5 year payback period (Expected profits * 5)
3. Next, filter value chain elements where we can build capabilities in less than 5 years (time of market entry)
4. Finally, decide mode of entry [own vs acquire (Option 1 vs 2)] that satisfies all criteria.
5. Recognize that vehicles have poor brand alignment and are not a good entry option. Also, it could be a good idea to
enter Batteries – Build even though it slightly exceeds the cost budget, to provide a holistic Batteries service
Value Chain Market size Exp. Profit Budget Best cost with Time Brand
Component Mode of entry Enter?
Element 2023 ($) 2023 ($) [Profit*5] ($) <=5 year (years) Alignment
Build $400B $4B $20B $40B 5 Acquire (Op#2) Low No
Vehicles Sell $80B $800M $4B - - - Low No
Operate $25B $250M $1.3B $1.2B 5 Acquire (Op#2) Low No
Build $10B $100M $500M $550M 5 Acquire (Op#2) Medium Yes Holistic service
Batteries Sell $3B $30M $150M $50M 3 Build Medium Yes

Operate $3B $30M $150M $100M 4 Build Medium Yes
Build $12B $120M $600M $400M 4 Acquire (Op#1) High Yes
Charging
Sell $2B $20M $100M Already Capable High Yes
Stations
Operate $5B $50M $250M Already Capable High Yes
Build N/A N/A N/A N/A N/A N/A N/A N/A
Power
Sell $10B $100M $500M Already Capable High Yes
Generation
Operate $4B $40M $200M Already Capable High Yes
Software / Build $3B $30M $150M $100M 3 Acquire (Op#1) Medium Yes
Mgmt. Sell $0.0B $0M $0M Already capable Medium Yes
Services Operate $3B $30M $150M $100M 3 Acquire (Op#1) Medium Yes
Total (for Yes’s) $55B $550M $2750M $1300M
49
Brainstorm other considerations/prioritizations to enter the EV market

1. Target customer segments – go after business/industrial customers who are working towards electrifying their fleets
(for sustainability) first (e.g.: UPS, PepsiCo, etc.)
2. Geographies to enter – Power & utility companies typically operate as monopolies in few states. Entering their own
states first makes most sense.
3. Regulations – Tax incentives, rebates by government to encourage switch to electric vehicles (govt. promoting
sustainability)
4. Competition – Cost/Product advantage of Harrison Energy over specialized players in each value chain element
• Established customer base (easier marketing / lower marketing costs)
• Leverage existing manufacturing and distribution network to scale easily (easier scaling)
• Better supplier relations (higher bargaining power)
• Better customer usage understanding (more targeted propositions)
• Better government relations (can work with government authorities to leverage incentives in EV market)
50

Recommendation: Risks include: Harrison Energy should:
Harrison Energy should enter the 1. Outsourcing may not add the 1. Start negotiations with
EV market after 5 years in all right amount of capabilities suppliers / acquisition targets
value chains except vehicles needed (little scope for
because of poor ROI and brand further innovation) 2. Identify customer segments
alignment. to pilot existing capabilities
2. Suppliers / acquisition targets
Expected annual profit w/o may have high bargaining 3. Create new organization
capability building costs = $550M power which may result in structure / hire consultants
(in 2023 dollars) longer timelines and costs to execute EV project
than expected
Harrison has existing capabilities
in 5 value chain elements, can 3. Overlooking vehicles, which
build in 2 and acquire competitors is the largest value chain
in 6 (3 op#1 and 3 op#2) with <5 element
year payback period
51
Case 3: Bailey Brothers Bancorp
52
Case Prompt
Our client, Bailey Brothers, is a retail bank with several branches in Ann Arbor, Michigan. Their
main competitor is Potter & Co., a regional bank that also operates in and around the Ann
Arbor area. The CEO of Bailey Brothers, George Bailey, would like us to recommend ways to
improve overall profitability in the face of an increasingly modernized industry.
Information provided upon request:

• Bailey Brothers and Potter both offer checking, savings, and retirement accounts, as well as
mortgages and auto loans, CDs, and investment accounts.
• Bailey Brothers and Potter both have well developed mobile apps and online capabilities.
• Bailey Brothers has eight equally sized branches, has been in Washtenaw County for several
decades, and is not considering expanding its footprint at this time.
• George would like to bring his profit margin to that of Potter’s within two years.
53
Exhibits: Candidate may ask for data specifically, but feel free to dump all the exhibits on them
at once without context to allow the candidate to work through it on their own.
Exhibit 1: Given that the target is to match profit margin, the candidate should recognize that
the exact number is given by the graph. A strong candidate will also note that the two firms
were similar until recent years.
Exhibit 2: Candidate should identify that A) Online access is increasing, and B) In-person,
branch interaction is not displayed here but can be implied to be dropping as online interaction
rises. 2018 data indicates that 85% of customers to interact with BB primarily through online
means, so it can be inferred that only 15% primarily use a physical branch.
Exhibit 3: Each line-item for Potter is exactly 8X that of Bailey Brothers, with the exception of
branch expenses. Since branch interaction is falling, the cost-saving solution would be to reduce
the number of branches in the Bailey Brothers footprint. A reduction in branches from 8
(annual cost of $12M) to 4 (annual cost of $6M) will bring Bailey in line with Potter in relative
expenses and therefore profit (which a good candidate will notice), however if the candidate
begins to calculate the new margin, let them.
54
Framework Recalculated Income Statement

A solid framework would include both
revenue (new product offerings, pricing, Revenue $50
account size, etc.) and cost (salaries,
marketing, client acquisition expense)
Salaries and Wages $20
buckets. Bonus points if the candidate
recognizes that a bank likely won’t have Branch Expenses $6
variable costs in the same way a CPG or Marketing $8
industrial company will. After sufficient Website/App $6
brainstorming of profitability factors, guide Total Operating
the candidate toward costs as this will be the
Expenses $46
focus of the case.
Profit Margin 20%
EBITDA $10
55
Exhibit 1
Profit Margin
25%
20%
15%
10%
5%
0%
2010 2012 2014 2016 2018
Bailey Potter
56
Exhibit 2
Primary Point of Contact for BB Clients
40%
35%
30%
25%
20%
15%
10%
5%
0%
2010 2012 2014 2016 2018
Website Alone Mobile App Alone Website and Mobile
57
Exhibit 3
Income Statements, FY18 (MM)
Potter & Co Bailey Brothers
Revenue $400 $50
Salaries and Wages $160 $20
Branch Expenses $48 $12
Marketing $64 $8
Website/App $48 $6
Total Operating Expenses $320 $46
EBITDA $80 $4
58

Recommendation: Risks include: Bailey Brothers Bancorp
should:
Bailey Brothers should close 4 of 1. Loss of remaining clientele
its 8 branches. The brick and that doesn’t use online 1. Further analysis into which
mortar presence is no longer resources branches to close to
necessary and the cost savings will minimize customer impact
boost margins from 8% to 20%. 2. Possibility of longer term
leases on branch properties 2. Exploration of leasing
that can’t be exited contracts and/or selling
immediately property assets
3. PR/morale erosion from 3. Campaign to educate

layoffs of employees working remaining 15% of offline
at branches customers in online
capabilities
4. Retraining (or buying

out/shifting location of)
branch employees
59
Case 4: Orange Bank Co
Financial Services | M&A
60
Case Prompt
Our client, an Amsterdam based retail bank, has seen exceptional growth in the last 5 years.
They are involved in commercial banking, investment banking and wealth management.
Currently, they are looking to acquire another bank in Europe. The CEO of Bank Co has hired
our firm to help identify an ideal acquisition target.
This is a typical McKinsey style case. After the prompt, let the interviewee ask clarifying
questions and then begin testing the interviewee’s capability of creating a structure to solve the
problem. After that, move onto the other questions as listed below. This case is about
comparing various acquisition targets from a financial and non-financial synergies standpoint.
61

• There is no metric for the client to 1. Market Attractiveness
measure success • Market size
• The rationale of the acquisition is to • Market growth
expand outside Amsterdam • Consumer trends
• They are open to acquiring organizations 2. Financial Attractiveness
with same/different financial products • Revenue
• Size of Bank: • Cost – FC and VC
3. Synergies
• Customers: 600K
• Product
• Assets Under Management: $10B
• Consumer
• Other Costs
4. Risks
• Brand Erosion
• Culture
• Regulatory
62
Exhibit Insights & Brainstorming

