Project Giantsford — Online Gaming Cross-Border Fairness
A 2-hour Internet / Cross-Border Going-Private Fairness case study with a complete model answer
Modeled After
Kroll
A cross-border going-private fairness opinion for an online gaming issuer: percentile ranking tables screening the peer set before any range is drawn, precedents promoted into the body and cut two ways as sector and cross-border sets, a per-depositary-share football field, and premia screened on both the going-private and the sector dimension
Structure and exhibit set are modeled after Kroll. The company, the financials and every figure in this case are entirely our own.
The Situation
Giantsford Interactive Limited (Nasdaq: GFDI) develops and publishes online games and sells advertising inside them. The holding company is a Cayman Islands exempted company; the games are made and operated by subsidiaries in the People's Republic of China; the accounts are kept in renminbi; and the shares trade in the United States as American Depositary Shares, each representing four Class A ordinary shares.
Giantsford Interactive Limited
- Sector
- Interactive entertainment — online game development and publishing, with an in-game advertising line sold against the same player base and run out of the same studios
- Size
- Geography
- Cayman Islands holding company; development, publishing and operations in the People's Republic of China; accounts kept in renminbi; American Depositary Shares listed in the United States on Nasdaq at four ordinary shares per ADS
- Ownership
- Situation
The Prompt
You are the financial advisor to the Special Committee of the Board of Directors of Giantsford Interactive Limited. A buyer group comprising Mr.
Supporting Materials
What you are handed at the start of the case, in the format a real process would use.
What You Have to Produce
The deliverables, in the order the committee will read them. The exercise runs 120 minutes.
PART 1
Unlevered free cash flow, both cases, one set of conventions
PART 2
A cost of capital that is denominated in the same currency as the cash flows
PART 3
Two discounted cash flows, and a proof that the currency treatment is right
PART 4
An equity bridge that crosses the border cleanly
PART 5
Screen the companies, rank the subject, then draw a range
PART 6
Two transaction screens, their criteria written first, and their intersection reported in full
PART 7
The football field, per depositary share, and the opinion
How to Approach It
The order a strong candidate works in, and why. This is the shape of the answer — the finished answer deck and Excel model are in the solution set below.
- 01
Write down what the deliverable is before you build anything
- 02
Settle the currency of the discount rate before you discount anything
- 03
Give country risk exactly one home and write down which
- 04
Treat reported cash and repatriable cash as different numbers
- 05
Put the equity affiliate outside the multiple and inside the bridge
- 06
Apply the depositary ratio once, in one place
- 07
Rank the subject inside its set before you apply a range to it
- 08
Write both screens' criteria on the page before naming a transaction
- 09
Let the two screens disagree, and explain the disagreement
- 10
Give the opinion, then say what makes it uncomfortable
Key Concepts
The ideas this case is built on. Know these cold and the case becomes a question of execution rather than knowledge.
Cross-border going-private transaction
The acquisition of a listed company by a group including its own management or founder, where the listing is in one country and the operating business is in another. It is usually structured through the holding company's own jurisdiction — here a Cayman Islands merger — while the assets, the cash and the tax exposure sit somewhere else entirely. The valuation problem is that the business is worth a number in one currency and the holders are paid in another, and every step between those two facts is a decision: the currency of the discount rate, the treatment of country risk, the amount of cash that can actually be repatriated, and the exchange rate at which the answer is expressed.
American Depositary Share
A negotiable United States security representing a fixed number of ordinary shares in a foreign company, issued by a depositary bank that holds the underlying shares. The ratio matters arithmetically and is a common source of error: option strikes, share counts and per-share statistics are usually quoted in ordinary shares while prices, premiums and valuation outputs are quoted per depositary share, and applying the ratio twice or not at all produces an answer that looks nearly right. It also matters legally — a holder of depositary shares is not a holder of record of the underlying shares, which has consequences for voting and for dissenters' rights.
