BCG Final Round: Stadium Naming Rights

4P – Part 1 (Problem, Product, Players, Profit)

1. Problem:
   1. Question: What are NeuBank's objectives in this opportunity? Brand Image, Customer Acquisition etc.?
   2. Rationale: Understanding the objective will guide the solution and measure effectiveness of the investment.
   3. Answer: NeuBank wants to expand from California & around - towards Ohio & around. NeuBank believes that the stadium naming rights in Ohio will be an instrumental marketing step for acquiring market share in Ohio.
2. Product:
   1. Question: What are the stadium specifics? How large? Which sport? Number and type of events?
   2. Rationale: These details can give a better sense of brand visibility the stadium will generate for NeuBank
   3. Answer: Stadium capacity is 30,000. 100+ English football matches annually across all league levels. Occasionally some music concerts or other entertainment shows to fill the calendar.
3. Players:
   1. Question: Are there any other bidders?
   2. Rationale: Understanding the competition can help NeuBank strategize its bid.
   3. Answer: Unknown - such bids are usually confidential
4. Profit formula:
   1. Question: How does NeuBank typically acquire customers and what is the average customer acquisition cost?
   2. Rationale: This will help in the financial analysis and estimating the potential return on investment.
   3. Answer: Customer acquisition methods similar to other neo banks – digital channels, social media etc.

4P – Part 2 (Product, Price, Promotion, Place)

1. Product:
   1. Question: What are NeuBank’s products & services?
   2. Rationale: Understanding NeuBank’s product portfolio can help better evaluate the suitability of stadium naming rights as an adequate promotional mechanism.
   3. Answer: NeuBank offers traditional banking for retail and corporate customers. Their USP is having all-digital and no-branch services - similar to other upcoming neo banks.
2. Price:
   1. Question: Are there some historical stadium naming rights deals we can learn about?
   2. Rationale: This gives a reference point for bid valuation and evaluation.
   3. Answer: Examples include A) Barclays Center ($300m/10y), B) Mercedes-Benz Stadium ($500m/15y), and C) Scotiabank Arena ($750m/20y).
3. Promotion:
   1. Question: How does NeuBank currently promote itself?
   2. Rationale: To check alignment of stadium naming rights with NeuBank’s existing marketing strategy.
   3. Answer: NeuBank's marketing activities are similar to other similar modern neo-banks including online ads, social media engagement, social media ads, and others.
4. Place:
   1. Question: Is NeuBank regionally focused or pan-US?
   2. Rationale: Customer concentration (or lack of) combined with NeuBank’s objectives for naming rights can help in accurately evaluating the opportunity.
   3. Answer: Majority customers are in California

3C (Company, Customers, Competition)

1. Company:
   1. Question: What is NeuBank's current market position and brand recognition in Ohio and generally in the US?
   2. Rationale: If NeuBank is relatively unknown, the naming rights might help boost its recognition significantly.
   3. Answer: NeuBank doesn’t have many customers in Ohio. Major customer base is in California (top 3 neo bank)
2. Customers:
   1. Question: What's the demographic profile of people visiting the games at the stadium vs NeuBank customers?
   2. Rationale: The naming rights might be more beneficial if attendees fit into NeuBank's target customer profile.
   3. Answer: Mixed bag, no specific age-group or audience profile
3. Competition:
   1. Question: What are some of our competitors doing for regional expansion?
   2. Rationale: It is good to know how the competition is trying to move ahead
   3. Answer: Different competitors are doing different activities such as roadshows, pop-ups etc. but so far no known competitor is heard of engaging in stadium naming rights

In this first section, we're setting the foundation for the entire case. The candidate is being evaluated on their ability to clarify the situation and ask relevant questions. It's important for the candidate to understand the case at hand, the client's objectives, and the industry context. The recommended approach is to use a blend of commonly known basic frameworks (such as 4Ps and 3Cs) with customized questions specific to the case. These are well-structured frameworks that help ensure all critical aspects are covered and also shows the interviewer that you're taking a systematic approach.

Key Learnings & Tips:

1. Identifying Key Objectives: NeuBank's objectives were one of the first things we wanted to clarify. It's important to know what the client hopes to achieve from the onset because this will guide your analysis throughout the case. Remember that a company’s objectives might not always be financial – they could be strategic (like in NeuBank’s case) or even regulatory.
2. Contextual Understanding: The questions asked were not random. They were carefully chosen to give us a good understanding of the case context - NeuBank's current situation, the stadium specifics, the potential bidders, and historical precedents of similar deals. This contextual understanding is crucial for formulating a well-grounded recommendation later.
3. Tailored Frameworks: While the 4P's and 3C's are generic frameworks, notice how they are customized to fit the specifics of the case. When preparing for case interviews, remember that frameworks are not meant to be used as-is. They need to be adapted to suit the case at hand.
4. Thinking Ahead: Some questions are forward-looking and indicate what analyses we might have to do in the next stages. For example, asking about historical stadium naming rights deals hints towards a possible benchmarking analysis for determining the bid amount.
5. Engagement: The candidate's questions should encourage dialogue with the interviewer. Open-ended questions that seek information or opinions, rather than just a yes/no, allow for a richer conversation.