Initial Insights: The candidate should start with at least some of these:
• We are looking at the variety of sizes – from smaller than us to bigger than us
• There is a visible trend that smaller the firm, higher the number of average products sold/
customer
• Average profitability/ customer doesn’t follow a particular trend so there are some
differences in the way these firms operate
Please drive the candidate to at least 2 of the above insights then ask deep dive questions
regarding each of these questions:
Question 1: What do you think are the advantages and disadvantages of acquiring these firms
based on size? Expected answers:
• Acquiring a smaller firm will be easier to manage vs. larger
• Difference in financial capital required
• Market perception would vary
• Larger firm would enable faster market entry
• Any other logical reason is also acceptable
63
Exhibit Insights & Brainstorming

Question 2: Why do you think the average products sold differ? Expected answers:
• Better customization at smaller size
• Larger company might have higher number of products covering large customer segments
• Better customer service/ salesforce
• Better products
Question 3: Why does the profitability differ? Expected answers:

• Higher price per product
• Better costs (ask the candidate to split costs)
• Better talent productivity
• Better financial management
• Better overhead management
64
Questions Calculation
Question 4: Ask the customer Bank Co profitability: $600K * $160 = $96M
based on the data they have –
if you have to choose one Bank A profitability: $600K * $100 = $60M
bank to acquire – which one Bank B profitability: $800K * $90 = $72M
are you inclined towards? Any Bank C profitability: $300K * $75 = $22.5M
answer is acceptable with a
sound logic. Increase in profitability
Question 5: If the # of Bank Co. + Bank A: ($96M + $60M)/(600K + 600K) = ~$130/

customer
customers for Bank Co is
Bank Co. + Bank B: ($96M + $72M)/(600K + 800K) = ~$120/
600K and the average
customer
profitability is $160. What
Bank Co. + Bank C: ($96M + $22.5M)/(600K + 300K) = ~$130$/
would be our increased customer
profitability if we acquire Bank
A vs. Bank B vs. Bank C?
Assume there are no synergies. Thus Bank A or Bank C gives us the same profitability
65
Questions Answer: Synergies & Risks

Question 6: Now that Bank A Synergies
and Bank C are giving us the Financial synergies
same profitability – what other • Increase in revenue: ease of capturing customers, different
factors will you look at to products might present cross-sell/up-sell opportunities, price
decide between them? increase possible in case of monopoly, etc.
• Reduction in cost: consolidation of branches, better
management of finances, consolidation of labor, less overheads
Risks Non-financial synergies
Regulations will need to verified in • Specialization sharing: If there are differences in specialization,
the new geography to understand these could be leveraged such as customer service, product
its impact on the bank operations innovation etc.
Integration of culture will need to • Process optimization: Larger processes present an optimization
be worked on opportunity
Brand perception will need to be • Brand presence: Bank Co will become a multi-national bank
considered if the target bank’s leading to increase in stock price
current reputation is not good
Any other logical reason is acceptable
66
Exhibit 1: Number of Customers - 600
Average products Average profitability/

Acquisition Target Total # of customers
sold/ customer customer
Bank A 600K 4.3 $100
Bank B 800K 3.4 $90
Bank C 300K 6.1 $75
*All targets are located in Luxembourg
67
Case 5: ShopOn
Retail | Profitability Improvement
68
Case 5: ShopOn
Case Prompt
Our client, a US based e-commerce company, ShopOn, has seen a rise in customer returns over
the last few quarters. Even though its revenue and market share have been increasing every
quarter, the CEO is concerned that customer returns will start impacting the margins soon. The
CEO of ShopOn wants your help to identify the reasons behind the high rate of returns and
create a mitigation strategy.
This is a typical McKinsey style case. After the prompt, let interviewee ask clarifying questions
and then begin with testing the interviewee’s ability to build a framework for an industry with
high growth and disruption. After that, move onto exhibits, followed by a brainstorm question.
The case has a lot of exhibits and the interviewee will have to identify reasons for rising
customer returns and recommendations from those.
69
Case 5: ShopOn
Clarifying Information Case & Exhibit Guidance

• Customer returns refer to products returned 1. After the interviewee prepares and explains
by customers post-delivery and not order the framework, the interviewer will prompt
cancellations before delivery. the interviewee to move forward with
• The return period for any ShopOn product is Exhibits, which cover the most important
30 days from the day of delivery. reason for increase in return % i.e. change in
product mix.
• Even though new competitors keep entering
the market, there has been no new competitor 2. After the interviewee has answered the math
in the last few quarters that could bring about question, the interviewer will lead the
any significant change to ShopOn. ShopOn is interviewee to brainstorming.
ranked #3 in the e-commerce space 3. Finally, the interviewer will prompt for a
• ShopOn holds 50% of the product inventory recommendation.
in its warehouses and 50% is a marketplace for
sellers.
• The mitigation strategy should focus on both
short-term (next 1-3 quarters) and long-term
action items (next 2-3 years)
• No investment guidance has been provided.
70
Case 5: ShopOn
Possible Framework Possible Framework

1. Change in product mix 5. Others
2. Product issues • Inaccurate website description
• Apparels - Size/fit/color • No longer needed
• Electronics – • Bought by mistake
Damaged/malfunctioning/perceived • Desirable product was out of stock then
defect and now it is back in stock
• Household – Damaged/color/size • Fraudulent behavior by customers i.e.
• Food – expired/seal broken used the product and returned within
3. Pricing issues the return policy
• Better price available elsewhere
• Better price available on ShopOn now
4. Delivery issues
• Product arrived late
• Wrong product delivered
• Shipping box damaged
71
Case 5: ShopOn
Question 1
Looking at the below exhibits, what was the customer returns % of ShopOn in the last 2
quarters and what led to the change?
Exhibits
% UNITS SOLD Q1 % UNITS SOLD Q2

Product
Category Returns %
Electronics 2% Others
15%
Others
25% Electronics
Apparel 5% Food 25%
Electronics 10%
35%
Household 4%
Food
10% Household Apparel
Food 2%
20% 30%
Household
Apparel
Others 3% 15%
15%
72
Case 5: ShopOn
Solution
Qtr. 1 % Units Returns % Total Qtr. 2 % Units Returns % Total
Sold Returns Sold Returns
Electronics 35% 2% 0.70% Electronics 25% 2% 0.50%
Apparel 15% 5% .75% Apparel 30% 5% 1.50%
Household 15% 4% 0.60% Household 20% 4% 0.80%
Food 10% 2% 0.2% Food 10% 2% 0.20%

Other 25% 3% 0.75% Other 15% 3% 0.45%
Total 3% Total 3.45%
The reason for change in the return % is the change in product mix. More units of Apparel and
Household are being sold that have a return % higher than that of the company average.
73
Case 5: ShopOn
Brainstorming Question
Question: Now that we know that the apparel business is leading to the increased returns %, on
analyzing further we found that a large number of products had quality issues and hence were
being returned by the customer. What are the various costs that are involved with a return in the
apparel business and how can we reduce those?
Solution
Ways to reduce costs: Return without replacement:
• Customer to re-package before returning the order • Shipping & Inventory holding cost
• Customer to be provided with sellers address to ship • Re-packaging if product is not damaged
returns directly • Shipping cost to seller if product is damaged
• Customer to be charged if the original product is • COGS
not returned within 30 days Return with replacement product:
• Supplier contracts to be changed so that they bear • Shipping cost
COGS in case of returns • Inventory holding cost
• Improve warehouse processes to ensure customers • Product cost if original product not returned
are always sent the correct order • Shipping cost to seller if product is damaged
• COGS
74
Case 5: ShopOn

Recommendation: Risks include: ShopOn should:
1. Reduce the returns % of 1. ShopOn can lose market 1. Cost benefit analysis of
apparels business by delisting share to a competitor, penalizing customers &
products with poor rating especially in the apparel suppliers
business
2. Reduce the returns % of 2. Competition’s seller
apparels business by 2. ShopOn might become agreements to be reviewed,
onboarding verified sellers unpopular among sellers so as to not be the unpopular
and blacklisting sellers with choice with sellers
poor reviews 3. Customers might not be
3. Specifications on the website
available/comfortable to
to be modified in case of
3. Reduce the return costs by open the product at the time
recurring issues
asking the customer to check of delivery
the product at the time of 4. Feedback and Blacklisting
delivery process for sellers with
recurring issues
5. Automated system to alert
both ShopOn and sellers if
product rating is below a
threshold
75
Case 6: Ferris Wheel
Entertainment | New Investment Analysis
76
Industry: Entertainment| New Investment Analysis
Case Prompt
A friend of mine is super rich and is always looking into interesting investment opportunities. To raise funds
for renovation, Ferris Wheel management in Chicago is considering inviting bids from High Net Worth
Individuals (HNIs) to let them run the Wheel for a whole year, 7 years later.
As a fan of Chicago and the Wheel, my friend wants to bid on this opportunity and wants to know how to
go thinking about this.
▪ Level: Easy, Round 1 Case
▪ Interviewee led case
▪ No charts/graphs
Concepts Tested Brainstorming, Setting up calculations, Math
77
Clarifying Information Good Framework

