Cookie and Privacy Settings

This website uses cookies to enable essential functions like the user login and sessions. We also use cookies and third-party tools to improve your surfing experience on preplounge.com. You can choose to activate only essential cookies or all cookies. You can always change your preference in the cookie and privacy settings. This link can also be found in the footer of the site. If you need more information, please visit our privacy policy.

Data processing in the USA: By clicking on "I accept", you also consent, in accordance with article 49 paragraph 1 sentence 1 lit. GDPR, to your data being processed in the USA (by Google LLC, Facebook Inc., LinkedIn Inc., Stripe, Paypal).

Manage settings individually I accept
expert
Expert with best answer

Sidi

99% Recommendation Rate

423 Meetings

4,087 Q&A Upvotes

USD 449 / Coaching

2

Investment Decision Case

Hi all,

I recently had my second round at one of the MBB firms with Partners/Principals, including the group head for the practice I was interviewing for (this is a lateral hire from IB). One of the interviewers, who is also the recruiting director, was out sick that day, which is why we had to reschedule another round.

I received very good feedback, however I was told I need to tackle the cases in a more structured way.

According to the headhunter what will now happen in the next and final round is that I will have to solve the same case again (they want to see what "lessons learned" I took away).

Therefore, I would be very grateful for a good "framework" / structure to solve the below, very broad question: "Mr XYZ has inherited a significant amount of money and wants to invest in an ore mine in Australia. Should he do it?"

How would you approach this?

Many thanks all!

Hi all,

I recently had my second round at one of the MBB firms with Partners/Principals, including the group head for the practice I was interviewing for (this is a lateral hire from IB). One of the interviewers, who is also the recruiting director, was out sick that day, which is why we had to reschedule another round.

I received very good feedback, however I was told I need to tackle the cases in a more structured way.

According to the headhunter what will now happen in the next and final round is that I will have to solve the same case again (they want to see what "lessons learned" I took away).

Therefore, I would be very grateful for a good "framework" / structure to solve the below, very broad question: "Mr XYZ has inherited a significant amount of money and wants to invest in an ore mine in Australia. Should he do it?"

How would you approach this?

Many thanks all!

2 answers

  • Upvotes
  • Date ascending
  • Date descending
Best Answer
Book a coaching with Sidi

99% Recommendation Rate

423 Meetings

4,087 Q&A Upvotes

USD 449 / Coaching

Hi!

The first thing you need to understand is what the actual purpose of a case structure is.

Structuring a case does NOT mean to come up with a nice looking list of areas that you want to look into. This is not a structure - it is just a bucket list (albeit a structured one). A case structure is a LOGIC! It is the logic according to which you will answer the client's question, and the qualitative areas which you will explore are just a byproduct of that logic.

This is the big misunderstanding (or non-understanding) that has been planted into the minds of candidates since books like Case in Point or Case Interview Secrets have been published years ago.

So here is a rough outline on how to think about the above mentioned situation:

1. Always start with distilling the Core Question: "Should the client invest into purchasing the mentioned mine in Australia?"

2. Identify criterion to make this decision: The additional value we can create over the our investment horizon has to be significantly higher than the investment cost. Moreover, the required capabilties to deal with the mine need to be in place and the risks need to be manageable.

3. Map out the potential value bucket by means of a profitability tree: what are the levers of value here? Calculate profit that can be expected if the mine is purchased and run ad infinitum or sold at some point in the future; compare Scenario A (mine purchased) to Scenario B (money used for best alternative). For this, you use a classical driver tree which disaggregates profits into its sub-components (both revenue side and cost side), and then you add a couple of examples (don't try to come up with an exhaustive list!) in terms of qualitative elements that influence these numerical drivers (e.g., market demand, price development, capacity of the mine, costs of operation)

4. Derive annual value (delta between Scenario A and B). If the mine indeed generates annual profits, you then divide the purchasing price of the PTA plant by this additional yearly profit. This gives you the break even point (point in time after which the investment becomes profitable). If this point comes earlier than the investment horizon, then this is a beneficial investment and the client should proceed with the purchase (purely based on financials).

5. Don't forget to assess capabilties and compile potential risks and mention them in your summary

This kind of thinking is based on first principles, and not on a "framework mindset". The beauty about it is that at the core, this is transferable to ANY strategic decision situation where a client wonders whether he sould do XYZ. As a corollary, it is completely unnecessary to have different frameworks in mind for situations like direct investment, market entry, product launch, M&A etc. The core assessment that needs to be conducted is absolutely identical across all these situations.

