one of the largest cable operators in the U.S., prepared to acquire the AirThread. Connections (ATC), a large regional cellular provider. Although this acquisition. By early , Zimmerman was considering the possibility of acquiring AirThread Connections, one of the largest wireless companies in the United States. This case can be used as a capstone valuation exercise for first-year MBA students in an introductory finance course. A senior associate in the business.
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However, she also estimated that the revenue per minute for business customers would be less than that charged to retail subscribers.
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Further, she wanted to keep things simple by assuming a stock purchase using the maximum amount of leverage available.
As an additional assignment, instructors can require students to consider the personal tax disadvantage of debt cohnections well as the synergies American Cable expects to achieve following the acquisition. A senior associate in the business development group at American Cable Communications, one of the largest cable companies in the U. We conduct the sensitivity analysis to find the effect on the value of AirThread by changing two inputs.
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AirThread Connections Case
The estimated revenue and gross profit for new wireless subscribers is shown in Table 5. This case can be used as a capstone valuation exercise for first-year MBA students in an introductory finance course. Operating Results As a starting point, Jennifer decided to create a base case using historical operating results as a guide, and then create an upside case that considered possible synergies.
We assume the negative growth rate in is abnormal, so we remove this rate from our calculation. Valuation of AirThread Connections Essay. The Case Centre is a not-for-profit company limited by guarantee, registered in England No and entered in the Register of Charities No How about make it original?
This discount is primarily related to the illiquidity of private investments, but also considers certain types of agency costs as well as the financial health and size of the firm.
On the other hand, there was also a well-established school of thought that believed large profitable firms with the ability to go public should not trade at a discount due to their status as private companies.
In addition, the company also believed that its experience as an acquirer had allowed it to develop unique operational know-how in the area of merger integration. Second, the acquisition could help both companies expand into the business market. By earlyZimmerman was considering the possibility of acquiring AirThread Connections, one of the largest wireless companies in the United States. Second, without thorough due diligence, it would be impossible to project the free cash flows for those minority interest equity investments.
Copying or posting is an infringement of copyright. Additionally, American Cable saw a looming competitive threat from advanced wireless networks based on the American Cable currently offered video, internet, and landline telephony, but did not have any kind of wireless offerings. Publicly traded equities with these characteristics have high risk-adjusted returns after controlling for common factors typically associated with value stocks.
In turn, these forces had been driving large investments in network infrastructure that require commensurate increases conbections the customer base to effectively utilize the new capacity. The smaller companies would eventually be weeded out through industry consolidation. Table 2 Return on Net Operating Assets 3. We connectioons to change the WACC and growth rate to achieve this because we think those variables are most important. Furthermore, expanding into the business segment would help each firm increase its network utilization and, as a result, increase its Do cost efficiency.
He was well aware of several high profile takeovers that had ended in bankruptcy or considerable loss of shareholder value, and overpaying for a target company was one of the quickest ways routes to disaster.
The basic aairthread of the AirThread acquisition was threefold.
Valuation of AirThread Connection by Ivan Ng on Prezi
airthrdad And we use the equity in earnings of affiliates of AirThread to multiple Overview of Cable Industry Dynamics op The cable industry had been rapidly transforming over the last decade as a result of advances in technology, changes in regulation, and shifts in competitive dynamics. Skip to main content. As discussed earlier, the wireless communications market was extremely competitive, and to a large extent it had been commoditized.
Next, we use the market multiple approach connevtions calculate the non-operating value part. Cite View Details Purchase. Accessed December 31, The case is a fictionalised account of true events.
Based on the projected cash flow information provided in the case, what is the stand- alone value of AirThread? Most of the national carriers with whom AirThread competed could provide at least two of those services. Zhang decided to use the comparable company information contained in Exhibit 7.