• Desired ROI : 10% ▪ Good framework could include:
• If the bid is won, the friend would be CEO of ▪ Revenue analysis
the company and run the operations ▪ Ticket sales
▪ Other revenues
• The friend also has some interesting ▪ Cost analysis
investments in the food and beverage space ▪ Salaries
• No funding limitations ▪ Marketing
▪ Rent, Energy and Maintenance
Interviewer Guidance ▪ Insurance
▪ Other aspects
• After framework development, let the
▪ Capabilities to operate
candidate drive the case but course correct if
▪ Risks of not knowing 7-year future
necessary:
▪ Synergies from F&B businesses
1. Brainstorm and calculate revenues ▪ Funding for bid amount
2. Brainstorm costs ▪ Opportunity cost
3. Calculate margin, discount for NPV and
maximum Bid amount
4. Recommendation to friend
78
Brainstorm and calculate revenues

1. Ask candidate to brainstorm how we’d calculate ticket revenues
• Should settle on Price of tickets, capacity of the wheel, # of days ride operates, # of hours a day
2. Ask candidate how they would think about pricing the tickets?
• Good factors to consider would be peak pricing on holidays and weekends
• Seasonal variation due to being in Chicago – less footfall in winter, heavy crowds in summer
• Push the candidate for more pricing ideas (combined packages, multi-ride pass, corporate rates)
3. Finally ask the candidates what are some other/alternate revenues that could be earning?
• Good answers would include Food & Beverage, photo memories, private cabins, memorabilia,
advertising partnerships, synergy benefits etc.
1. This section to entirely facilitate brainstorming for the candidates
2. Creativity in pricing and alternate revenue streams is encouraged (can also be drawn from candidates
personal experiences)
3. Can push candidates with the “What else?”
79
Ticket Sale Revenue Calculation

1. Provide the candidate these numbers to run the calculations:
• Runs 52 weeks, 11 hours/day, capacity: 200 people/hour, $15 tickets (weekend 30% premium)
• Utilization: Spring/Summer/Fall weekdays (80%) and weekends (100%) | Winter weekdays (50%)
and weekends (75%)
• Other revenues + synergy benefits : $4.5M
2. Good candidate will lay out the math in a 2 by 2 matrix (Summer & Winter, Weekend & Weekday)
3. If a candidate does 2 buckets of calculation quickly – you can give them revenues from other 2 buckets
Assume 26 weeks each (it's Chicago after all)
Spring/Summer/Fall Winter
- # of days = 26 weeks*5 = 130 days - # of days = 26 weeks*5 = 130 days
- # of hours working = 130 days*11 = 1430 hours - # of hours working = 130 days*11 = 1430 hours
Weekday - Utilization (80%) = 1144 hours - Utilization (50%) = 715 hours
- Total People = 1144 hours *200 = 228,800 - Total People = 715 hours *200 = 143,000
- Sales = 228,800*$15/ticket = $3.432M - Sales = 143,000*$15/ticket = $2.145M
- # of days = 26 weeks*2 = 52 - # of days = 26 weeks*2 = 52

- # of hours working = 52 days*11 = 572 hours - # of hours working = 52 days*11 = 572 hours
Weekend - Utilization (100%) = 572 hours - Utilization (75%) = 429 hours
- Total People = 572 hours *200 = 114,400 - Total People = 429 hours *200 = 85,800
- Sales = 114,400*$20/ticket = $2.288M - Sales = 85,800*$20/ticket = $1.716M
Total from ticket sales: $9.521M + Other $4.5M = Total Revenues is $14M
80
Brainstorm costs and calculate margin + bid amount

1. Let the candidate suggest that now let’s look at the costs of running the Ferris Wheel
2. Ask candidate to brainstorm some of the those costs:
• Good answers include: Salaries/Labor, Marketing, Rent, Energy, Maintenance, Insurance, etc.
• Provide the candidates total costs needed for a year : $3M
3. Good candidates would proceed to calculating margin / net income (if not, guide them to this):
• Revenues – Costs = $14M - $3M = $11M Net Income
4. Good candidates would consider time value of money, since this margin would be earned 7 years later
• Rule of 72 discounting: 72/rate of return (10%) = ~7 years to double money or NPV is half
• Therefore, net income in today’s value = $11M/2 = $5.5M
• If candidates are unaware to consider discounting or how to discount – do prompt and guide
5. Good candidates will proceed to calculate maximum bid amount for today:
• Max bid amount for 10% ROI = $5.5M/110% = $5M
6. Ask candidate to make a recommendation
81
Recommendation Risks Next Steps

• Make a bid for a Risks include: Your friend should:
maximum amount of $5M
to ensure an ROI of 10% 1. These projections may 1. Ensure appropriate liquid
would be achieved for not stay constant for over funds are available to bid
NPV of $5.5M 7 years and we should
consider possible changes 2. Plan a bidding strategy to
• Any lower bid would in market trends / help succeed in the
increase ROI to >10% competition auction by wining it with
a less than <$5M bid
2. With no prior experience
in managing such a 3. Think of other synergy
venture previously, there benefitting investments
may be hiccups and your could be made over next
friend should consider few years
hiring a CEO to run this
3. Are opportunity costs of
other investments >10%?
82
Case 7: 6PAQ P.E. Firm
Entertainment | Private Equity & Profitability Improvement
83
Case Prompt
Your client, 6PAQ, is a small-market P.E. firm that specializes in suburban business
development.
One of its analysts identified two movie theaters in a small suburban area that separately or
together might prove to be a good investment. Should your client, 6PAQ, purchase these movie
theaters?
This is an interviewer-led case, but the interviewer should gauge the candidate’s ability to drive.
The interviewer should assess the interviewee’s potential for structuring math, making
calculations easier, and bringing up relevant industry trends (e.g. Netflix, MoviePass, etc.).
Concepts Tested Market Sizing, Setting Up Calculations, Brainstorming
84

• Theater Specific Info: Problem: Improve Profitability and Investment Valuation
• The movie theaters are somewhat dilapidated • Financials
• Rev (can include ways to improve here)
• Competition: None, they are the only two in the • Tickets (P * Q)
suburb and surrounding suburbs • Concessions (P * Q)
• Cost
• Revenue Streams: • FC- movie leases, labor, rent, taxes, electricity
• Tickets (tix)-movies leased through distributors (HVAC), cleaning materials, insurance, maintenance
• VC- concession costs
• Concessions (cns)-purchased from distributors • Revenue Improvement Opportunities (and list of them)
• Marketing/Customer Analysis
• P.E. Company 6PAQ Info: • Price Sensitivity Analysis
• Portfolio: Suburban recreational facilities and • SKU Analysis (Concessions and Tix)
• Gap analysis
entertainment (swimming pools, shopping malls, • Advertising/Discount Spends
bowling alleys, laser tag facilities, etc.) • Entrance & Exit
• Objectives: • Purchase Price & Exit Price
• Valuation Methods- Multiple, NPV, Comparables
• 6PAQ has a standard of 100% ROI for all • Buyers
investments • Other
• Synergies
• Sell in five years • Bundle opportunities w/ portfolio companies (cross-sell)
• Cost (back-office, increased buying power, etc)
• Evaluate modernization project
• Industry-wide Trends from 2010-181: A good candidate will consider possibility for localized monopoly, exit
opportunities, synergies with existing portfolio, and innovative ways to
• Ticket sales have declined by 1.18%
improve revenue and decrease costs
• Average Ticket Price Increased by 15.46%
1 https://www.the-numbers.com/market/ and individual analysis
85
Interviewer Guidance (pt. 1)

