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Medium Merger & Acquisition

Riyadh Airport Metro

#Manufacturing

Practice this intermediate merger & acquisition case interview question in the Manufacturing sector. Includes detailed problem prompt, clarifying questions, structured framework, and expert recommendation. Part of ProHub's 835+ consulting case library.

ProHub Comment

This case tests a candidate's ability to build a bottom-up financial model for infrastructure investment evaluation. The core challenge is estimating ridership through logical breakdowns (airport passengers → transportation modes → metro adoption), then calculating payback period. The critical insight is recognizing that with fixed costs and limited pricing power, the only lever to improve returns is increasing passenger volume through operational design changes.

Estimated Time 26 minutes
Difficulty Medium
Source HKUST
19 / 100
Our client is the Saudi Arabia Ministry of Infrastructure. They are planning the construction of a metro direct link connecting the international airport to the Riyadh city center. They already estimated the upfront investment for the engineering, procurement and construction to be USD 2 billion, of which 60% to be funded by the Saudi Arabia Sovereign Fund and 40% to be funded by the Ministry of Infrastructure. They called us to help them evaluate this potential investment. Goal (to be asked by candidate): The Client wants to base their decision on the payback period of their part of the investment (the 40%), and they aim at a payback lower than 25 years.

Clarifying Information

  1. Number of passengers using the metro
  2. Price of a metro ticket
  3. Salaries
  4. Maintenance
  5. Utilities
  6. Other, like ticketing, train cleaning, stations management
  7. Trains can be leased (operational cost) or bought (upfront investment). In this case they will be bought, so shall be excluded
  8. Based on their experience, the Ministry expects that the metro would have a profitability of 20%
  9. Unit price of a metro ticket is USD 5
  10. Can assume 300 days per year for ease of calculation
Mock Interview
Interviewer

Our client is the Saudi Arabia Ministry of Infrastructure. They are planning the construction of a metro direct link connecting the international airport to the Riyadh city center. They already estimated the upfront investment for the engineering, procurement and construction to be USD 2 billion, of which 60% to be funded by the Saudi Arabia Sovereign Fund and 40% to be funded by the Ministry of Infrastructure. They called us to help them evaluate this potential investment. Goal (to be asked by candidate): The Client wants to base their decision on the payback period of their part of the investment (the 40%), and they aim at a payback lower than 25 years.

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
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Practice this case with AI Mock Interview

Evaluate whether the Saudi Ministry should invest in a direct airport-to-city metro link. The analysis reveals a 50-year payback period (far exceeding the 25-year target), leading to a recommendation against a direct link, instead proposing intermediate stations to boost ridership and improve financial returns.

Key Insights:

  1. Build estimation frameworks systematically: start with total airport passengers (250k/day), then apply transportation mode splits, then metro adoption rate (55k/day)
  2. Recognize the importance of using Free Cash Flow as a proxy for profits when payback period is the evaluation metric
  3. Understand that with constrained costs and pricing, revenue growth through operational changes (adding stations) is the lever to improve project economics
  4. Direct infrastructure links have lower ridership than multi-stop options; intermediate stations serve a broader geography and increase adoption

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