Remember, the goal of the clarifying questions is not just to ask questions for the sake of it but to provide a clearer direction for your case analysis. Your questions should demonstrate your logical thinking process and give the interviewer confidence in your structured approach.

• NeuBank wants to expand from California & around - towards Ohio & around. NeuBank believes that the stadium naming rights in Ohio will be an instrumental marketing step for acquiring market share in Ohio.
• The stadium has a capacity of 30,000 and hosts over 100 events each year, including major league, minor league, and college league football matches, and occasionally music concerts.
• It is not known if there are any other bidders as such information is usually confidential.
• NeuBank's customer acquisition methods are similar to other neo banks - through digital channels, social media, etc.
• NeuBank offers traditional banking services for retail and corporate customers, with the unique selling proposition of being an all-digital, no-branch access bank.
• Previous naming rights deals for similar stadiums include A) Barclays Center ($300m/10y), B) Mercedes-Benz Stadium ($500m/15y), and C) Scotiabank Arena ($750m/20y).
• NeuBank's marketing activities are similar to other similar banks, utilizing digital channels, and social media.
• The majority of NeuBank's customer base is located in California.
• NeuBank is new to Ohio. It is currently mainly in California and its nearby states. In California, it is a top-3 neo
• The demographic profile of people attending the games at the stadium is a mixed bag, with no specific age-group or audience profile.
• NeuBank's competitors use various methods for regional expansion such as roadshows, pop-ups, etc., but information about doing stadium naming rights is not publicly known yet.

There are 3 questions asked by the client in the case prompt. The first question is the business decision of evaluating the naming rights as a suitable initiative for NeuBank. Evaluating a business decision not only involves looking at the direct financial benefits but also requires a holistic look at non-direct benefits, non-financial benefits, issues, challenges, and other considerations. Below, we have a step-by-step guide on how to structure your approach. 

• Step 1: Top-level (Level 1) pillars with fundamental areas that need analysis
• Step 2: High-level (Level 2) hypotheses for top-level pillars
• Step 3: Hypotheses (Level 3) for evaluating each high-level hypotheses
• Step 4: Information requirements to validate all hypotheses
• Step 5: Analyse the hypotheses based on the information presented (next section)

Start by identifying the fundamental areas that need analysis. In decision-based cases like this, the evaluation is best structured around four core pillars—Finance, Strategy, Operations, and Legal. You can choose a different set of pillars as well if you like. This classification provides a holistic coverage of the organization's activities and ensures the decision-making process is comprehensive. Your top-level breakdown, therefore, includes:

1. Financial Feasibility
2. Strategic Alignment
3. Operational Considerations
4. Regulatory and Legal Factors

For each pillar, devise a high-level hypothesis that aims to answer the overall case question of whether the naming rights is a good idea or not. Here are examples for each:

1. Financial Feasibility: Will this initiative be financially beneficial for NeuBank?
2. Strategic Alignment: Does this initiative align with NeuBank's strategic objectives?
3. Operational Considerations: Is this initiative operationally feasible for NeuBank to execute?
4. Regulatory and Legal Factors: Are there any regulatory or legal issues for NeuBank in the naming rights?

Think of each hypothesis as a mini question that needs to be answered to answer the high-level question. Leverage first-principle thinking by breaking down each high-level question into the foundational assumptions or facts that would need to be true for the answer to the high-level question to be a "yes". Here's how you might generate these hypotheses

Financial Feasibility: Will this initiative be financially beneficial for NeuBank?

• Will the financial returns from the naming rights investment meet NeuBank's expectations?
• Will the naming rights bid create any financial distress for NeuBank?
• Are stadium naming rights typically within NeuBank's budget?
• Are naming rights a cheaper method of customer acquisition vs NeuBank's current practices?
• Will naming rights increase NeuBank’s shareholder value?

Strategic Alignment: Does this initiative align with NeuBank's strategic objectives?

• Are naming rights compatible with NeuBank’s current strategy?
• Are naming rights strategically effective for entry into Ohio?
• Will naming rights foster the right perception of NeuBank in Ohio?
• Will naming rights offer strategic cross-promotion opportunities for other NeuBank services?
• Is the current stadium in Ohio the best choice for naming rights?