Currency of the discount rate
A nominal discount rate carries the expected inflation of the currency it is observed in. Discounting cash flows denominated in one currency at a nominal rate observed in another therefore charges an inflation differential that does not exist in the numerator, and the error compounds with the horizon. The two consistent constructions are to convert the rate through the inflation differential and discount local cash flows at a local rate, or to translate the cash flows at forward rates implied by the same differential and discount at the foreign rate. Done properly the two give identical answers, which makes the second one the cheapest available proof that the first was done right.
Country risk premium
An addition to the cost of equity intended to capture risks that attach to operating in a particular jurisdiction rather than to the business itself — sovereign credit risk, expropriation, capital controls, abrupt regulatory change. It is normally estimated from a sovereign default spread, sometimes scaled by the relative volatility of local equities to local bonds, and reasonable estimates for the same country can differ by forty basis points or more. The discipline that matters more than the estimate is where it is charged: a premium in the discount rate and a haircut in the cash flows are two chargings of the same risk, and a reader cannot separate them from outside the model.
Repatriation and withholding tax
Cash sitting in an operating subsidiary abroad is not the same asset as cash sitting at the listed parent. Getting it out usually means a dividend, and a dividend to a non-resident holder generally attracts withholding tax at a statutory or treaty rate. Some jurisdictions add a further constraint: PRC subsidiaries must appropriate a share of after-tax profit to statutory reserves that are not distributable at all. An equity bridge that adds the reported cash balance gross of both overstates the equity by real money, and it foots perfectly while doing so — which is why the adjustment has to be built line by line rather than assumed away.
Equity-method affiliate
A minority interest large enough to give significant influence but not control, carried on the balance sheet at cost plus the investor's share of the affiliate's profits and losses. Its revenue and its earnings appear nowhere in the investor's consolidated Adjusted EBITDA. Two consequences follow for a valuation: any multiple must be struck on an enterprise value that excludes the interest, or the numerator and the denominator are measuring different businesses; and the interest is then added back separately in the equity bridge. Where a third party has recently priced the affiliate, that price — not the carrying value — is the evidence, because the carrying value is an accounting artifact of accumulated losses.
Dual screening
Running a precedent universe through two independent screens on different axes — for instance sector fit and deal structure — and carrying both surviving sets rather than merging them. It is the right approach when the subject is unusual on more than one dimension, and it has one discipline that cannot be skipped: the criteria for each screen are written before any transaction is named, and the size of the intersection is reported whatever it turns out to be. A dual screen that leaves a comfortable set at the crossing has almost always been loosened until it did, and the two sets are then no longer independent evidence about anything.
Percentile ranking of the subject
Placing the subject inside its own comparable set on each statistic — growth, margin, multiple — before any range is applied to it. It converts an argument that would otherwise be assertion into arithmetic: a company in the middle of its set on what it earns and in the bottom third on what it is being paid for is a specific, checkable claim. It also disciplines the range that follows, because a judgment range drawn after the subject has been ranked has to be consistent with where the subject actually sits rather than with where the analyst would like it to.
Fairness opinion
A formal statement by a financial advisor that, as of a stated date and subject to stated assumptions and limitations, the consideration in a transaction is fair from a financial point of view to a specified group of holders. It is narrow. It does not address the underlying business decision, the relative merits of alternatives, the fairness of anybody's compensation, or how a holder should vote. It is supported by a range of implied values rather than by a point estimate, and in a going-private transaction it is a report that is filed as an exhibit and summarized in the disclosure document — so it is written for readers who were not in the room.
Primary and reference methodologies
The convention of drawing the range of implied values on methodologies that value the business — discounted cash flow, trading comparables, precedent transactions — while showing methodologies that measure a price, such as premiums paid, the historical trading range and published analyst targets, beside the range rather than inside it. The reasoning is that an opinion drawn on what other buyers paid is an opinion about other buyers. It is a convention rather than a rule, which is exactly why a book should state it on the page: a reader who disagrees can then see what would change.
What Makes It Hard
The specific traps in this case — the places candidates lose the assessment without noticing.
