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ACC is considering acquiring AirThread Connections to expand into the wireless market. There would be synergies from bundling AirThread's wireless services with ACC's existing video, internet, and phone offerings. AirThread faces challenges of high costs, intense competition, and declining revenue per customer. However, combining with ACC could reduce AirThread's backhaul costs by 20% and increase revenues through bundled service packages. A valuation analysis estimates AirThread's enterprise value would increase from $7.7 billion without synergies to $11.1 billion if acquired by ACC, due to cost savings and revenue growth opportunities from the combination.
ACC is considering acquiring AirThread Connections to expand into the wireless market. There would be synergies from bundling AirThread's wireless services with ACC's existing video, internet, and phone offerings. AirThread faces challenges of high costs, intense competition, and declining revenue per customer. However, combining with ACC could reduce AirThread's backhaul costs by 20% and increase revenues through bundled service packages. A valuation analysis estimates AirThread's enterprise value would increase from $7.7 billion without synergies to $11.1 billion if acquired by ACC, due to cost savings and revenue growth opportunities from the combination.
ACC is considering acquiring AirThread Connections to expand into the wireless market. There would be synergies from bundling AirThread's wireless services with ACC's existing video, internet, and phone offerings. AirThread faces challenges of high costs, intense competition, and declining revenue per customer. However, combining with ACC could reduce AirThread's backhaul costs by 20% and increase revenues through bundled service packages. A valuation analysis estimates AirThread's enterprise value would increase from $7.7 billion without synergies to $11.1 billion if acquired by ACC, due to cost savings and revenue growth opportunities from the combination.
M&A Case Study GROUP 3 Ashish Chandel 11B Pradeep Reddy Badaam 33B Prasoon Gupta 34B Prince Choudhary 35B Rajesh Gadde 32C Reedhima Singh 39B Overview of Cable Industry Advances in Technology Changes in Regulation Shift in Competitive dynamics Large investment in network infrastructure 2 Overview of ACC Company Robert Zimmerman- Senior VP of BD Currently Offers video, internet and landline telephony but no wireless offerings Consolidate Revenue and NI of $30.9 bn and $2.6 bn in 2007 respectively. Competition ILECs with wireless networks Increasing cost of acquiring new customers and the high penetration rates in video and high speed internet M&A Strategy From 1999 to 2005, BD group spearheaded $15 bn of acquisitions and developed unique operational know-how in area of merger integration Past strategy: Purchase the target with a significant amount of debt and then pay down the debt to a sustainable long-term level that was in line with industry norms Air Thread Connections Business Provided service in more than 200 markets in 5 geographic regions 2007 revenues were expected to be $3.9 billion The network covered more than 80 million people Challenges Wireless communications market was intensely competitive The competitors had big pockets when compared with ATC ATCs operating costs were approximately 20% higher than its main rivals It could not bundle its wireless services with land line, internet or video services Avg. revenue per min. decreased from 6.71 to 5.95 cents over the last year Cost of acquiring a new customer increased from $372 in 2005 to $487 in 2007 ATC had lower operating and EBITDA margins compared with its primary rivals The above challenges made ATCs long-term survival doubtful 3 Synergies 4 Increasing shift towards bundled service offerings ACC Offers video, internet and landline telephony No wireless offerings Growing completion from ILEC wireless networks AirThread Did not offer landline or internet service Immediate competition due to growing costs and slowing growth Expansion into the business market Current situation Heavy reliance on retail/residential customers Less stability and reliability of revenues Opportunity to increase network utilisation and cost efficiency Add value to AirThreads operations Cost disadvantage compared to ILEC wireless competitors Potential to reduce around 20% of backhaul costs Valuation Results Scenario Value(in $mn) Enterprise Value without Synergy 7669.5 Enterprise Value with Synergy 11118.1 5 Detailed Valuation showed in excel sheet attached.