Operational Considerations: Is this initiative operationally feasible for NeuBank to execute?

• Does NeuBank have the operational capability to manage the logistics of naming rights?
• Does NeuBank have the necessary resources to implement and manage this initiative?
• Are the operational changes required for this initiative, feasible for NeuBank?
• Can NeuBank establish an on-site presence for cross-promotions of services at the stadium?

Regulatory and Legal Factors: Are there any regulatory or legal issues for NeuBank in the naming rights?

• Are there existing legal or regulatory restrictions that prohibit NeuBank from acquiring stadium naming rights?
• Are there potential reputational risks to NeuBank if the home team does not perform?
• Can NeuBank effectively manage the potential risks associated with this initiative?

Always keep the case question in focus. Each element in your framework should be designed with an approach to answer the case question. When you make your framework this way, you will achieve the following:

• You will not need to over explain your framework - typically you have less than 2 minutes to explain your framework
• You will end up keeping the interviewer engaged - losing the interviewer’s interest is completely undesirable in the interview
• You will impress the interviewer with your simplicity and no-nonsense style - this is what the interviewers want
• You will solve the case in half the time and increase your chances of getting an offer - most interviews are timed and do not allow for a lot of time to solve the case - perhaps 15-30 minutes only. Not being able to finish the case on time is quite undesirable

In an interview, you will be expected to come up with the framework in about 2 minutes and take another 1-2 minutes to explain it to the interviewer

For each hypothesis, identify the elements that need to be considered to validate or refute that hypothesis. This is where you apply first-principles thinking again by identifying the base facts or data that would be necessary to determine if the foundational assumptions in your hypotheses are correct. Here's an example of how to do this for each pillar

Financial Feasibility: The elements here will help in calculating the financial impact of this decision. Elements such as incremental customers and profit will help quantify the direct financial benefit, while others such as investment payback period, IRR, and NPV will assist in understanding the overall return on this investment. Additional elements such as the cost of naming rights and potential additional revenue sources help build a fuller picture of the investment.

• Incremental customers, revenue, and profit
• Investment payback period, IRR, and NPV
• Typical cost of such naming rights seen in the market
• Additional revenue as a consequence of the naming rights (e.g., a share of ticket sales and merchandise)
• Expected increase in customers, revenue, and profit due to increased visibility in new area
• Current cost of customer acquisition via other channels
• Current market capitalisation value of NeuBank vs potential increase

Strategic Alignment: These elements serve to validate the strategic fit of this initiative with NeuBank's current strategy. Understanding current marketing activities, customer profile, and potential synergies with other products and services will allow a thorough assessment of the initiative's strategic alignment.

• NeuBank's current marketing activities and channels
• Target customer profile and overlap with stadium attendees
• Potential synergies with other NeuBank products or services
• Potential for future expansion in the Ohio region

Operational Considerations: Operational elements are necessary to understand what changes NeuBank will need to make to its operations and whether it has the resources to make these changes. These elements will highlight potential operational challenges and requirements.

• Logistical requirements for brand promotion at the stadium
• Ability to provide additional banking services at the stadium
• Required changes to NeuBank's current operations
• Availability of necessary resources (manpower, capital, etc.)

Regulatory and Legal Factors: The elements here help NeuBank understand the legal and regulatory landscape they are entering. From understanding the contractual obligations and restrictions to assessing potential negative publicity, these elements will guide NeuBank in understanding the potential risks involved in acquiring the naming rights.

• Contractual obligations and restrictions involved in the deal
• Regulatory implications for stadium naming rights, particularly in the financial industry
• Risk of negative publicity or backlash
• NeuBank's capacity to meet regulatory requirements

• Embrace Structure and Hypothesis-Driven Thinking: The case approach provides a framework that systematically breaks down a complex problem into manageable segments or pillars. Hypotheses are then formulated for each segment to guide data collection and analysis. Embrace this structure in your case preparation and practice developing hypotheses that direct your thinking.
• Be Comprehensive: The choice of broad pillars (Finance, Strategy, Operations, Legal) ensures a comprehensive analysis that covers all major aspects of the business decision. In your own case analysis, always aim for a holistic approach, considering both direct and indirect impacts of a decision.
• Seek Specific Data: The case demonstrates how to derive specific information requirements from your hypotheses. By identifying the data you need to validate your hypotheses, you can request precise information from the interviewer, making your data collection more efficient and targeted.
• Consider Trade-offs: Real-world business decisions often involve trade-offs. Practice considering and articulating these trade-offs in your case interviews. Always provide a substantiated and reasoned recommendation, looking at the decision from all angles.
• Transfer Learning: The approach used in this case can be adapted to many different types of business decision cases. As you continue your case preparation, look for opportunities to apply these methods to other cases.
• Remember, like any skill, case-solving improves with practice. Aim to internalize the principles in this case approach and adapt them to suit different case scenarios. The ability to think critically, handle complexity, and provide well-reasoned conclusions will stand you in good stead during your interviews and beyond. Good luck!

