IESE CONSULTING 2021, Schemes and Mind Maps of Integrated Case Studies

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I E S E C O N S U L T I N G C L U B

C A S E B O O K 2 0 2 1

IN PARTNERSHIP WITH BOSTON CONSULTING GROUP

2 nd^ Edition

FOREWORD

Dear Reader,

In partnership with Boston Consulting Group (BCG), we are proud to share the second edition of The IESE Case Book.

The IESE Consulting Club collaborated with BCG to create a competition for consulting club members at IESE (Class of 2021 and 2022) to write and submit original cases, to help the next generation of aspiring consultants prepare for interviews. Each submitted case passed through a careful and completely blind evaluation process conducted by the IESE Consulting Club and BCG, which selected the 5 best cases based on pre-defined evaluation criteria. These 5 best cases form the IESE Case Book 2021 which will enable the reader to:

• Develop interview guidance techniques to practice peer-to-peer preparation
• Improve problem-solving skills
• Mimic real-life interview situations with solid cases, accompanied with BCG insights

We have paid special attention to the user experience so that the whole process of practicing peer-to-peer mocks becomes easier, seamless, and intuitive. We have tried our best to provide a detailed explanation of how to use the book and some tips for interviewer guidance throughout all cases.

We would like to thank Boston Consulting Group for their partnership and support in bringing this case book to life. Wishing you the best of luck and hope you enjoy your preparation journey!

IESE Consulting Club

CONTENT

 ACKNOWLEDGEMENT

 CASES 2 nd^ Edition

 HOW TO USE THE CASEBOOK

Eurotech By Íñigo Arteche (IESE MBA 2022)

Crunch Yo’ Burger By Pieter Swart (IESE MBA 2021)

Transantiago By Michael Stefanic (IESE MBA 2022)

California Wildfires By Alan Bielberg (IESE MBA 2022)

South bank By Giancarlo Young (IESE MBA 2022)

 CASES 1 st^ Edition

The second edition of the IESE Case Book is the result of coordinated efforts between Boston Consulting Group and all IESE students that employed time, creativity, and dedication in bringing this case book to life.

The collection of cases that you will find in the following pages were created as part of the 2 nd^ IESE Casebook Writing Competition amongst consulting club members, who were challenged to write cases based on business problems that could help consulting candidates in their preparation process.

Each one of the cases submitted passed through a careful and completely blind evaluation process, conducted by the IESE Consulting Club and BCG, which selected the five best cases based on pre-defined evaluation criteria.

We would like to thank the BCG Team for their time, support, and guidance in this endeavour, the participants for the time and effort they put to develop their cases, and the IESE Casebook Team members from Class of 2021 and 2022 who helped bring this book to life in its final format.

Acknowledgement

Eurotech

By Íñigo Arteche

TMT M&A Profitability

Easy Medium Hard

Eurotech

CASE FLOW – FOR INTERVIEWER

(*) Refers to the manufacturing and installation of reception devices (antennas), transmission infrastructure (Wiring), and end-terminals (set-top-boxes, smart TVs, phones…)

Prompt & exhibit I

Time: 5-7 mins Main Objectives:

• Understand the industry & company size
• Address the problem to be solved: synergy calculation

Structure

Time: 6-10 min Main Objectives:

• Elaborate a structure to address the problem
• Use main levers (cost and revenue) as part of the structure

Exhibit II & quant

Time: 12-15 min Main Objectives:

• Calculate the main synergies
• Notice one-off costs
• Understand the difference between target and potential synergy

Risk brainstorming

Time: 8 mins Main Objectives:

• Elaborate a list of risks associated with the NewCo synergy implementation and future operations

Recommendation

Time: 5 mins Main Objectives:

• Outline target synergy
• Comment on main synergies
• Elaborate on risks and mitigation actions

Total time: 36-45 min

TMT M&A Profitability

Easy Medium Hard

Country

LY Revenue M€ 150 85 83 75 70

3Y CAGR -20% -10% -5% **^ -12.5% -15%

Eurotech – Exhibit 1

INDUSTRY INSIGHTS (^) PRODUCT CATEGORIES – HW TRANSMISSION

MAIN COMPETITORS AND 3Y CAGR

• 80% of TAM^1 depends on Hospitality

purchases

• Hotels have recently been moving to

Software services, reducing

dependence on Hardware providers

• Market size for HW companies has

been declining for the last 3Y (see

graph)

Notes: () An encoder/converter is a device that converts different signals (Satellite, Terrestrial, IP…) into playable content (video and/or audio). (*) The Swedish competitor has recently acquired a SW company which is offsetting its decline in sales. | Glossary: (1) Total Accessible Market

RECEPTION TRANSMISSION TERMINALS

Antennas, Encoders, & Converters*

Wiring for different signals and network devices

End user devices such as Smart TVs, Tablets, computers…

CLIENT CLIENT

800 (^680 )

2018 2019 2020 EU Total Accessible Market (M€)

TMT M&A Profitability

Easy Medium Hard

Eurotech – Exhibit 1

GUIDANCE

This exhibit is for the candidate to understand better the industry, it is important to try to link it to the reason behind the M&A operation

The candidate should notice that :

1. The market is experiencing an overall decline ( (660-800)/800 = -140/800 = -7/40 = -17.5 % ). If the candidate makes the calculation, it would be considered positive
2. This decline is caused by the fact that clients are switching traditional Hardware for Software services. If the candidate notices that the Swedish sales have declined less due to the acquisition of a Software firm it would be considered a plus
3. The operation will create the biggest company in the market (75+80 = 155M€)
4. The Polish company initially presents a better financial outlook (lesser decline than most competitors and bigger revenues)
5. The market relies heavily on one type of client: hospitality. If the candidate links the fact that consumers now bring the content linked to their devices (i.e. Netflix, Hulu…) to the increased importance of software services it would be considered a good understanding of the industry behaviour
6. Finally, the candidate should try to guess that since the industry is experiencing such a decrease, the operation might help capture synergies that help both companies survive in such a demanding market

If the candidate does not suggest the reason for the operation, the interviewer might ask him/her to brainstorm a set of possible reasons. When synergies come up, the interviewer might suggest moving on to the structure.