Revenue: The candidate should drive towards understanding revenues first. If not, guide them there. Show
Exhibit 1 and explain, “We do not know revenues for Theaters A and B for certain but 6PAQ obtained this
exhibit. What does it tell you?”
Key insights:
1) Revenue has been consistent for both Theaters and they have similar net profits
2) Theater A has much higher revenue
3) Theater A’s costs are much higher as a percentage of revenue, indicating its cost structure could be improved
Once the candidate nails these insights, indicate, “6PAQ plans to send the same analyst to each theater for a
month to estimate the number of yearly visitors and revenue. Neither theater offers demographic discounts
(e.g. senior discounts) and the analyst cannot sit at the front of the theaters and count customers or be in
multiple places at once. What instructions would you give to the analyst and how would you calculate it?”
Important Note: All numbers necessary for calculations should be provided and candidates can round to the
tens of thousands $x.xx million (see Calculations – Revenue and Profitability by Theater pg. 88)
• After having candidate calculate revenues, ask them to brainstorm ways to improve them (see Ansoff
Matrix in Brainstorming Guidance, pg. 89)
• Next, tell them that you believe there are significant synergies and that total costs for theaters as a
function of revenue are: Theater A) 50% Theater B) 20%
• Ask candidate what could be driving the difference in cost and afterwards, to calculate profitability. (see
Brainstorming Guidance, pg. 7, Revenue Calculations pg. 90)
86
Interviewer Guidance (pt. 2)

Modernization project: Tell the candidate that the analyst identified an investment for both theaters he
believes will significantly lift Net Income. Specifically, it will install arcades in both theaters, nicer seats, a new
mobile app for ticket purchasing, and an HVAC system for Theater A which will drive down heating and AC
costs. It will cost $4m upfront. After completion one year after development begins, both theaters will
generate an additional 50% revenue (in part due to monopoly pricing and improved theater quality), and
Theater A’s costs will decrease to what Theater B’s are (due to increased buying power and lower HVAC
costs) as a percentage. The theaters will continue to operate as they originally did during the year until
completion. Discount rates and opportunity costs should be ignored. Should the firm undergo this project,
consistent with their firm investment criteria?
Note: This is an ROI calculation (see Calculations – ROI modernization project pg. 91)
A good candidate will realize that during the first year, nothing will change about either theater while improvements are
made, so they should consider the investment only for its Net Profit in Years 2-5. A good candidate would also realize that
as revenues have doubled, costs have gone down, and the increase in multiple means that they will certainly be able to sell
for a 100% ROI.
Ask the candidate to calculate whether the overall investment would clear the firm’s 100% ROI hurdle, if the
purchase price multiple was 5x Net Income and the exit price multiple is 6x. (see Calculations – Overall
Investment, pg. 10). Lastly, ask for a recommendation (see Recommendation, pg. 93)
87
Exhibit 1 – Revenue and Profitability by Theater
2013 2014 2015 2016 2017 2018
Theatre A Revenue Theatre A Profitability

Theatre B Revenue Theatre B Profitability
88
Brainstorming Guidance
Revenue Improvement Cost Drivers
Existing Products New Products • Electricity/HVAC
• Alter SKUs • Open alternative space (e.g.
arcade)
• Movie leases
• Implement special/discounts
(senior, students, etc) • Charge for parking if lot • Rent/real estate
Existing Customers
owned • SKU choices

• Increase prices (w/ new local
monopoly) • New food or alcohol
• Unionized labor
• Show more movies • Start movie pass
• Taxes if on larger property
• Additional trailers • Offer premium seating
• Poor relationships with distributors
• Increase ad spend
• Offer theme nights or
diversify customer-targeted
• Offer other types of
New Customers
movies (e.g. cult classics

reruns) entertainment (e.g. local
plays)
• Open additional theater
• Cross-sell to customers of
other portfolio companies
89
Calculations – Revenue and Profitability by Theater

Tickets:
# of Screens * # of Seats/Screen * Avg Fill Capacity * # of movies played per screen/month =Total Monthly Visitors
Theater A) 10 screens * 80 seats per screen * 75% average fill capacity * 20 movies played per screen per month = 12,000 Total Monthly
Visitors
Theater B) 10 screens * 80 seats per screen * 50% average fill capacity * 20 movies played per screen per month = 8,000 Total Monthly Visitors
Total Monthly Visitors * Percentage of Movies Matinee (or Premium) * Price of Matinee (or Premium) ticket * 12 months/year = Total Monthly Matinee Revenue
(or Premium)
Theater A) 12,000 Total Monthly Visitors * 90% Premium * $10 Premium Price * 12 months/year = $1.296m (round to $1.29m)
12,000 Total Monthly Visitors * 10% Premium * $5 Matinee Price * 12 months/year = $.072m (round to ($.07m)
Total Theater A Ticket Revenue = $1.36m
Theater B) 8,000 Total Monthly Visitors * 80% Premium * $10 Premium Price * 12 months/year = $.768m (round to $.77m)
8,000 Total Monthly Visitors * 20% Premium * $5 Matinee Price * 12 months/year = $.096m (round to ($.1m)
Total Theater B Ticket Revenue = $870k (round to $870k)
Concessions:
Total Monthly Visitors * Average Spend Per Customer * Percentage of Customers who buy concessions * 12 months/year = Total Yearly Concession Revenue
Theater A) 12k Monthly Visitors * $6 Avg Cust. Spend * 75% of Cust. Purchase Concessions * 12 Months/year = $648k (round to $650k)
Theater B) 8k Monthly Visitors * $7 Avg Cust. Spend * 75% of Cust. Purchase Concessions * 12 Months/year = $504k (round to $500k)
Total Revenues: Total Costs: Total Profitability:
Theater A) 1.36m+.65m=$2.01m 50% * 2.01m=~$1m 2.01m-1m=$1.01m (round to $1m)
Theater B) .87m+.5m=$1.37m 20% * 1.37m=$.27m 1.37m-.27m=$1.1m
For both theaters: $2.1M
90
Calculations – ROI Sub-Investment
Y0 Y1 Y2 Y3 Y4 Y5
Yearly Revenue Improvement: $1.7m

Initial Cost:
Yearly Cost Improvement: $.27m
$4m investment
Yearly N.I. Improvement:: ~$2m
ROI Calculations: Formula: Net Profit/Invested Capital
Modernization Project: Incremental Profit = (Total New Profit – Total current Profit) * Years
Incremental Profit = ((150% Current Revenue – New Costs) – (Current Revenue – Current Costs)) * 4 Years
Incremental Profit = ($5.07m – 20% * ($5.07m)) – ($3.38m – $1. 27m)) * 4 years
= ($4.06m – $2.11m) * 4 years
~ $2m * 4 years = $8m
ROI: $8m-$4m / $4m = 100%
91
Calculations – Overall Investment
New Revenues
Current Revenues * (1+Revenue Increase Percentage) = New Revenues
Current Revenues: $2.01m + $1.37m = $3.38m

New Revenues: $3.38m * 150% = $ 5.07m Overall Investment:
New Total Costs Valuation =N.I.*N.I multiple
New Revenues * New Total Cost Percentage = New Total Costs (exc. Purchase Price =$2.1m * 5 = $10.5m
Current Costs: $1m + $.27m = $1.27m Exit Price $4.06m * 6 = ~ $24.4m
New Costs: $5.07m * 20% = $1.01m ROI $24.4m-$10.5/$10.5m
= 132%
New Net Income
New Revenues – New Total Costs = New N.I.
Total: $5.07m-$1.01m=$4.06m
92

Recommendation: Risks include: 6PAQ should:
6PAQ P.E. Firm should invest in both 1. Substitutes and Threats 1. Conduct analysis:
theaters and undergo the modernization
project • New local entrants • Use its existing
relationships in the
With its new improvements and • Netflix and streaming industry to conduct
monopoly powers, it could make over services intelligence gathering
100% ROI on both the initial and
modernization project 2. Accuracy of assumptions • Purchase market research
reports to identify time
On the modernization project, 6PAQ • NI multiple increase horizon of threats trends
could make a 100% ROI while on the
• Improved NI from • Further analyze and
overall theater investment, 6PAQ could
investment triangulate assumptions
make a 132% ROI
• No opportunity cost or 2. Approach theater owners to gauge
discount rate interest and initiate discussions
• 100% ROI on
modernization project
leaves little room for error
3. Theater owners’ unstated intent to

sell
93
Case 8: Hamm’s University
Higher Ed / Non-Profit| Profitability Improvement
94
Higher Ed / Non-Profit | Profitability Improvement
Case Prompt
Our client, Hamm’s University, is a mid-size not for profit private university in the Midwest of
the United States, well-known for its liquid gold colored sports uniforms. Over the last few
years, Hamm’s University has received less state and federal aid, leading to a negative net margin.
However, other Universities near us have overcome this issue and haven’t seen margin erosion.
The Board of Regents has engaged our firm to help the University strengthen its position.
• Hamm’s University is located near a city with a population size of ~450,000 in a state with a
population of ~7M. A majority of students are from the same state or surrounding states
• There are 2 other private universities and a large state school within an hour of Hamm’s
• Hamm’s University has sports teams in the Division II league
• There are several graduate schools, with programs for Medicine, Law, Dentistry, Business,
Psychology and Engineering
• Psychology & Econ departments are highly ranked in faculty prowess & research
• The Board wants to increase net income by 25M/year within 2 years (was -5M last year)
Concepts Tested Financial Statement Analysis, Setting up calculations, Brainstorming