Level 1: Understanding the data & Basic Observation

• “This exhibit displays key metrics of some past naming rights deals. It gives us a sense of the total deal size, the annual payments by the sponsors for stadium naming rights, and the duration of naming rights.”
• “It seems that the Annualized Fee is simply the total bid divided by the number of years – can you please confirm if that is the case or the Annual Fee is over and above a one-time bid amount?” → Bid payment is only one-time in the beginning, the annualized number is just an indication.

Level 2: Inferences

• “The annual payments range from $10 million to $25 million, and deal durations are generally between 10 and 20 years. In terms of total deal size, we see the range vary from $150M to $350M.”
• “The data also seems to suggest that Football stadium rights are more premium than baseball and soccer stadium naming rights. This would perhaps raise our minimum bid level to $15-18M per year.”

Level 3: Implications

• “Since the range of annual payments in the benchmark seems relatively coherent, NeuBank could assume a similar range for their bid as well. Since this is the first time NeuBank is engaging in such a deal, it might be prudent to pick a shorter duration (e.g. 10 years).”
• “The final bid size would also depend on the assessment of potential benefits and tradeoffs for NeuBank – an analysis that would require further deliberation.”

Overall response:

• “This exhibit offers preliminary insights on the typical deal sizes for stadium naming rights. We learn from the exhibit that the deals are typically 10-20 years long, with an annual payment of $10M to $25M. While this range is not exactly narrow, it still gives us a ballpark range of price and duration for NeuBank’s bid. Given this, NeuBank would need to consider its financial capacity and potential benefits & tradeoff to commit to a similar arrangement. Furthermore, the range might also be influenced by the sport – with Football commanding higher prices, potentially indicating a higher level of visibility or engagement with fans.”

Level 1: Understanding the data & Basic Observation

• “This exhibit shows a high-level view of NeuBank's financial performance over the past five years. The data includes annual revenue and net profit.”
• “The revenue range is $1-2Bn, the profit is around 9-10%”

Level 2: Inferences

• “Revenue has grown 80% in 5 years, and profit has doubled in the same time”
• “Revenue and profit have grown by 15-20% every year”
• “The profit margin is increased from 9% to 10% over the past 5 years – indicating a healthy model”

Level 3: Implications

• “NeuBank's consistent growth and healthy profit margin suggest financial stability and potential capability to take on a sizable investment like a stadium naming rights deal. However, the exact capacity would depend on their cash flows and other investment commitments.”

Overall Response:

• “NeuBank's financial performance, as shown in this exhibit, indicates strong and consistent growth over the past five years. The bank has maintained a net profit margin of 9-10%, showcasing its healthy business model. Given this solid financial foundation, NeuBank could potentially undertake the significant investment required for a stadium naming rights deal. However, a more comprehensive financial analysis, taking into account cash flow and other investment commitments, would be needed to make a final decision.”

Level 1: Understanding the data & Basic Observation

• “This exhibit illustrates NeuBank's current brand awareness and reputation in California and Ohio, and the estimated figures after the potential naming rights deal.”

Level 2: Inferences

• “We see that brand awareness in California is 40% vs 5% in Ohio – which is expected since NeuBank’s primary market is in California and it is wanting to enter the Ohio market with this naming rights deal”
• “We also observe that the brand reputation has a similar trend as the brand awareness with a very high score of 8.1 in California, and a lower yet upcoming score of 6.0”
• “Both metrics are expected to see a positive uptick after the naming rights deal”

Level 3: Implications

• “The potential increase of brand awareness and reputation in Ohio following the naming rights deal could contribute to NeuBank's business growth and facilitate a strong market entry in the state.”
• “With an expected increase in brand awareness and reputation even in its home state of California, the naming rights deal appears to be showing a fallout effect that can create additional secondary benefits.”

Overall Response:

• “As seen in this exhibit, NeuBank’s currently low brand awareness in Ohio reflects its regional status and alsocreates a strong case for working on the brand development for Ohio’s market entry. We see that the naming rights deal can not only give NeuBank a strong leg-up in the Ohio market, but will also have minor secondary benefits in its home market in California as well. These potential boosts in brand awareness and reputation could be strategically beneficial, increasing NeuBank's visibility, enhancing customer perception, and ultimately contributing to business growth in these states.”

