Evaluate Aramco’s valuation and IPO share in the case interview setting

and Bain BCG Framework IPO McKinsey Valuation
New answer on Nov 04, 2019
2 Answers
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JW asked on Nov 03, 2019
Ex-Mck trainee (Oxford PhD), interviewing with MBB, done 60+ cases!

Dear Prep lounge community,

I am preparing for my upcoming Mck interview as an APD, and saw this big news announced, Aramco’s IPO, with these two questions popped.

1. What factors to consider for Aramco’s valuation?

2. How much percentage of shares should Aramco release for IPO?

So I really like to learn how would experienced consultants approach these two questions in a case interview setting situation.

In my understanding, the valuation processes can be (1) DCF analysis, (2) comparable company analysis, and (3) precedent transactions. However, which one is more feasible and appropriate to use in the case interview setting? And what are the factors we should consider?

As for Aramco’s share release for IPO, I can think of the following factors to consider:

(1) Financial factors

  • Capital raise
  • Lower cost of capital (equity & debt)
  • Share value

(2) Non-financial factors

  • Number of board members
  • Company governance
  • Regulation

But I really love to listen to your ideas and learn from you! Thank you!

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Vlad
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Content Creator
replied on Nov 04, 2019
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

You will never have such a case at MBB interviews since it's too financial. Thus it's irrelevant.

Max what you can have is doing some simple DCF valuation on paper using company's profits and some discount rate

Best

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Anonymous A on Nov 05, 2019
Thank you Vlad!
Anonymous replied on Nov 04, 2019

Agree with Vlad - this sort of question would never come up in a Consulting interview, so I would really not worry about it.

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Anonymous on Nov 05, 2019
Thank you Alessandro!
Vlad gave the best answer

Vlad

Content Creator
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School
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