The caveat here is just that it usually takes a little bit of time to properly internalize this - but once it becomes second nature, navigating through a case becomes quite easy because you have a robust way of thinking that "automatically" creates the roadmap towards the solution.

Cheers, Sidi

Hi!

The first thing you need to understand is what the actual purpose of a case structure is.

Structuring a case does NOT mean to come up with a nice looking list of areas that you want to look into. This is not a structure - it is just a bucket list (albeit a structured one). A case structure is a LOGIC! It is the logic according to which you will answer the client's question, and the qualitative areas which you will explore are just a byproduct of that logic.

This is the big misunderstanding (or non-understanding) that has been planted into the minds of candidates since books like Case in Point or Case Interview Secrets have been published years ago.

So here is a rough outline on how to think about the above mentioned situation:

1. Always start with distilling the Core Question: "Should the client invest into purchasing the mentioned mine in Australia?"

2. Identify criterion to make this decision: The additional value we can create over the our investment horizon has to be significantly higher than the investment cost. Moreover, the required capabilties to deal with the mine need to be in place and the risks need to be manageable.

3. Map out the potential value bucket by means of a profitability tree: what are the levers of value here? Calculate profit that can be expected if the mine is purchased and run ad infinitum or sold at some point in the future; compare Scenario A (mine purchased) to Scenario B (money used for best alternative). For this, you use a classical driver tree which disaggregates profits into its sub-components (both revenue side and cost side), and then you add a couple of examples (don't try to come up with an exhaustive list!) in terms of qualitative elements that influence these numerical drivers (e.g., market demand, price development, capacity of the mine, costs of operation)

4. Derive annual value (delta between Scenario A and B). If the mine indeed generates annual profits, you then divide the purchasing price of the PTA plant by this additional yearly profit. This gives you the break even point (point in time after which the investment becomes profitable). If this point comes earlier than the investment horizon, then this is a beneficial investment and the client should proceed with the purchase (purely based on financials).

5. Don't forget to assess capabilties and compile potential risks and mention them in your summary

This kind of thinking is based on first principles, and not on a "framework mindset". The beauty about it is that at the core, this is transferable to ANY strategic decision situation where a client wonders whether he sould do XYZ. As a corollary, it is completely unnecessary to have different frameworks in mind for situations like direct investment, market entry, product launch, M&A etc. The core assessment that needs to be conducted is absolutely identical across all these situations.

The caveat here is just that it usually takes a little bit of time to properly internalize this - but once it becomes second nature, navigating through a case becomes quite easy because you have a robust way of thinking that "automatically" creates the roadmap towards the solution.

Cheers, Sidi

(edited)

Book a coaching with Vlad

97% Recommendation Rate

404 Meetings

11,348 Q&A Upvotes

USD 239 / Coaching

Hi,

At the beginning of the case, I would ask the clarifying question: Why is he thinking about this investment now. What is the objective and the criteria for success?

Then I'd look at:

Industry

  • Size
  • Growth rates
  • Profitability
  • Segments and growth rates
  • Regulation

Competition

  • Market shares of competitors and their segments (see the next point) and growth
  • Concentration / fragmentation (Fragmented market with lots of small players is less mature and easier to enter from a scratch. Concentrated market is hard to enter but has potential acquisition targets)
  • Unit economics of the players (Margins, relative cost position)
  • Key capabilities of the players (e.g. suppliers, assets, IP, etc)

Company

  • Revenues and growth rates
  • Profits
  • Unit economics (Margins, costs) on each product
  • Key capabilities (IP, products, etc)

Returns

  • ROI / NPV if that's the objective
  • Exit time / multiple if the objective objetive
  • Existence of buyers
  • Risks

Best!

Hi,

At the beginning of the case, I would ask the clarifying question: Why is he thinking about this investment now. What is the objective and the criteria for success?

Then I'd look at:

Industry

  • Size
  • Growth rates
  • Profitability
  • Segments and growth rates
  • Regulation

Competition

  • Market shares of competitors and their segments (see the next point) and growth
  • Concentration / fragmentation (Fragmented market with lots of small players is less mature and easier to enter from a scratch. Concentrated market is hard to enter but has potential acquisition targets)
  • Unit economics of the players (Margins, relative cost position)
  • Key capabilities of the players (e.g. suppliers, assets, IP, etc)

Company

  • Revenues and growth rates
  • Profits
  • Unit economics (Margins, costs) on each product
  • Key capabilities (IP, products, etc)

Returns

  • ROI / NPV if that's the objective
  • Exit time / multiple if the objective objetive
  • Existence of buyers
  • Risks

Best!