Level 1: Understanding the data & Basic Observation

• “This exhibit outlines the current and predicted impacts on NeuBank's key financial and business metrics following the potential naming rights deal. We have current and predicted customers in both states, as well as the predicted revenue – with or without the naming rights”

Level 2: Inferences

• “The naming rights deal is predicted to lead to step-increases in customer base, deposits, revenue, and net profit. Furthermore, there's an expectation of additional revenue from the stadium itself.”

Level 3: Implications

• “The predicted positive impact on key financial metrics suggests that the naming rights are a potentially profitable investment for NeuBank. The additional revenue from the stadium also presents a unique source of income. However, the bank should carefully evaluate the feasibility and risks associated with such a significant commitment.”

Overall Response:

• “Based on this exhibit, the naming rights deal is predicted to positively impact NeuBank's financial metrics and business growth all around. Furthermore, the additional revenue from the stadium introduces a new income source for the bank. The incremental net profit due to the naming rights appears to be around $20M – which can by itself cover the annual payout required for the naming rights deal and provide a stronger future upside”

When we evaluate this deal based on our framework through the lenses of Financial, Strategic, Operational, and Legal pillars; we get an overall promising recommendation:

• Financially, the deal appears to make sense. NeuBank has been profitable and growing consistently over the past few years (Exhibit 2). And the investment amount in naming rights seems manageable on an annual basis, especially considering the potential increase in customers, deposits, and revenues predicted in Exhibit 4.
• Strategically, the deal aligns well with NeuBank's aim of increasing its brand awareness and reputation, especially in Ohio being a new market for NeuBank. Exhibit 3 clearly shows that the naming rights deal can significantly boost these key metrics.
• Operationally, while we don't have detailed data on operational impacts, we can infer that the increased customer base and deposit volume could require scaling up customer service and operations. However, as a growing bank, one could assume that NeuBank should be able to manage this expansion.
• Legally, we have not identified any significant regulatory risks or legal constraints associated with stadium naming rights in this case. Perhaps more details might come up during the contract implementation phase.

• From the exhibits and data that we have explored in this section, we can deduce several key points. The naming rights industry, as evidenced in Exhibit 1, is quite lucrative, with annual payments ranging from $10 to $25 million. From NeuBank's financials in Exhibit 2, we see that the bank has shown consistent growth over the years and has the capacity to invest in such a deal. The brand awareness and reputation scores in Exhibit 3 suggest that the naming rights could help NeuBank significantly in creating the right brand value in Ohio. Finally, Exhibit 4 provides an encouraging prediction of increased customer base, deposits, revenue, and profit after the deal, alongside additional revenue from the stadium.
• Considering the insights from the data and our subsequent analysis, I recommend that NeuBank should proceed with the naming rights deal. The potential increase in brand visibility, solid financial performance of the bank, and promising projections all suggest that this would be a strategically and financially sound decision for NeuBank.

• Mastering Data Interpretation: I can't stress enough the importance of being comfortable with data. In this section, you saw a lot of numbers, charts, and percentages. The ability to comprehend and make sense of this data is paramount. It's not just about understanding what the numbers say but also about what they mean and the story they tell.
• Approach Analysis in Layers: Notice how the candidate is expected to interpret the data in a multi-layered fashion, starting from basic understanding, moving to advanced analysis, and finally applying the data insights to the case at hand. As you practice your cases, I encourage you to think about data in these layers. It will help you derive meaningful insights and not just report the numbers.
• Connection is Key: Connecting the dots between different pieces of data is crucial. In this case, the candidate could correlate data from various exhibits to create a holistic analysis. I want you to remember this during your case preparations. Always try to connect your insights back to the main question or problem at hand.
• Stick to Your Framework: A good way to structure your case is by adhering to your initial problem-solving framework. In this section, you saw how the candidate connected their final evaluation and recommendation back to the initial framework (Financial, Strategic, Operational, Legal). This consistency is important to demonstrate in your case interviews.
• Communication Matters: It's not enough to do a great analysis; you also have to present it well. I want you to practice presenting your findings and recommendations in a clear, concise, and articulate manner, explaining the rationale behind your conclusions.
• Be Realistic: Note how the candidate remained pragmatic in their recommendation. Despite recommending proceeding with the deal, they acknowledged that more details might surface during the contract implementation. In your cases, always maintain a balanced perspective, taking into account the inherent uncertainties in business decisions.
• As you continue to prepare for your case interviews, keep these coaching tips in mind. Practice not just your problem-solving skills but also your data interpretation, synthesis, and communication abilities. Don't forget to use the layered analysis approach to derive deeper insights from data. Keep practicing, and you'll get there!

Now that we have assessed the opportunity and deemed it beneficial for NeuBank, the next step is to determine an appropriate bid amount for the stadium naming rights. This calculation requires a consideration of various financial and strategic factors.