95
Case Guidance
Case Guidance:
Through exhibits 1 & 2, the interviewee should note that both private schools 1 and 2 are
relatively similar to our school, but private school 2 has a revenue structure that we can more
easily replicate.
Reason to not replicate private school 1: Endowment and gift campaigns are difficult to
replicate, especially given our lower starting endowment and less active alumni donor base.
Starting a campaign to make our alumni more active can be difficult to do and wouldn’t
necessarily have a high success factor.
Reason to replicate private school 2: University grants for research are generally a function of
how successful that school is at research and how many faculty research staff and grant writing
staff they employ. Given the already prestigious nature of Hamm’s University psychology
department, Hamm’s university should look to increase grant revenue by hiring more staff.
96
Framework
A solid framework would include detail on the financials of the University and an examination
of the other universities in our area. Points to consider are included below.
Revenue Costs Industry
• Undergrad tuition • Instruction • Public
(including R&B), • Research • Private
by students and tuition • Operations (+ depr) • Financial Statement
rates • Scholarships Analysis
• Federal & State Aid • Administration • Student body composition
• Grants & Contracts • Materials + Supplies • Learn from how they
• Endowment Income improved
• Athletics
• Gifts (for immediate
use)
97
Exhibit 1
YOY Statement of Activities (2017 & 2018) and KPIs
All $ in MM 2018 2017
Total Revenue $545 $580

• Net Tuition (incl. Scholarships + Room and 404 350
Board)
• Federal and State Aid 65 100
• Grants and Contracts 30 80
• Endowment Income 11 15
• Athletics 21 20
• Alumni Gifts 14 15
Total Cost $550 $530
• Instruction 222 200

• Research 20.5 20
• Operations 97.5 100
• Administration 112 110
• Materials + Supplies 98 100
Net Margin $ -5 $ 50
Selected KPIs
• Undergraduate attendance 13,800 13,500
• Graduate attendance 2,150 2,200
• Faculty Researchers 50 50
• Grants Awarded 85 84
• Endowment Balance $195M $200M
• Active Alumni Donors 20,000 20,000
98
Exhibit 2
Case 1: Hamm’sSchools
University
Comparison (2018 Data)
All $ in MM Public 1 Private 1 Private 2
Total Revenue 1,765 580 571

• Net Tuition (incl. Scholarships + 1,100 380 320
Room and Board)
• Federal and State Aid 200 60 55
• Grants and Contracts 180 30 150
• Endowment Income 90 60 20
• Athletics 110 15 15
• Alumni Gifts 85 35 11
Total Cost 1,685 555 536

• Instruction 640 211 204
• Research 65 22 35
• Operations 311 102 92
• Administration 357 118 105
• Materials + Supplies 312 103 99
Net Margin 80 25 35
Selected KPIs
• Undergraduate attendance 24,500 16,000 11,000
• Graduate attendance 8,000 0 2,000
• Faculty Researchers 110 50 85
• Grants Awarded 195 85 145
• Endowment Balance $3B $1.1B $300M
• Active Alumni Donors 100,000 35,000 18,000
99
Additional Math Problem

Addt’l Problem / Math:
The interviewee should note that research revenue is roughly $1M per grant awarded and grants
are awarded at a roughly 1.6 grants / researcher rate. Each researcher at Hamm’s costs roughly
$400,000, and there is also an additional 50,000 in administration costs / researcher. Tell them
to assume these are fixed numbers.
“Assuming these numbers hold true and grants are awarded on average 1 year after
application, how many faculty researchers do we need to hire to achieve our goal?”
25M NI Goal = (Researchers to Hire) * 1.6 * 1M – (Researcher to Hire) * 450K

25M NI Goal = Researchers to Hire * 1.15M average Margin
25 / 1.15 = ~22 more faculty researchers to achieve 25M NI Goal
100

Recommendation: Risks include: Hamm’s University should:
Hamm’s University should hire at 1. New researcher’s won’t be as 1. Potentially hire more than 22
least 22 more researchers to successful as historical researchers, explore space
increase it’s NI to make up for constraints at University
State and Federal Aid shortfalls 2. Total grant market isn’t big
enough to support receiving 2. Market research on how big
this much money total Psychology grant
market is and if we can
3. Potential dilution of brand increase share in that market
image from hiring more
3. Begin setting up hiring team
researchers
to start identifying which
candidates to interview
101
Case 9: Allsafe
Insurance| M&A
102
Case 9: Allsafe
Insurance| M&A
Case Prompt
Our client, Allsafe, a large insurance company, provides home, auto, renter’s and life insurance.
Recently, Allsafe acquired a technology firm specializing in data analytics software. As part of
the acquisition, Allsafe also acquired a smaller subsidiary, MarketMaven, a marketing analytics
software-as-a-service firm. Our firm has been engaged a few years post-acquisition and Allsafe
would like to know how to proceed with MarketMaven – AllSafe already has an acquisition offer
of $1.1B for MarketMaven and the choice is between taking the deal (i.e. divesting
MarketMaven) or integrating it with AllSafe.

• Allsafe is a large insurance conglomerate that employs an outside marketing agency for all
marketing services
• MarketMaven is small firm, but has experienced growth over the last 5 years.
Concepts Tested Valuation, Financial Analysis
103
Case 9: Allsafe
Insurance| M&A
In this case, the candidate will explore whether Allsafe should integrate or divest MarketMaven. Due to the
fact that there are no synergies between Allsafe and MarketMaven, the candidate should decide that Allsafe
should sell the firm. This case requires the candidate to then ask for the information necessary to value
MarketMaven.
Only when the candidate asks for MarketMaven’s financials should the following information be provided.
The candidate will need to build out an income statement based off the following financials in order to
determine the cash flows to value MarketMaven.
• 2018 Revenues: $200M
• Cost of Revenue: 25% of Revenue
• SG&A: 40% of Gross Profit
• Depreciation + Amortization: $5M
The candidate needs to value the firm. Have them build out an income statement to EBIT as adding in Tax
and Interest make the numbers a little messy. This may not be fundamentally correct in terms of finding the
FCF for the NPV, so if you want to finesse the numbers further feel free to do so.
104
Case 9: Allsafe
Insurance| M&A
Possible Framework Calculated Income Statement

Problem: Integrate or Divest MarketMaven
• Integrate Revenue $200M
- Firm Synergies: MarketMaven + AllSafe
- AllSafe capabilities -- have they been able to
successfully integrate a firm in the past Cost of Revenue 200*25% = $45M
- Marketing Analytics Market
Gross Profit $155M
- # of key players
- # of customers Operating Expenses 155*40%=$60M
- MarketMaven's position in current market EBITDA $95M
• Divest
- MarketMaven's current financials
- Potential buyers
D+A $5M
- Comparable firm transactions in the past EBIT $90M
- Risks
- Integration Risks
- Divestiture Risks
105
Case 9: Allsafe
Insurance| M&A
After the candidate finds the EBIT of the MarketMaven, use that amount as the free cash flow
to value the firm and brainstorm potential firm strategies. The candidate should be directed to
value the firm in perpetuity with the following parameters.
• Growth Rate: 5% (growth will slow due to increased market competition)
• Discount Rate: 15%
NPV = FCF/r-g=90/(15%-5%)=$900M
The ideal insight into the NPV calculation should be that since the buy offer for MarketMaven
($1.1B) has a $200M premium over the NPV, it should be sold off.
Brainstorming: What could AllSafe use MarketMavens platform for? Examples could be:
• Track advertising and media insights in-house
• Bring all advertising efforts in-house
• Use it for Market Intelligence and PR purposes to track what is being said about AllSafe in
the media
106
Case 9: Allsafe
Insurance| M&A

Recommendation: Risks include: AllSafe should:
Allsafe should divest 1. Potential undervaluation of 1. Assemble internal team to

MarketMaven for a $200M MarketMaven’s intellectual begin the divestiture process
premium. property
2. Engage a bank to begin the
• $900M NPV, $1.1B deal size 2. Negative impact on Allsafe process of divesting
company morale if MarketMaven
• Use the cash from the sale to divestiture news leaks 3. Build MarketMavens sell
reinvest in programming or
story
platforms within their firm
• Cost of integration and to

keep on MarketMaven not
worth it to AllSafe
107
Case 10: Mega Pharma
Retail| M&A
108
Retail| M&A
Case Prompt
Our client Mallgreens is a large pharma retail company. It wants to acquire a smaller pharmacy
retailer, BrightAid. The operational footprint of the two companies looks like this:
Company States Stores Employees
Mallgreens 50 5000 2000
BrightAid 13 (Coasts) 2000 1000
Mallgreens wants us to assess this acquisition, and understand potential risks.