Check Your Answer
Type the figures you produced and find out how many are right before you open the worked answer. You get a verdict and, where you are off, a pointer to the part of the build to re-check — never the number itself. Everything you type stays on this device.
How to type a figure. Digits, with an optional unit: 1,234.5, $1,234.5, 2.6x, 21.4%. For a negative use (20.0) or -20.0. Enter as many decimals as you carried — precision is never penalised.
What the Case Asked For
The arithmetic is only half of it. Tick off what you actually produced — this half is yours to score, because nothing can grade a written recommendation from a checkbox.
The Model Answer
The worked answer in full: answer deck and Excel model, built the way a banker would actually build them. It is a reference, not a submission — a strong answer under the clock is far shorter.
What the Solution Covers
- —Percentile ranking tables across the peer set
- —Sector and structural precedent splits
- —Per-depositary-share football field
- —Dual-screen premia analysis
- —Equity affiliate valued separately
- —Country risk premium in the cost of equity
Answer Deck
Full model answer, banker-formatted
Upgrade to Diamond
Sign up and upgrade to Diamond to unlock the answer deck, the Excel model and the audio walkthrough.
Get StartedThe Excel Model
The model is linked and tied out end to end — every schedule, every formula and every check, in the file itself.
Downloads are available to Diamond members
Excel Model and PowerPoint Deck and Answer Deck (PDF) — yours to open, edit and rebuild
Walkthrough
A conversational walkthrough of how to approach the case under time pressure — where to start, what to cut, and how the recommendation gets defended.
Audio Walkthrough
How to approach Project Giantsford — Online Gaming Cross-Border Fairness
60-second preview — upgrade to Diamond for the full walkthrough
Frequently Asked Questions
What is a cross-border going-private fairness opinion case study in an investment banking interview?
It is a special committee exercise in which a buyer group including the company's own founder or management proposes to take a United States listed company private, where the operating business, the currency and the tax regime are somewhere else. The candidate is asked for an opinion — supported by a range of implied values — on whether the agreed consideration is fair, from a financial point of view, to the unaffiliated holders. What is graded is how the candidate handles the border: whether the discount rate is denominated in the same currency as the cash flows, whether country risk is charged once, whether the cash on the balance sheet is treated as repatriable when it is not, and whether the comparison sets are screened on the axes that actually make this company unusual.
Can you discount local-currency cash flows at a dollar cost of capital?
No, and this is the single most common error in cross-border valuation. A nominal discount rate carries the expected inflation of the currency it was observed in. If the risk-free rate, the equity risk premium and the betas are all dollar observations, the resulting rate embeds dollar inflation, and applying it to cash flows that embed a different inflation rate charges a differential that is not in the numerator. There are two consistent routes. Convert the rate through the inflation differential and discount local cash flows at a local rate; or translate the cash flows at forward rates implied by the same differential and discount at the dollar rate. They give the same answer when done properly, and building both is the cheapest proof available that the first was done right.
Should the country risk premium go in the discount rate or in the cash flows?
In one of them, and the choice matters less than the consistency. Putting it in the discount rate is the more common practice and is easier to explain, because a single premium added to the cost of equity is visible and auditable. Putting it in the cash flows — through scenario weights on the outcomes that country risk actually describes — is more precise in principle and much harder to do credibly. What is not acceptable is doing both, which is what happens when an analyst adds a premium to the cost of equity and then also haircuts the terminal value or weights a downside regulatory scenario. That charges the same risk twice, cannot be unpicked from outside the model, and reads as conservatism while actually being an error.
Why is reported cash not the right number for a cross-border equity bridge?
Because some of it cannot be moved and the rest costs something to move. Many jurisdictions require operating subsidiaries to appropriate part of after-tax profit into statutory reserves that are not distributable while the business is a going concern, and a dividend from a subsidiary to a non-resident parent generally attracts withholding tax at a statutory or treaty rate. Cash already held offshore is unaffected. The result is that reported cash and repatriable cash are different numbers, and the difference is real money that cannot reach the holders being valued. The bridge has to be built line by line — onshore, less reserves, less withholding, plus offshore, less debt — rather than netted in a single step.