• Step 1: Identify financial benefits and downsides for a net picture
• Step 2: Identify various analysis approach and select one (e.g. payback method, NPV method etc.)
• Step 3: Select an appropriate method and conduct analysis (e.g. NPV)
• Step 4: Factoring in non-financial items and synergies
• Step 5: Gather all inputs and provide a bid recommendation

Financial Benefits

• Increase in customer base: The visibility from stadium naming rights is likely to attract more customers to NeuBank.
• Increase in deposits: More customers will translate to an increase in deposits.
• Increase in revenue: Higher deposits will lead to an increase in revenue.
• Increase in net profit: If managed efficiently, the rise in revenue can lead to a higher net profit.
• Additional revenue from the stadium: The stadium will bring in revenue through ticket sales, concerts, and other events.

Financial Downsides

• The cost of bidding: NeuBank would have to expend resources to prepare and submit a competitive bid.
• Annual sponsorship amount: If successful, NeuBank will have to pay a significant sponsorship amount annually.
• Risk: There is always a chance that this naming rights deal does not meet the expected success

There are several methods to analyze such a deal, including the Payback Period, Net Present Value (NPV), and Internal Rate of Return (IRR). Each method has its strengths and weaknesses:

• Payback Period: This method determines the amount of time it takes for NeuBank to recoup its investment in the naming rights deal. While it's simple to understand, it is typically more relevant for timeframes of 3-5 years since in that period one does not see much effect of the time value of money. For stadium naming rights that can go up to 20 years it is essential to consider the time value of money.
• Internal Rate of Return: The IRR method estimates the intrinsic rate of return for the expected cash flows from the investment. If the rate is higher than the discount rate, then the project is deemed to be financially beneficial. While this approach does account for the time value of money, the math can be challenging for a case interview.
• Net Present Value: NPV is the most suitable method for our case. It takes into account the time value of money, considers cash flows over a long time horizon, and can also take into account the growth rate of the client. Mathematically, the NPV method can be as challenging as IRR method. However, by extending the time period to indefinite time, the formula condenses into an elegant form that is quite manageable for a case interview and is generally seen as a prevalent practice as well. An indefinite NPV calculation may only deviate from the accurate 20-year calculation by 10-20% - this being practical and accurate enough for an interview. Thus, for a deal as long-term and impactful as stadium naming rights, NPV provides a more accurate and comprehensive analysis.

NPV inputs and assumptions

• Annual Cash Inflow (c1): For simplicity it can be considered loosely equal to the incremental profit due to naming rights ($20M + $5M as per exhibit 4 – also includes the revenue from stadium activities)
• Annual Cash Outflow (c2): Since the payment for the naming rights is all upfront, no incremental annual cash flows are expected
• Net Cash Flow (c): This is simply the net of inflow and outflow (c1 – c2)
• Discount Rate (d): This is a data point that can be obtained from the interviewer. However, increasingly interviewers are leaving that assumption to the candidates. For a US-based Bank – a typical discount rate could vary from 10-20%. More details on this assumption may be found online on various financial education websites
• Growth Rate (g): While the Discount Rate diminishes the value of future cash flows, the Growth Rate counteracts that by growing the size of the cash flows themselves. Together, the difference of the Discount Rate and Growth Rate gives us the net discount rate. For NeuBank, we have seen a growth of 15-20% in the last 5 years – which might not be sustainable for the next 20 years. A more reasonable growth number can vary between 5-10%
• Initial Investment (i): This would be the bid amount that NeuBank will pay to the stadium in the beginning of the deal

Non-financial items

• Data Collection & Customer Insight: The sponsorship opportunity can serve as a rich source of customer data, potentially leading to better customer acquisition and retention rates. This would eventually lead to higher revenue and profit, but would be difficult to quantify in any case.
• Sponsorship Extension Clause: Consider adding a clause that gives NeuBank the right of first refusal when the sponsorship deal expires. This means NeuBank would get the opportunity to renew the sponsorship before the stadium owner can offer it to other potential sponsors. This clause, while not directly adding to the cash inflows, could provide significant long-term value.

Intangible benefits

• Brand Visibility and Goodwill: Increased brand visibility and goodwill are crucial strategic benefits. They are not easy to quantify, but can have a value based on market research or management estimates. Let's assume that the value of increased brand visibility and goodwill to be worth $20-30M on NeuBank’s balance sheet.
• Employee Engagement and Retention: The stadium could also serve as a venue for NeuBank’s employee engagement activities – thus leading to improvement in overall employee morale and productivity.