• Mallgreens provides pharmacy, clinical, photography and convenience store services
• BrightAid provides pharmacy and clinical services
• The two companies have very different distribution models
Concepts Tested Brainstorming, Consolidation, Acquisition Strategy
109
Retail| M&A
Framework
1. Synergies 2. Acquisition & Integration Costs
• Revenue Synergies • People:
• Selling Power • Lock-in Bonuses for Retained
Employees
• Newer Locations for Photography
and Convenience • Severance Packages for Fired
Employees
• Cost Synergies
• Operational
• Buying Power with manufacturers
• IT
• Retail footprint consolidation
• Marketing / Branding
• Corporate functions & Executive
team • Long-term: Capital Gains Tax
3. Risks
• FTC: Market share too high?
• Customer, Vendor & Competitor
response
110
Retail| M&A
Brainstorming Questions
Interviewer Guidance: A good setup before getting into actual questions would be to
brainstorm the mechanics of an acquisition. Important factors to brainstorm are:
1. The companies have different distribution models. On a high level, how can switching to
either of them for the combined entity help reduce costs.
2. If the core product (pharmaceutical retail and clinical services) is the same for both
companies, and the market is saturated, do cross/up-selling opportunities exist for the
combined entity? If the revenue cannot be augmented, is the acquisition worth it?
3. Types of purchase: stock purchase vs. asset purchase. Pros and cons of both in the current
deal.
These are open questions and can run depending on the quality of the
framework and brainstorming in the interview.
111
Retail| M&A
Question 1
The store footprint of both companies in selected states looks like this:
State Mallgreens BrightAid
CA 400 250
WA 280 65
NY 350 200
MI 280 0
IN 220 0
TX 350 180
In which states will you consolidate stores, and why?
112
Retail| M&A
Question 1: Interviewer Guidance

Brainstorm about cost reduction from a retail location consolidation perspective. What factors
will drive this consolidation?
Answer to question (next slide): Stores should be consolidated in California, New York and
Texas. This is because both companies have a large retail footprint in both the states and
therefore this is the scope for consolidation.
113
Retail| M&A
Question 2
The client has created a summary of stores in California based on the (i) Distance from the
nearest Mallgreens / BrightAid store, and (ii) Profit / Loss status. It is as follows:
Distance Profit-making Loss-making Stores

Stores
< 0.5 mile 200 100
0.5 – 2 miles 80 60
> 2 miles 70 40
Which of these stores do you recommend that our client close? What do you recommend for
the rest of the stores?
114
Retail| M&A

In retail, a key success factor is retail presence (‘footprint’). Sometimes, to achieve a footprint on
scale, some loss-making locations also have to be retained.
To answer this question (next slide):

• All loss making stores which are <0.5 miles from another store should be closed.
• For all loss making stores which are 0.5 – 2 miles from another store:
• Customers should be surveyed – is brand stickiness enough to make them travel 2 miles
if the current store closes
• Can these stores be turned profitable with short to mid-term transformation measures
• For all loss making stores >2 miles, the company should invest in long term profitability
transformation measures
115
Retail| M&A
Question 3
1. What are key questions that the market regulator can raise?
2. How will you ensure that the deal and the combined entity adhere to legal requirements?
116
Retail| M&A

An important factor in understanding regulatory market share concerns in an acquisition is to
understand the type of purchase:
• Stock purchase: the target company’s stock (complete or partial) is bought from its current
shareholders. All vendor, customer and employee contracts typically continue, and all assets
and liabilities transfer to the acquiring entity.
A stock purchase would typically be more complicated. In this case, the acquiring company will
have to commit to divesting/selling parts of the combined business after the deal to bring it
below the market regulator (FTC)’s defined levels. In this case, Mallgreens can decide to sell its
photography and convenience store business after the acquisition.
• Asset purchase: only selected assets (retail locations, manufacturing/warehousing facilities
etc.) are purchased. Contracts and liabilities do not transfer.
In an asset purchase, the acquiring company can choose to buy only selected assets from the
target. In this case, Mallgreens can buy only selected BrightAid stores and remain within FTC’s
threshold.
117
Retail| M&A

Recommendation: Risks include: Mega Pharma should:
Mallgreens should acquire 1. Potential concerns from 1. Start integration planning –

BrightAid and: Market Regulators on market systems, procurement,
share of combined entity distribution being the focus
• Close 100 loss-making stores areas
within 0.5 miles of other 2. Competitor and Supplier
Malgreens stores response 2. Define communication plan
for customers and employees
• Survey customers of 60 loss
making stores within 0.5 - 2
miles of other Malgreens
stores
• Invest in long-term
profitability of 40 loss-making
stores more than 2 miles of
other Malgreens stores
118
Case 11: Mike Apparel
Consumer Goods| Market Entry
119
Case Prompt
Our client, Mike Apparel, is a large apparel and sporting goods company. The client is interested
in entering the women’s golf apparel market and is looking for guidance on whether this is a
good idea.

• Mike makes both produces and retails the goods in its own stores
• The objective is to invest extra cash (amount undefined) in a profitable project
• Scope of the launch is the United States
Concepts Tested Brainstorming, Structure, Basic Quant & Financials
120
Framework
1. Market Size A strong framework will hinge on two factors:
• Population of the United States Market Size or Revenue Potential, and the costs of
• Ratio of women the launch and ongoing operations.
• Percentage of golf players Basic cost numbers available are as follows:
• Achievable market share • R&D (one-time): $255M
• Customer $ purchases/year
• Fixed Costs (yearly): $5M
2. Costs
• R&D
• Fixed Costs
• Variable Costs
• Marketing & Advertising
3. Risks
• Cannibalization of existing
products/shelf space
121
Questions
1. What does the market size and revenue potential look like?
2. When can breakeven be achieved?
Data Available
• Buying Frequency, Selling Price
Item Buying Frequency Selling Price
Shirt 2 / year $60
Hat 1 / year $80
• Variable Cost to produce

Item Variable Cost
Shirt $15
Hat $20
122
Interviewer Guidance and Solution: Question 1

Market Sizing (nudge the interviewee towards the following numbers)
• Population of US 300M
• Women (50%) – 150M
• ~80% people in age ranges that play golf: 80% * 150M = 120M
• Golf is an affluent sport, only rich can play. Rich = 10%. 10% * 120M = 12M
• Percentage of people who actually play Golf 25% (a fourth of affluent people is a
reasonable assumption) = 3M
• Market Penetration (20%) = 600K
123
Interviewer Guidance and Solution: Question 2

Profit potential depends on two factors – numbers of items bought and profit on each item. We
already know we have 600,000 potential customers.
Therefore, profit per customer per year:

• Shirt: 2 * ($60 - $15) = $90
• Hat: $80 - $20 = $60
• Total: $150
Total Revenue Potential = $150 * 600K = $90M

(-) Fixed Cost = $90M - $5M = $85M
Breakeven = $255M / $85M = 3 years
124
Interviewer Guidance: Recommendation

Recommendation: Enter Market – 3 year breakeven
• $85M annual profit, quick breakeven
• Tap new customer base – women, may have been untapped by industry before
• Women-focused product promotes diversity in sporting, also good for branding/PR
Risks
• Bad launch may affect other products
• Some cannibalizing of standard products (e.g. non-golf specific shirts and hats)
Next Steps
• Setup manufacturing
• Sign brand ambassador: a professional woman golfer
• Research which products to replace on shelves
125

