2 Case Studies - Candidate Assessment - July2019
2 Case Studies - Candidate Assessment - July2019
NEO Bank, one of the largest private sector banks in India has just received an approval from the Central
Bank of Saudi Arabia – the Saudi Arabian Monetary Authority (SAMA) to open 5 branches in the Kingdom
of Saudi Arabia (KSA).
After some deliberation, the Executive Management Board (EMB) of NEO Bank decide that the bank
should spread these 5 branches across 3 cities, but are unable to arrive at a consensus on which cities the
bank should open branches in. The EMB decide to appoint a consultant to help them shortlist the final 3
cities, and share the following debrief:
i) NEO Bank would like to equally focus on Retail Banking and Corporate Banking business in KSA.
- To maximize its visibility to Retail Banking clients, NEO Bank would like to be present in cities with
sizeable Expat (i.e. Non-Saudi population). Further, NEO Bank would like to focus only on medium
to high income clients to grow their Retail business
- To support the growth of Corporate Banking, the bank would like to be present in cities with large
industries that contribute to the growth of the Saudi economy
ii) The EMB is especially undecided as to whether they should focus on large cities which may already
have a lot of bank branches or medium/smaller cities which may also have potential for growth.
iii) The EMB would also like to study the financial metrics of other banks in the market to understand the
market landscape
Based on the above, EMB would like the Consultants i.e. you to share the following information:
i) Which are the top 3 banks in KSA (by branch coverage and by assets)?
ii) Which banks have shown the fastest growth rate in the last 3 years? What metrics should be
compared to assess this growth?
iii) How would you assess which banks operate most efficiently? Which metrics and ratios would
you measure?
iv) Which are the likely top industries/sectors that contribute to the growth of the economy?
v) Which cities contribute most to the growth of the economy?
vi) Which cities are likely to have the target Retail Banking segment (Medium to High Income
clients) that NEO Bank wants to target
vii) Based on the above, which cities do you think NEO Bank should target to maximize its
presence in KSA, and why?
Please present your findings in a Word Document/Powerpoint presentation. You could use charts,
where required to present your analysis.
Excel Partners, a UK based Private Equity fund that invests in the banking and financial institutions sector
is contemplating an exit from one of its portfolio companies. The portfolio company, Payments Club, is
based in the Middle East and is a regional leader in providing payments processing services to financial
institutions in the Middle East.
Excel Partners had first invested in Payments Club in the year 2015, acquiring a 40% stake for a value of
USD 400 million (i.e. Payments Club was valued at total valuation of USD 1 billion at that time).
Payments Club continued to expand its business in the Middle East and is today the largest payments
processing service provider in the Middle East. Given the recent growth of Payments Club, Excel Partners
is contemplating an exit at an attractive valuation either through pursuing an IPO of Payments Club or
through selling its 40% stake to another private equity firm. Based on discussions with few private equity
funds in the UK market, Excel Partners has received preliminary offers that value Payments Club at a total
valuation of USD 1.6 billion. However, Excel Partners believes that there is additional value that could be
extracted from Payments Club and hence, wants you to explore the following two options.
You are requested to assess the options mentioned below with calculations and analysis supporting these
options. Your results can be presented to us in the form of an excel model with clear recommendations.
1. Option 1 - Sale of Excel Partner’s 40% stake in Payments Club at a total valuation of USD 1.6 billion
at the end of 2019 – please show what Excel Partner’s IRR would be if this option is pursued,
taking into consideration the initial investment, annual dividends received (refer table below) and
proceeds from its 40% stake sale.
2. Option 2 - IPO of Excel Partners at the end of 2019, assuming that Payments Club is able to obtain
an IPO valuation which reflects its current Net Present Value (or discounted cash flows) over the
next few years. Please calculate the free cash flows (you can use EBITDA for this purpose) that
would accrue to Payments Club over the next few years and then the Net Present Value of these
cash flows. Please also explain your assumptions around the cost of capital and growth rate
considered. Ignore tax considerations for this computation. Assume Payments Club has no debt
in its books.
Payment Club’s recent financials and forecasts for the next five years are presented in the table below:
All numbers in USD mn, unless otherwise specified
Financial metric 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
(actual) (actual) (actual) (actual) (forecast) (forecast) (forecast) (forecast) (forecast) (forecast)
Revenue 300 350 375 430 460 490 525 565 610 660
Earnings before interest, tax, 40.0% 40.0% 42.0% 44.0% 45.0% 45.0% 45.0% 46.0% 46.0% 46.5%
depreciation (EBITDA)
(as % of revenue)
Dividends paid to shareholders 40 40 40 40 40
Disclaimer: This is a mock case study solely designed for the purpose of candidate assessment