Thanks Vlad, this is very helpful (and much more structured what I did in the last round haha). Can I just ask one follow-up: would you go through these points in the above order? Or not too relevant which one you approach first? Many thanks again — Julian on May 01, 2019

Related case(s)

MBB Final Round Case - Smart Education

Solved 15.3k times
MBB Final Round Case - Smart Education Our client is SmartBridge, a nonprofit educational institution offering face-to-face tutoring services. The client operates in the US. The mission of SmartBridge is to help as many students as possible to complete studies and prevent that they drop from the school system, in particular in disadvantaged areas. The client is considering starting operations for its services in the Chicago area. They hired us to understand if that makes sense. Due to the nonprofit regulation, SmartBridge should operate on its own in the market, without any partnership. How would you help our client?
4.6 5 527
| Rating: (4.6 / 5.0)

Our client is SmartBridge, a nonprofit educational institution offering face-to-face tutoring services. The client operates in the US. The mission of SmartBridge is to help as many students as possible to complete studies and prevent that they drop from the school system, in particular in disadvant ... Open whole case

Espresso, Whatelse?

Solved 9.0k times
Espresso, Whatelse? Espresso Whatelse is an Italian company that produces coffee and espresso machines since 1908. It is the Italian market leader and has a strong presence overall in Europe. In 2019, Espresso Whatelse has increased its revenues but it has seen declining profit margin. Your client wants to understand the root causes of this 2019 trend and how to increase its profit margin again.  
4.6 5 451
| Rating: (4.6 / 5.0)

Espresso Whatelse is an Italian company that produces coffee and espresso machines since 1908. It is the Italian market leader and has a strong presence overall in Europe. In 2019, Espresso Whatelse has increased its revenues but it has seen declining profit margin. Your client wants to understand ... Open whole case

Hot Wheels

Solved 4.8k times
Hot Wheels Problem definition: Our client is Korean Car Parts (KCP), a multi-national original equipment manufacturer (OEM) of car parts based in Korea. They've recently seen a decline in profits and have brought us in to understand how to address this falling profitability.
4.6 5 284
| Rating: (4.6 / 5.0)

Problem definition: Our client is Korean Car Parts (KCP), a multi-national original equipment manufacturer (OEM) of car parts based in Korea. They've recently seen a decline in profits and have brought us in to understand how to address this falling profitability. Open whole case

Chinese Chess - Airline Business During COVID-19

Solved 3.3k times
Chinese Chess - Airline Business During COVID-19 Sky China, a government-backed Chinese airline, has recently seen profits plummet due to COVID-19. Profits are down 80% in the months of February and March, but are showing early signs of a rebound in April.  They've brought you in to first investigate what can be done immediatedly to prevent hemorrhaging cash and surive in the short-term. They are also looking to see how the current situation can be viewed as an opportunity, and what can be done to prepare for the future. 
4.3 5 102
| Rating: (4.3 / 5.0)

Sky China, a government-backed Chinese airline, has recently seen profits plummet due to COVID-19. Profits are down 80% in the months of February and March, but are showing early signs of a rebound in April. They've brought you in to first investigate what can be done immediatedly to prevent hemor ... Open whole case

Coronavirus Times - COVID-19 Brainteaser

Solved 3.0k times
Coronavirus Times - COVID-19 Brainteaser You and your family are faced with a challenging set of decisions. Due to coronavirus, your partner has taken a 20% paycut and you are worried you may lose your job. In addition, while daycare is still open, you are worried that sending your two children there will increase the risk of them bringing the virus back to your house, where your elderly grandparents are also staying. How would you go about thinking about this problem, and what would you recommend?
4.6 5 36
| Rating: (4.6 / 5.0)
Difficulty: Beginner | Style: Brain Teaser | Topics: Brain teaser

You and your family are faced with a challenging set of decisions. Due to coronavirus, your partner has taken a 20% paycut and you are worried you may lose your job. In addition, while daycare is still open, you are worried that sending your two children there will increase the risk of them bringing ... Open whole case