Recommendation: Risks include: Mike Apparel should:
Enter Market – 3 year breakeven 1. Bad launch may affect other 1. Setup a manufacturing facility
products
• $85M annual profit, quick 2. Sign brand ambassador: a
breakeven 2. Some cannibalizing of professional woman golfer
standard products (e.g. non- 3. Research which products to
• Tap new customer base – golf specific shirts and hats) replace on shelves
women, may have been
untapped by industry before
• Women-focused product
promotes diversity in sporting,
also good for branding/PR
126
Case 12: PharmaDeliver
Pharma| Growth Strategy
127
Case Prompt
Your client, PharmaDeliver, is a large pharmacy that provides both prescription and over the
counter medications to patients. With many new entrants in the healthcare industry, the
company is evaluating ways to both improve the customer experience and invest in the future.
In one initiative related to this, PharmaDeliver is exploring the use of drone delivery for its’
customers. The company has hired us to evaluate the potential use of drone delivery.
• They distribute a wide variety drugs directly to customers through both retail and home
delivery channels. 80% of non-controlled prescription substances are delivered via home
delivery
• The company only operates in the US
• The company wants to increase their deliveries by at least 15% and have total profits of at
least $7B per year by using drones.
• The company wants this increase in the first year
Concepts Tested Brainstorming, Structuring, Quant

128
Framework
A good framework will include an analysis of the pharmacy market (including competitive
trends, future technological advances, etc.), a breakout of how they will both increase deliveries
and hit $7B in total profit internally, and a consideration of mode of entry for using drones
(merger, acquisition, partnership). Candidates should also note regulatory risk for moving into
this space, since it is not a mature industry.
129
Question & Exhibit 1

Calculate how many increased deliveries are possible for both M-F and the weekend,
respectively.
ParmaDeliver Annual Medication Volume
Total Medications Sold* 2.6B
Prescription Controlled Substances per year* 350M
Current Deliveries Weekly Volume Caps M-F Sat Sun
Controlled Substances 100% 0% 0%
UPS 90% 10% 0%
Drone Projected Weekly Volume Caps *Total medications include the prescription
controlled substances
M-F Daily Cap Sat Sun
*Prescription controlled substances are not
8M 5M 6M included in the home delivery %
130
Answer 1
Assume 50 weeks per year. Candidate should ask for the home delivery % (80% of NON prescription
controlled substances)
1. Calculate the number of home deliveries per year: (Total Medications – Prescription Controlled
Substances)* % Home Delivery of Non-Prescription Controlled Substance Medications = (2600 –
350)*.8 = 1.8B
2. Calculate the weekly number of deliveries assuming 50 weeks per year. 1.8B/50 = 36M
3. Calculate the number of deliveries for each of the days of the week.
• M-F Deliveries % * total =90% * 36M = 32.4M; Deliveries / # days = 32.4M/5 = 6.48M
• Sat Deliveries % * total = 10% * 36M = 3.6M
4. Find the difference for both M-F and the weekend between current and new. For M-F, multiply it by 5
and then by 50 to find the increased annual deliveries. M-F: 8M-6.48M = 1.52M * 5 * 50 = 380M; S/S
= 10-3.6 = 6.4 * 50 = 320M. Finally, take 320M+380M = 700M and confirm that this is 15% higher
than the number of deliveries currently (1.8B * 1.15 = 2.07B). Great answers will also acknowledge that
the demand increases may not match this increased capacity.
131
Question & Answer 2

Question: Please brainstorm possible ways to expand into using drone delivery.
Answer: A good answer will include an analysis of exploring new clients, partnerships, or
acquisitions to go into this business. Commentary on the benefits of each can lead to a great
answer. A great answer will also acknowledge options other than drone delivery to possibly
explore (i.e. autonomous vehicles, uber, etc.)
132
Question 3
PharmaDeliver has identified a potential partner, DroneCo, for future shipments. As part of
the agreement, DroneCo will take 10% of the profit for each shipment in exchange for its’
services. Please calculate the annual projected profit by utilizing DroneCo to deliver all
packages. Calculate the expected NPV of this using the projected profit.
Tip for interviewer: This profit is inclusive of all potential costs/revenues that the candidate
likely covered in the framework.
133
Exhibit for Question 3
Future avg profit per delivery* Weekly shipment demand with increased capacity
M-F Daily Sat Sun M-F Dailly Sat Sun
$4.44 $3.33 $3.33 7M 3M 2M
*This does not include the 10% DroneCo will take from each shipment
134
Answer 3
Calculate the profit for the new deliveries.
Start by finding the projected profit for each by taking off the 10% commission for each of the
breakouts.
Then multiply the profit by each of the daily and weekly projected demands to get: M-
F*5*profit = 7M*5*4 =140M, S: 3M*3 = 9M, Sun: 2M*3 = 6M;
Total profit per week = 155M,
Total per year = 155*50 = $7.75B.
Then, using a discount rate of .2, we assume perpetuity and use the formula to find: $7.75B/.2
= $38.75B.
135
Question & Exhibit 4

We are also exploring the acquisition of a similar company, Fly Away, for $9B. Using the new
profit information, please calculate the NPV of this acquisition.
These numbers are inclusive of all post-merger synergies.
Estimated future avg profit per delivery with acquisition*
M-F Daily Sat Sun
5 4 4
136
Answer 4
In a similar calculation, find the profit per year projected with the acquisition.
Using this, we find M-F*5*profit = 7M*5*5 =175M, S: 3M*4 = 12M, Sun: 2M*4 = 8M;
Total profit per week = $195M,
Total per year = $195M*50 = $9.75B.
Then, using a discount rate of .2, we assume perpetuity and use the formula to find: $9.75B/.2
= $48.75B.
Then, subtracting off the acquisition cost we find $39.75B.
137
Final Recommendation
For the final recommendation, the candidate should acknowledge that the acquisition gives us a
higher NPV, but that there are some downsides to acquiring a drone company. Drone delivery
is still a relatively new business, and acquiring this company could be a risky investment if
regulation does not pass in Fly Away’s favor.
138
Case 13: Single Cup of Coffee
Consumer Products | Market Sizing
139
Case Prompt
Our client is a PE firm who is considering making an investment in a coffee equipment
company that services office buildings. The company makes machines that use single cups
(same thing as K-Cups) and sells the pods needed to make coffee. What is the market
opportunity for this investment?
This is an interviewee led case. This case is about market sizing so the interviewee should lay
out a clear framework on how to size the market and be creative and detailed with their
assumptions. This case will be a market sizing exercise on the amount of coffee drinkers in the
market and the amount of machines needed to service coffee consumption.
Concepts Tested Math, Market sizing, Brainstorming
140

• The company looks to service all office buildings Problem: Estimate market size for coffee pods and
nationally (U.S. only) machines
o The target market are white collar • How often each machine is needed
professionals - Estimate number of office workers
• The PE shop has experience working in the beverage - Avg number of workers in each office
service market - How many machines per office
or
• Price of each single pod is $0.75 a pod - Estimate number of coffee drank in a day
• Price of a coffee machine is $100 - Busiest periods in the day and how much coffee
is being consumed in that period
• The company currently offers a machine that can
- How long it takes each cup to brew
only make coffee. There is a variety of coffee flavors
• Number of coffee pods used each year
- Estimate number of office workers
- How many office workers drink coffee
- How often each person drink coffee
141
Question #1
What is the market opportunity for office coffee drinkers and single pod usage?
Information to give if requested: Each coffee drinker drinks 1.5 cups of coffee a day; 350 working days in a year
Recommended Answer
320m people in the U.S. 320m
Life span of 80 with an equal distribution between ages 320m/80 = 4m
Avg work life is 21 - 70 (70-21)*4m = 196m people in the workforce
Eliminate teachers, blue collar workers, gov’t employees etc. 196m * .40 = 54.8m office workers
to get to an estimate of 40% office workers Round to 55m
Estimate 60% of office workers drink coffee 55m*.60 = 33m coffee drinkers
33m coffee drinkers* 1.5 cups a day 33m*1.5 = 49.5m; Round to 50m cups of coffee per day
50m coffee per day* 350 days in a year 50m*350= 1.75b cups of coffee a year
1.75b cups * $0.75 a cup 1.75b*$0.75 = $1.3b
Interviewee does not have to use the above approach, as long as they use sound assumptions and get to a similar number
142
Question #2
Based on the amount of coffee drinkers, how many coffee machines can be sold in the market to accommodate the office
workers with minimal wait time?
Candidate should first brainstorm ideas and layout their structure. After brainstorm session, show Exhibit 1
Recommended Answer
Key Questions: When will the coffee machine be most active/how many people will be using it? Exhibit 1
• How much does the machine take to brew a cup of coffee? 1.5 mins
Since the morning time frame is the busiest it should be used as a benchmark for the # of machines needed
50m cups in a day * 65% of cups 50m * 65% = 32.5m cups between 8am – 10am
60 mins in an hour/1.5 minutes to brew 1 cup 60mins/1.5cups per hour = 40 cups in an hour
40 cups * 2 hour span 40*2 = 80 cups between 8am – 10am
32.5m cups in time span/ 80 cups in time span provides 32.5m/80= 406,250 machines = ~400,000 machines
how many machines are needed
400k machines *$100 a machine 400k * $100 = $40m
143
Exhibit 1
Busiest time in the office kitchen
Time of day % of coffee cups