How do you value a company's minority stake in a private affiliate?
First establish where it belongs. If the stake is equity-method accounted, none of its revenue or earnings is in consolidated Adjusted EBITDA, so any multiple must be struck on an enterprise value that excludes the stake and the stake is then added back in the equity bridge. Leaving it inside enterprise value while dividing by an EBITDA that excludes it inflates the multiple and makes a transaction look more generous than it is. Then value it on the best available evidence. A recent priced round led by an unaffiliated investor is evidence; the equity-method carrying value, which is cost less accumulated losses, is an accounting artifact and is usually not. Apply a stated discount for marketability if the round is stale or the stake is illiquid, say what you applied, and show what a different assumption would do.
What does it mean to screen precedent transactions on two axes?
It means running one universe through two independent screens that test different things, and carrying both surviving sets separately rather than merging them into one list. Here one screen is about the business — interactive entertainment, a date window, a size band, a change of control — and the other is about the listing and the structure: a United States listed issuer with operations elsewhere, a buyer group including the founder or management, all cash, a size band. The discipline is that the criteria go on the page before any transaction is named, that the counts surviving each screen are reported, and that the intersection is reported however small it turns out to be. An intersection of two transactions is not a sample and no range should be drawn from it.
Who bears the exchange rate risk between signing and closing?
It depends entirely on which currency the consideration is fixed in, and the answer should be stated rather than assumed. Where the merger consideration is a fixed dollar amount per depositary share, holders receive the same number of dollars whatever the exchange rate does, so they bear none of that risk. The buyer group bears it, to the extent its equity commitment is denominated in the local currency, because a stronger dollar makes the same fixed dollar price cost more locally. What does move with the exchange rate is the advisor's own valuation, because a local-currency business is being expressed in dollars — which is why the value per share should be run at more than one spot rate and the width shown to the committee.
How should you allocate 120 minutes across a cross-border fairness case?
Front-load the screening, because it is the decision you least want to make in a hurry. A working budget: about 20 minutes reading the pack and the extract and running both screens before typing anything; about 15 minutes on the cash flow build and the cost of capital together; about 20 minutes on the discounted cash flows and the currency proof; about 13 minutes on the equity bridge, which is where the cross-border content actually lives; about 22 minutes on the selected companies and the two transaction screens; about 10 minutes on the valuation summary; and the remaining 20 minutes writing the presentation. The template leaves 698 cells empty across 254 distinct formulas — roughly three cells per formula, because a grid is one formula filled down and right — and both numbers are printed on its cover with a build order beside them.
Why does the founder's shareholding matter if he owns a minority of the economics?
Because a dual-class structure separates economics from control. A founder holding a fifth of the shares through a class carrying ten votes each can hold a comfortable majority of the vote, which means no third party can acquire the company over his objection and no alternative transaction can be approved without him. That is a blocking position rather than economic control. Calling such a holder a controlling stockholder overstates his economic interest and, in a non-Delaware issuer, imports a legal framework that does not apply. The practical consequence for the opinion is the same either way: there is no market check available, and the opinion should say so on its face rather than letting the absence read as an oversight.
About This Internet / Cross-Border Going-Private Fairness Case Study
Internet / Cross-Border Going-Private Fairness case study for investment banking interviews. 120-minute format covering percentile ranking tables across the peer set, sector and structural precedent splits, per-depositary-share football field. Includes the full prompt, a model answer deck, a tied-out Excel model and an audio walkthrough.
This case study sits in Investment Banking, under Technology. Every case ships with the full prompt, the supporting materials, a complete model answer and an audio walkthrough of the judgment behind the recommendation.
120-Minute Format
The time limit a real assessment would give you
Answer Deck
Included in the model answer
Excel Model
Included in the model answer
Audio Walkthrough
How to approach the case under time pressure
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