Synergies

• Cross-Selling Opportunities: By becoming the naming sponsor of the stadium, NeuBank can promote and cross-sell its financial products and services directly at the stadium. This might add an estimated $1-5M/y to cash inflows.
• Integration with NeuBank's Digital Initiatives: The stadium could serve as a 'live lab' for showcasing NeuBank's digital technology – thus further boosting their brand image and give a further upside to revenues and profit. A deeper analysis into the costs and potential benefits for this integration would lead to better estimation.

Note: While financial analysis provides a robust framework, there are non-financial items and synergies that can significantly impact the decision. In NeuBank's case, these factors could potentially add significant value and need to be considered.

• Establishing a Bid Range: Based on our NPV analysis, we calculated a potential bid range of $167 million to $500 million. This range is based on our assumptions and management estimates of discount rate and growth rate. For a conservative approach, we might want to consider a first bid towards the lower end of the range.
• Non-Financials: We have also identified several non-financial factors and potential synergies. While it is difficult to immediately quantify these items – they do present a reasonable upside to the P&L and balance sheet of NeuBank. These factors can either allow us to bid higher (if required), or potentially give a bonus upside for the shareholders.
• Risk Considerations: We must also factor in the potential risks involved in this deal. These include a potential failure to meet expectations, reputational risks if the stadium is associated with any negative events, reputational risks if the home team’s performance slides, and the risk that the stadium's popularity could decrease over time.

Based on this comprehensive analysis, a recommended starting bid could be towards the lower end of our calculated range, say around $200 million. This would give NeuBank some room to negotiate and increase the bid if necessary, while factoring in the risks involved. It is also within the boundaries defined by our NPV calculations and would generate positive NPV given the expected cash inflows, including those from non-financial factors and synergies.

Finally, it's important for NeuBank to continually monitor and reassess the situation. Should the deal go through, NeuBank should have mechanisms in place to monitor the ongoing benefits and challenges, to ensure the investment continues to provide the expected returns. This would allow NeuBank to make informed decisions about any future opportunities for renewal of the naming rights.

• Quantitative Skills and Financial Modeling: This section emphasizes the importance of being comfortable with numbers and financial analysis. For example, the candidate had to use the Net Present Value (NPV) method to identify an appropriate bid range for NeuBank. Your ability to accurately calculate and interpret financial models such as NPV, IRR, or Payback Period is a crucial asset in case interviews. Remember, the choice of the financial model should also be justified based on the context of the case.
• Strategic Approach: Besides mathematical calculations, the candidate also factored in non-financial items and potential synergies that could affect the deal. This involves a layer of strategic thinking beyond numerical analysis. Always remember, the best recommendations often come from a blend of quantitative analysis and qualitative factors. So, always consider the strategic implications of your analysis.
• Making Assumptions: In real-world scenarios, all the data needed for financial models might not be readily available. Thus, making reasonable assumptions is a part of the process, just as the candidate assumed values for the discount rate and growth rate. However, remember that every assumption you make should be logical, reasonable, and justified based on the context of the case.
• Presenting your Recommendation: After performing the analysis, the candidate had to present a clear and informed recommendation. While your calculations and analysis are crucial, your communication skills are equally important. Practice articulating your recommendations effectively, ensuring to clarify the rationale behind your conclusions.
• Risk Considerations: Notice how the candidate identified potential risks involved in the deal. This reflects a comprehensive understanding of the business implications of the deal. In your cases, remember to evaluate potential risks and uncertainties associated with your recommendations.
• Reflection and Improvement: After completing the case, reflect on your approach. Identify areas where you struggled and work on improving those skills. Did you find the financial analysis challenging? Were you unsure about some assumptions? Were there strategic aspects you overlooked? Reflecting on these questions will help you understand where to focus your efforts in improving.
• Remember, mastering case interviews involves building a diverse set of skills, including quantitative analysis, strategic thinking, making reasonable assumptions, effective communication, and risk assessment. By practicing these aspects, you can significantly improve your case interview performance.

As NeuBank and the stadium management move towards this naming rights deal, it's crucial to ensure that it benefits both parties. The following are some ideas to make this a win-win situation:

