Featured case: Underwriting a Privatization IPO:
The Sale of Royal Mail plc

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The case

Who – the protagonist

The Shareholder Executive, the UK government body responsible for state-owned assets and charged with making sure the UK taxpayer was getting value for money from the sale of Royal Mail.


Royal Mail was a 100% government-owned national postal service in the UK. In 2013, the group employed almost 165,000 people and delivered approximately 17.4 billion letters and 1.4 billion parcels every year.


The postal services industry was in considerable turmoil. Email and texting had substantially reduced the volume of letters being posted, but at the same time, e-commerce had increased the number of parcels being sent. However, competition in the parcels market was fierce and it was unclear how a sleepy state monopoly would be able to respond.



Royal Mail was founded 500 years ago in 1516 when the position ‘Master of the Posts’ was created by King Henry VIII. The organisation was in public ownership for most of its history until it was floated on the London Stock Exchange in 2013.


Royal Mail served the whole of the UK with a ‘one price goes anywhere’ domestic service, complemented by a significant continental Europe parcels business via GLS (General Logistics Systems).

vinceKey quote

‘The government's decision on the sale is practical, it is logical, it is a commercial decision designed to put Royal Mail's future on a long-term sustainable business. It is consistent with developments elsewhere in Europe where privatised operators in Austria, Germany and Belgium produce profit margins far higher than the Royal Mail but have continued to provide high-quality and expanding services.’ – UK Business Secretary, Vince Cable, July 2013.

What next?

Royal Mail suffered considerable financial loss in the financial year 2011/2012, but then rallied in the next year with a net profit of £566 million. How could investors accurately value the company? There was also a large pension deficit and disagreement over the value of Royal Mail-owned land in London. A fine line had to be drawn between achieving value for money and ensuring a successful transaction. The deadline for a decision was pressing.

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The author

AndreyAndrey Golubov

Andrey explains why he wanted to write about Royal Mail and the importance of the support he received from The Case Centre via his Case Writing Scholarship.

logoReal time events

I followed the events around Royal Mail’s initial public offering (IPO) as they were unfolding in real time, and was using them as a ‘live’ case in my ‘Raising Equity Capital’ course that I was teaching at Cass Business School in the UK back then. Corporate finance and investment banking are my primary areas of teaching and research interest, and this was one of the major deals happening in the UK at the time.

Scholarship support

scholarship.pngThe Case Centre’s scholarship helped in many ways. First, the training I received at The Case Centre’s case writing workshop was eye-opening. Second, the feedback from the case reviewers was very useful in refining the case. And finally, having a deliverable expected from me acted as a commitment device to actually complete the case.

Using the case series

I think case (A) is best used for class discussion, multiples valuation exercises, and generally setting the scene. Case (B) is then perfect for role play and presentations (I have used it as a final project; students love to get to be investment bankers!) Finally, case (C) serves as an epilogue and takeaway, as well as a bridge to other topics such as auction-type IPOs and follow-on equity offerings (should the instructor choose to explore them). 

Widely applicable

This case series illustrates some of the concepts that are relevant to equity capital markets anywhere in the world. I would recommend this case to anyone teaching advanced corporate finance, investment banking, or raising capital.

writing cases

Key case writing tip

It is easy to just sit on your drafts and ideas for too long. Don’t be perfectionist about it; there is no such thing as a perfect case. Instructors will always take what they want from the case.

Incredibly rewarding

Teaching with cases is an incredibly rewarding experience, and students consistently cite cases as the best aspect of the courses I have taught so far. If you haven’t tried case teaching – give it a go, and I am pretty sure you will not look back to plain lecturing.

About the author

Andrey Golubov is Assistant Professor of Finance at Rotman School of Management, University of Toronto.
e Andrey.Golubov@Rotman.Utoronto.Ca


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