Morning 8am – 10am 65%
Afternoon 1pm – 3pm 25%
Evening 5pm – 7pm 10%
144
Question #3
Other than selling the coffee pods and machines, what are some other ways the target company
can generate revenues?
Recommended Answer
Possible answers:
• Began to offer more than coffee with their machine (latte, hot chocolate, tea)
• Allow other companies to make pods for their machine and receive a royalty fee
• Expand to home services and to non-corporate employees
• Provide servicing for the machines
145

Market is attractive with combined Market potential is driven by Examine competitors in the
revenue potential of $1.34bn assumptions, which can be wrong market, market trends (shift to
($1.3b cups, $0.04bn machines), (ex. We assumed the 1.5 cups teas/energy drinks/any other
therefore worth investing. Also people drink in a day will come substitutes), and triangulate
revenue upside by servicing from office coffee machine and market sizing data.
machines or outsourcing pods. not home or local coffee shop),
we don’t have a clear view of the
competitive landscape in the
market as well as the cost to
produce and ship coffee machines
and cups. Additionally,
competitors could sell cups for
client’s machines if cup shape and
size aren’t patented.
146
Case 14: Cheesy Situation
Food and Beverage| Growth Strategy
147
Food & Beverage| Profitability
Case Prompt
Our client is a cheese producer based in Vermont. Currently, they produce two types of cheese:
Cheddar and Gouda. While revenues have grown, their profits have been decreasing. They have
asked us to help them understand why and what they can do to increase profits.
This is an interviewee led case. The case is about profitability and the candidate should lay out a
clear framework to analyze revenues and costs for different products to calculate annual profits.
The candidate should then brainstorm recommendations for increasing profits.
Additional info:
-The market is stable, with no major changes in competition in recent years
-They sell some cheese to wholesalers and a very small amount direct to consumer
Concepts Tested Math, Profitability, Brainstorming
148
Framework
Return to
Profitability
Market Costs Revenue
Quantity
Trends Competitors Variable
Fixed Price -Number of
-Customer preferences -New entrants -Milk
-PPE -Price to wholesalers pounds sold
changing (organic, etc) -New competition -labor
-SGA -price to consumers through each
-Move toward artisanal from abroad -utilities
-Marketing -elasticity of demand changel
producs -Channels -storage
-Product Mix
149
Exhibit 1
Cheddar Gouda Cost
Milk .75 gallons 1 gallon 3.75/gallon
Labor 1.5 hours/100 lbs 2.5 hours/100 lbs $16/hour
Energy .8 kwh .5 kwh $.10/kwh
Time to age 1 year 6 months

Q4 2018 Q4 2019 Price
Lbs Cheddar Sold 6000 6500 $8.99/lb
Lbs Gouda Sold 6000 5500 $7.99/lb
Note: Each lb of cheese takes up one square foot while aging. Rent for the 50,000 sq. ft. warehouse is $20,000/month
150
Exhibit 1: Answers
Cheddar (per pound) Gouda (per pound)
Milk $3 $4
Labor $.24 $.40
Energy $.08 $.05
Time to age $4.8 $2.4
Total cost $8.12 $6.85
Profit $.87 $1.14
Q4 2018 Q4 2019 CHANGE
Profit $12060 $11925 $(135)
151
Brainstorming Question
What can our client do to increase sales of Gouda cheese?
Answers should be structured and MECE. Example answer:
Product: Sell a version of the cheese only aged for 3 months, saving $1.2/lb.
Place: Sell to high end restaurants to increase brand awareness
Promotion: Run an ad at local grocery store, partner with influencers
Price: Examine price elasticity to understand effect on changes in price
152

• Client should plan to • Risks could include • Next steps could
increase sales of gouda decreased sales of include hiring an ad
through increased cheddar, poor customer agency, running
brand awareness and reception, poor ROI on promotions, changing
better product advertising the aging time for the
positioning cheese, etc.
153

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ROSS CASEBOOK 2019

Understand the Develop Form

• LISTEN • Ask for a moment to • Refer to the • State your

𝑅𝑒𝑣𝑒𝑛𝑢𝑒−𝐶𝑜𝑠𝑡 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒

Markup 𝑃𝑟𝑖𝑐𝑒 − 𝐶𝑜𝑠𝑡

𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝑆𝑎𝑙𝑒𝑠 𝐴𝑠𝑠𝑒𝑡𝑠

ROE = Operating Efficiency * Asset Utilization * Leverage

K = Capital Invested (Assets, Working Capital, etc.)

Customer ▪ Leisure travelers – (generally price sensitive)

Customer ▪ Cars, vans, pickup trucks and SUVs ▪ Commercial purchasers

▪ Savings and loan ▪ Traditional checking ▪ Microfinance

▪ Change in savings behavior

▪ Hospitals ▪ Nursing homes ▪ Pharmacies

▪ New legislation and shifting regulations

Key ▪ Regulation for health & medical insurance ▪ Aging population

Customer ▪ Enterprise (SME / Large)

Theory of Change ▪ Define timelines, initiative priorities and ownership

Implementation Feasibility ▪ New infrastructure cost – IT systems, office space

Customer ▪ Petroleum refiners ▪ Domestic and commercial users

▪ Access to reserves ▪ Political pressures

▪ Research & Development ▪ Due to significant R&D lead ▪ Marketing costs

Customer ▪ Medical patients ▪ Government insurance programs

▪ Department Stores/Big box retailers ▪ Demographic retailers

▪ Residential and Small Business (Price sensitive)

▪ Retail stores - carriers and mass retailers

▪ Rapid development of technology ▪ New low-cost entrants driving prices down

▪ Clean energy threatens the future of traditional power generation methods

Concepts Tested Graph reading, Setting up calculations, Brainstorming

Clarifying Information Possible Framework

Interviewer Guidance for case flow

Drive Insight/Calculations → Candidate Data Request → Exhibit

Exhibit 2 – American Bank ATM fall in hits across US (2018)

<0 hits (Increase in hits)

Exhibit 3 – Operating costs for American Bank ATMs (2018)

Operating Structure: Region - States:

Exhibit 4 – Reasons for reduction in hits in vendor operated1 ATMs

Price per txn ($)

Exhibit 5 – Downtime pattern and causes in vendor operated1 ATMs

Average Downtime Downtime Causes (2018)

Exhibit 6 – Revenues from ATMs (2018)

Exhibit 6A – Metrics comparison with competition (2018)

Proportion of Own : Other customers Proportion of Fin : Non-Fin transactions

Exhibit 1 Insights Exhibit 2 Insights Exhibit 3 Insights

Exhibit 4 Insights Exhibit 5 Insights Exhibit 6/6A Insights

Ideas for profitability improvement and revenue potential (1)

Ideas for profitability improvement and revenue potential (2)

Interviewer question: What is the average break-even number of daily hits?

Recommendations Risks Next Steps

Total revenue (and profit)

Concepts Tested Problem structuring, Brainstorming, Graph reading

Clarifying Information Possible Framework

Brainstorm when to enter the EV Market

Exhibit 1 – Market maturity and Total Cost of Ownership

Total Cost of Ownership (TCO1) of EV EV Market Maturity Curve

$40,000 Price ($ TCO) to demand (#) correlation

Calculations / Working for when to enter EV Market

Interviewer Guidance for segment / proposition selection

Exhibit 2 – Harrison Energy Capability Analysis

$400 15 years $30B

$10 10 years $600M

- # of days = 26 weeks2 = 52 - # of days = 26 weeks2 = 52