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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This presented two problems. My account New to The Case Centre? In fact, some had argued that the company needed to find a suitor before its market position became untenable.

Valuation of AirThread Connections Essay Example for Free

Erik Stafford and Joel L. In order to move wireless traffic from a cell tower to a central switching office required either leasing telephone lines from the local carrier or investing in very expensive rP microwave transmission equipment, which was oftentimes technically difficult to employ due to line of site requirements.

This case can be used as a aidthread valuation exercise for first-year MBA students in an introductory finance course.

In addition, the handwriting was on the wall in terms of service offering convergence. Begenau, Juliane, and Erik Stafford.

Zhang decided to use the comparable company information contained in Exhibit 7. In turn, this was a limiting factor for future growth and increased network utilization. How about make it original? We’ll occasionally send you account related and promo emails. 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.

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. The case includes two interesting characters — Zimmerman and Zhang, but contention among the characters is not the primary aim of the case. The acquisition would give American Cable access to wireless technology and the wireless spectrum and enable wirthread company to offer competitive service bundles including wireless, currently a hole in the company’s service offering.


For example, Accounts Receivable Finally, we get the WACC, which is 9. 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, airtgread the ROC return on capital is defined as net operating profit after taxes divided by the book value of equity plus connecfions.

You can change your cookie settings at any time but parts of our site will not function correctly without them. 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.

Download the case Educators can login to view a free educator preview copy airthtead this case. Go to advanced search. First of all, we calculate the NPV. By earlyZimmerman was considering the possibility of acquiring AirThread Connections, one of the largest wireless companies in the United States.

Second, the acquisition could help both companies expand into the business market. Finally, because most businesses required reliable high-speed internet and connectioms telephony service, the recent trend toward bundled services had, to a large extent, frozen ATC out of the op business market.

Further, she wanted to keep things simple by assuming a stock purchase using the conmections amount of leverage available. Given the projected synergy and financing method, what is the value of AirThread as a merger target?

This makes for a challenging and comprehensive case which also mirrors real-world financial analysis and modelling. 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 connectionss the appropriate approach for situations in which the capital structure is changing or assumed to be constant. Most of the national carriers with whom AirThread competed could provide at least two of those services.

AirThread Connections Case

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. Finance Globalization Health Care.


In terms of the long- term growth rate, Jennifer understood that it could not exceed that of the macro economy as a whole. What methodology should be used to value AirThread, given the characteristics of the expected cash flows after the merger?

AirThread Connections Case

This would help ensure that ACC remained a viable industry player and would also help improve profitability through better network utilisation. Article Journal of Finance. Valuation of AirThread Connections Share this page: Click here to sign up.

How to cite this page Choose cite format: When By earlyZimmerman was considering the possibility of acquiring AirThread Connections, one of the largest wireless companies in the United States. Skip to main content. The debt payment schedule is presented in Ex 6.

Juliane Begenau and Erik Stafford. 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 arthread one of the quickest ways routes to disaster. About the authors Erik Stafford is John A. Valuation of AirThread Connections send By clicking “Send”, you agree connectioms our terms of service and privacy policy.

However, she also estimated that the revenue per minute for airtherad customers would be less than that charged to retail subscribers. Finally, she decided tC that the nonoperating assets and liabilities should be valued separately so that the attention remained squarely on the ongoing operations.

Do 2 Total consolidated markets are markets for which the company has operating licenses but may not provide service. Technology and Operations Management. First, we calculate the operating value during and using APV.

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