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Medium Merger & Acquisition Market Sizing Cost Reduction

Chicago Parking Meters

#Public-Private Partnership #Manufacturing #Non-profit #Transportation
ProHub Comment

This case requires a robust quantitative valuation approach (NPV calculation) for a public-private partnership, followed by qualitative brainstorming on pricing strategies and technological advancements. It tests a candidate's ability to structure a complex financial model, make logical assumptions, and think creatively about market dynamics and operational improvements.

Estimated Time 26 minutes
Difficulty Medium
Source Wharton
10 / 100
Your consulting firm has been hired by the Company Parking GenNext to give a reasonable price for the rights to collect all money* from Chicago’s meters over a 20 year timeframe to win the competitive bid. How would you go about estimating it? *Money collected on parking tickets goes to the city, not the company.

Clarifying Information

  1. In Chicago, there are ~40,000 metered spaces.
  2. In Chicago, there is a three-ring structure when setting meter rates:
    • Ring I Description: Downtown Loop, Price per Hour: 3, % Meters: 3%
    • Ring II Description: Central Business District, Price per Hour: 2, % Meters: 16%
    • Ring III Description: Suburbs + Others, Price per Hour: 1, % Meters: 81%
  3. Assume Ring I usage is 12 hours per day, Ring II 8 hours per day, Ring III 4 hours per day.
  4. Assume weekend / weekday usage are same.
  5. Assume 30 days a month, 12 months a year.
  6. One-time investment to upgrade the parking meters to accept cash, credit and debit cards. For simplicity, we can assume that the newly installed meters will have a life of 20 years and the bidder will not be expected to change them during the period.
  7. Recurring operating expenses – labor costs, maintenance costs, etc.
  8. We can assume (or help lead the candidate to assume) that the 40,000 old single-space coin-operated meters will be replaced 5,000 new meters (such that each meter is capable of handling 8 spaces).
  9. Unit cost for one parking meter could be assumed to be in $20K, including installation costs.
  10. Candidates should be expected to estimate how many people will be required, the hourly wage per worker, ongoing maintenance costs, etc.
Mock Interview
Interviewer

Your consulting firm has been hired by the Company Parking GenNext to give a reasonable price for the rights to collect all money* from Chicago’s meters over a 20 year timeframe to win the competitive bid. How would you go about estimating it? *Money collected on parking tickets goes to the city, not the company.

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
Structure Analysis Communication Business Sense Quantitative
Practicing...
Score coming soon
Practice this case with AI Mock Interview

The case asks a consulting firm to determine a reasonable bid price for a 20-year contract to operate Chicago’s parking meters on behalf of client Parking GenNext. This involves calculating the Net Present Value (NPV) of future revenues and costs, including a mandatory high-tech upgrade, and considering qualitative factors like pricing strategies and technological advancements.

Key Insights:

  1. A structured revenue-minus-cost framework (NPV) is crucial for valuing long-term assets or contracts.
  2. Making explicit, reasonable assumptions for revenue drivers (price, usage) and cost components (one-time investment, recurring expenses) is key.
  3. Understanding the scope of revenue collection (e.g., parking fees vs. tickets) is critical for accurate valuation.
  4. Beyond quantitative analysis, qualitative brainstorming on pricing strategies and technological enhancements adds significant value.
  5. Public-private partnerships often involve significant upfront investment and long-term operational considerations.