TMT M&A Profitability

Easy Medium Hard

Eurotech – Proposed structure

Notes: () An encoder/converter is a device that converts different signals (Satellite, Terrestrial, IP…) into playable content (video and/or audio). (*) The Swedish competitor has recently acquired a SW company which is offsetting its decline in sales. | Glossary: (1) Total Accessible Market

COST SYNERGIES

Raw Materials •^ Potential Savings in terms of purchasing and supplier optimization

Direct Labour • Cost reduction derived from optimization of production process

R&D •^ Savings associated to duplicated R&D functions

Structure Costs •^ Potential savings in centralizing Selling & Administrative costs

OTHER

CONSIDERATIONS

Risks

• Risk analysis for determining potential threat to synergy consecution i.e.. cannibalization, high costs associated with terminations, reputational risks, liquidity issues…

Feasibility •^ Feasibility of the merger operation: action plan, funding & liquidity, stage of the

industry (i.e. mature close to obsoletion…)

SALES SYNERGIES

Products • New potential cross-selling opportunities coming from gaining access to:

 New products  New countries  New clients

Geographies

Products

TMT M&A Profitability

Easy Medium Hard

Eurotech – Exhibit 2

REVENUES FY

All Numbers in M€ French Company Polish Company

Revenues 70 85

Variable Costs 10 11.

Raw Materials (components,

wirings, hardware pieces…)

Transportation 1 1.

Energy 1 0.

Fixed Costs 55 50.

Production (Salaries of employees) 42 33.

Research & Development 10 15

Sales and Administration 3 2

Operational Profit 5 23

• Variable Costs have remained

stable over the last 10 years and

are not expected to change

since relation with the provider

is good

• Fixed costs have been increasing

over the last 5 years at a slow

steady pace (no hiring nor firing

has occurred for the last 6 years)

ADDITIONAL INFO

TMT M&A Profitability

Easy Medium Hard

Eurotech

QUANTITATIVE ANALYSIS

For the quantitative analysis, the interviewer will ask the candidate to calculate the synergies between the two players using the information contained in the first exhibit.

(It is important that the candidate makes the calculation with at least 2 decimals, specially for the ratios)

SOLUTION

• Sales synergies (0M€): here the candidate should brainstorm some ideas on where he thinks the synergies are (i.e. cross-selling of non-common products, access to new countries…). He should state that this type of synergy is more uncertain and speak about the possibility of cannibalization. The interviewer should indicate the candidate to consider zero in terms of sales synergies.
• Raw Materials: here the candidate should use the purchasing ratio from Poland to quantify the potential synergy behind Raw Materials. 9 – (70 x 9.5/85) = 1.17M€
• Production: in terms of salaries, the candidate should try to explore the possibility of moving production to Poland, as it is more cost-efficient this would yield: 42 – (70 x 33.5 / 85) = 42 -27.588 = 14.41 M€
• Research & Development: here the candidate should notice that this cost is duplicated, with one R&D department they would be able to serve the whole organization, and since the Polish one seems to be more effective (in terms of sales) he could propose to move all R&D to Poland maintaining the Polish budget. 10M€, all French R&D cost
• Sales & Administration: same reasoning as before yet more unclear since Spain would need to retain some Financial controllers/administrative staff. 2-3M€

Target Recurrent Saving of: (1.17 + 14.41 + 10 + 2.5) x 0.7 = 28.09 x 0.7 = 19.66 M€ One-off Profits/Losses: +2 – 10 = -8 M€

TMT M&A Profitability

Easy Medium Hard

Eurotech

BRAINSTORMING QUESTION

SAMPLE ANSWERS

Last, the interviewer must ask the candidate to elaborate on the last point of the plan, which is risks/feasibility. The candidate

must elaborate a list of risks that could harm the synergies and the profitability of the NewCo in the future. (Broader scope)

REVENUES VARIABLE COSTS FIX COSTS

• Substitute products
• Competitive environment (i.e.,

price-war)

• Failure in the R&D process
• Harming client relations
• …
  • Increase in the price of

components

• Decline in bargaining power

against suppliers (i.e., bankruptcy

of current providers)

• Increase in the price of utilities…
  • Moving production from France

to Poland might not be possible

(gov. pressure, legal procedures…)

• Employee dismissal may harm

reputation in the French market

• Loss of capacity in the R&D

function…

The candidate should explore the different risks associated with the future of the NewCo. If he proposes a structure that is

linked to profitability, it would be considered a plus, i.e.:

TMT M&A Profitability

Easy Medium Hard

Crunch Yo’ Burger

By Pieter Swart

Food service Profitability Operations

Easy Medium Hard

• This case is designed to be as long or short as you want
• There are two optional estimations to test candidate’s market sizing ability

  • Subway restaurants in the US

  • of sit-in customers per Subway per day

• If you are short on time, you can simply give the candidates the values of these inputs
• If the candidate would like to practice estimations, they can estimate these inputs

Crunch Yo’ Burger

UPFRONT NOTE FOR INTERVIEWER

Food service Profitability Operations

Easy Medium Hard