• Joint Marketing Initiatives: NeuBank and the stadium could launch joint marketing initiatives that enhance the visibility of both entities. For instance, NeuBank could offer promotional deals tied to the stadium events or the home team's games, which would also increase stadium footfall.
• Exclusive Perks for NeuBank Customers: NeuBank could provide exclusive benefits to its customers, such as discounted tickets for games or concerts, priority access to events, or unique experiences (like behind-the-scenes tours). This could enhance NeuBank's customer loyalty and engagement while increasing the stadium's customer base.
• Digital Integrations: As NeuBank is pushing digital banking, it could integrate digital technology into the stadium experience. For instance, developing a co-branded app to handle ticket purchases, in-stadium payments, and other interactive features. This would make the stadium experience more convenient while showcasing NeuBank's digital capabilities.
• Community Engagement: Both NeuBank and the stadium could work together on community engagement initiatives, such as sponsoring local sports teams, organizing community events, or contributing to local development projects. This would not only help build a strong community connection but also enhance the reputational standing of both entities.
• Renewable Energy Initiatives: NeuBank could finance the installation of renewable energy systems in the stadium, such as solar panels or wind turbines. This would reduce the stadium's operating costs and align any sustainability goals for NeuBank, enhancing the reputation of both entities.
• Stadium Facilities Upgrade: NeuBank could contribute to upgrading stadium facilities or infrastructure, providing a better experience for spectators and thereby increasing ticket sales. This could also present an opportunity for NeuBank to showcase its branding in high-traffic areas of the stadium.
• First Right of Refusal: As part of the deal, NeuBank could negotiate a right of first refusal for future naming rights opportunities, thereby giving NeuBank the chance to maintain its relationship with the stadium in the long term.
• Brand Integration: NeuBank's branding could be integrated into the stadium and the home team's merchandise, further increasing NeuBank's visibility and potential for customer acquisition.

These ideas aim at a shared value creation where both NeuBank and the stadium mutually benefit from the partnership. A successful implementation of these strategies would require continuous dialogue and collaboration between NeuBank and the stadium management.

Thank you for the opportunity to evaluate this case. Over the course of our discussion, I have examined the potential investment in stadium naming rights from various angles. Here's my summary:

• Understanding the Situation: Based on the information provided, NeuBank is a successful banking institution with steady financial growth and good brand awareness, particularly in California. It's interested in extending its brand recognition and customer base into Ohio, and stadium naming rights present a unique opportunity to achieve these objectives.
• Framework and Analysis: Using the framework we discussed, I evaluated the financial, strategic, operational, and legal considerations of the potential deal. The data in the exhibits provided valuable insights into the naming rights industry, NeuBank's financial health, potential brand impact, and estimated financial outcomes.
• Determining the Bid: I applied an NPV analysis method to estimate a bid amount that took into account the estimated additional revenue, customer base growth, and assumed discount rate. Based on these factors, the recommended bid for NeuBank is between $267M and $800M for a 20 year deal.
• Deal Terms: We brainstormed numerous deal terms, such as guarantees of brand visibility, unique selling points of the deal, and ways to monetize this initiative beyond increased customer base. These points will need to be negotiated with the stadium for a successful agreement.

In conclusion, stadium naming rights represent a significant, but potentially rewarding investment for NeuBank. While it's important to consider the substantial financial commitment, the strategic benefits - in terms of increased brand awareness and customer base - are enticing. IfI were advising NeuBank, I'd recommend going ahead with the deal, given that the estimated benefits seem to outweigh the costs. However, the final decision should also incorporate NeuBank's strategic plan, risk tolerance, and other business objectives.

In terms of next steps, if NeuBank chooses to proceed, they should:

• Enter into formal negotiations with the stadium to finalize the deal.
• Develop a marketing strategy to maximize the impact of their stadium presence.
• Plan for business initiatives that leverage the increased visibility and customer base.

The wrap-up is your opportunity to bring all the pieces of the analysis together and present your final conclusions and recommendations. It is crucial to do this in a clear and concise manner, demonstrating your ability to synthesize the information and insights you have gathered throughout the case. 

Here's a guide to help you perform the case wrap-up effectively:

• Summarize the Situation and Your Analysis: Start by briefly summarizing the case situation and the main points of your analysis. You should touch upon the client's background, the opportunity they're considering, and the key insights from the data you've examined.
• Present Your Conclusion: Based on your analysis, provide a clear statement of your conclusion. In this case, whether or not NeuBank should invest in stadium naming rights. Ensure that your conclusion is logically derived from the analysis and insights you've shared.
• Recommendations: Following your conclusion, you should provide some concrete recommendations for the client. In the context of this case, this could include the estimated bid amount for the naming rights, key deal terms to consider, or potential next steps if NeuBank decides to go ahead with the opportunity.
• Link Back to Framework: Throughout your wrap-up, make sure to link your conclusions and recommendations back to the framework you've established earlier in the case. This helps demonstrate the structured thinking behind your analysis and conclusions.
• Communicate Clearly: Above all, your wrap-up should be clear and easy to understand. Remember, the purpose of the wrap-up is to show that you can pull together your findings into a coherent whole, and communicate them effectively to your 'client'.

Keep these points in mind as you perform the wrap-up for this case and any other case you tackle in the future. Good luck