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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In turn, these forces had been driving large investments in network infrastructure that require commensurate increases in the customer base to effectively utilize the new capacity. Students learn the basic valuation concepts including DCF discounted cash flow using APV adjusted present value and WACC weighted average cost of capital and they must choose the appropriate approach for situations in which the capital structure is changing or assumed to be constant.
We assume that after the acquisition, the constant growth rate will increase to 2. Juliane Begenau and Erik Stafford We decompose bank activities into passive and active components and evaluate the performance of the active components of the bank business model by controlling for passive maturity transformation strategies that can be executed in the capital market.
Wider debate The case includes two interesting characters — Zimmerman and Zhang, but contention among the characters is not the primary aim of the case.
AirThread Connections Case
Zhang was well aware that the terminal value was likely to be the single largest component of the valuation. As an additional assignment, instructors can require students to consider the personal tax disadvantage of debt as well as the synergies American Cable expects to achieve following the acquisition. My account New to The Case Centre?
Exhibit 2 According to the casebook, the reinvestment rate is defined as capital expenditures plus investments in working capital minus depreciation divided by net operating profit after taxes, and airthead ROC return on capital is defined as net operating profit after taxes divided by the book value of equity plus debt. 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.
Your Answer is very helpful airthreac Us Thank you a lot! This makes for a challenging and comprehensive case which also mirrors real-world financial analysis and modelling.
However, she also estimated that the revenue per minute for business customers would be less than that charged to retail subscribers. We are very pleased to receive this award as it means that we are being acknowledged as having made a pedagogical contribution in the area of financial case method. First, American Cable and AirThread could help each other compete in an industry that was moving more and more toward bundled service offerings.
Given the projected synergy and financing method, what is the value of AirThread as a merger target? Zhang believed that the combined company would be able to attract business customers now that wireless, wire line, and internet service could be offered by the same provider. Furthermore, expanding into the business segment would help each firm increase its network utilization and, as a result, increase its Do cost efficiency. If you contact us after hours, we’ll get back to you in 24 hours or less.
Next, we use the market multiple approach to calculate the non-operating value part.
Remember that different valuation models are not mutually exclusive, you can use different model for different forecasting periods. He was well aware of several high profile takeovers that ended in either eventual bankruptcy or considerable loss of shareholder value, and overpaying for a target company was one of the quickest ways to achieve disaster.
Finance Globalization Health Care.
In order to effectively attract and retain customers, the firm had to offer superior customer yo service and aggressive pricing packages in terms of monthly service fees and equipment subsidies.
Most of the national carriers with whom AirThread competed could provide at least two of those services. Leave your email and we will send you an example after 24 hours About the Connectikns Erik Stafford.
The estimated revenue and gross profit for new wireless subscribers is shown in Table 5. First, when we calculate the operating value, we use the DCF model.
Valuation of AirThread Connections | Zakir Pashayev –