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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Second, without thorough due diligence, it would be impossible to project the free cash flows for those minority interest equity investments.
AirThread Connections Case
The very strong investment performance of passive maturity transformation strategies over this period may mask the underperformance of the specialized bank activities. When By earlyZimmerman was considering the possibility of acquiring AirThread Connections, one of the largest wireless companies in the United States.
If you contact us after hours, we’ll get back to you in 24 hours or less. Help Center Find new research papers in: The debt payment schedule is presented in Ex 6. Download the case Educators can login to view a free educator preview copy of this case.
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To order copies or request permission to reproduce materials, callwrite Harvard Business Publishing, Boston, MAor go to http: As seen in Table 3, compared with its primary rivals, AirThread had lower operating and EBITDA margins, which largely reflected the previously discussed competitive disadvantages.
Those networks are expected to be able to deliver not only wireless telephony but also internet service with throughput similar to that which is currently offered by cable providers. Valuation of AirThread Connections Share this page: Additionally, American Cable saw a looming competitive threat from advanced wireless networks based on the It offered services in more than markets across five geographic regions.
Finance General Management Marketing. Valuation of AirThread Connections. The reasons above make us believe that the synergy is positive and the acquisition is a good idea. Briefly explain your answer.
Valuation of AirThread Connections
Finally, because most businesses required reliable high-speed internet and airthreax telephony service, the recent trend toward bundled services had, to a large extent, frozen ATC out of the op business market. 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.
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The goal was to use a tax-efficient structure that maximizes investor returns by minimizing the amount of up-front equity invested in the deal. Do 4 A bullet payment refers to a single payment to pay off the remaining loan balance at the time of maturity. Jurek and Erik Stafford.
The smaller companies would eventually be weeded out through industry consolidation. 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.
You can change your cookie settings at any time but parts of our site will not function correctly without them. With the rapidly increasing costs of acquiring new customers and the high penetration rates in video and high speed internet, the group surmised that the only way to achieve meaningful customer growth would be through additional acquisitions. Most of the national carriers with whom AirThread competed could provide at least two of those services.
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.
American Cable currently offered video, internet, and landline telephony, but did not have any kind of wireless offerings. The acquisition would give American Cable access to wireless technology and the wireless spectrum and enable the company to offer competitive service bundles including wireless, currently a hole in the company’s service offering.
The wider debate is about how and when certain valuation methodologies should be employed. 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.
Valuation of AirThread Connections | Zakir Pashayev –
Article Journal of Finance. Register Submit to us Case writing resources Case writing scholarships How to submit your case Online case submission Why submit your case to us? Treasury bonds; 2 the cost of bank deposits exceeds the cost of bank debt; 3 bank equities have CAPM betas near one, while passive maturity transformation strategies have CAPM betas near zero; and 4 portfolios of bank equities consistently underperform portfolios designed to passively mimic their economic exposures.
Accessed December 31, Gains Losses on Investments A senior associate in the business development group at American Cable Communications, one of the largest cable companies in the U. The Cost of Capital for Alternative Investments. We assume the equity as the average equity of the industry, which is 0. Tax ID No Zhang contemplated her new assignment, she decided to take a methodical step-by-step approach to the valuation by focusing on projecting the operating results, estimating the appropriate cost of capital and quantifying the potential synergies that might result from combining the two companies.
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AirThread Connections Case
Moreover, she also knew the cost savings would be gradual. The potential synergies come from system operating cost saving as well as the increase in revenue and gross profit.
We conduct the sensitivity analysis to find the effect on the value of AirThread by changing two inputs. Hi there, would you like to get such a paper? As a result, she decided to segregate the potential airthreaf into various categories.
We show that the high excess returns to hedge funds and put-writing are consistent with an equilibrium in which a small subset of investors specialize in bearing downside market risks. Enter the email address you signed up with and we’ll email you a reset link. Table 2 Return on Net Operating Assets 3. Furthermore, expanding into the business segment would help each firm increase its network utilization and, airtthread a result, increase its Do cost efficiency.