Case Study: AT&T and McCaw Merger
MERGER BETWEEN AT&T AND McCAW By:
Shilpa Keswani Lakhani
Kashif Khan
Satyameet Singh Ahuja
Moin Akhtar
Madhur Chaudhary
With multiple valuation numbers being arrived at ranging from 5.4 billion dollars to 173 billion, we believe that the most appropriate value for the organization is 12 billion dollars. It has been arrived at, by maintaining the industry standard of pricing a potential customer at a 173 dollars. The highest valuation we arrived at was by the DCF method (193 billion), this number is only plausible when we assume that the organization will grow at 7% indefinitely. On the other hand the organization was valued the lowest at 5.4 billion dollars. This number makes sense only when we extend the industry average for market to book valuation to be a fair way to assess the potential of Mccaw.
Deviation in our and Mccaw’s assumption could boil down to the projected rate at which one see’s this business grow. At the same time, they may also disregard our valuations basis comparing them to industry averages. This belief could be attributed to the uniqueness each business enjoys in this space and how well is an organization’s foothold in a particular market.
Advantages of Merging:
Besides the obvious benefits of entering an industry which is pegged to grow steadily, it makes operational and economic sense to both the organizations. To not go the merger route means huge time and monetary costs for AT&T. And with arduous regulatory issues and depleting cost effective spectrum licenses, AT&T may just not be able to cross the high entry barriers to this industry. At the same time, AT&T could look at acquiring other players in this industry, but with the weak dollar price (less mergers) the action may need to be quick in nature. Besides which as Mccaw is still predominantly a family run business, the transition period could be reduced
Shilpa Keswani Lakhani
Kashif Khan
Satyameet Singh Ahuja
Moin Akhtar
Madhur Chaudhary
With multiple valuation numbers being arrived at ranging from 5.4 billion dollars to 173 billion, we believe that the most appropriate value for the organization is 12 billion dollars. It has been arrived at, by maintaining the industry standard of pricing a potential customer at a 173 dollars. The highest valuation we arrived at was by the DCF method (193 billion), this number is only plausible when we assume that the organization will grow at 7% indefinitely. On the other hand the organization was valued the lowest at 5.4 billion dollars. This number makes sense only when we extend the industry average for market to book valuation to be a fair way to assess the potential of Mccaw.
Deviation in our and Mccaw’s assumption could boil down to the projected rate at which one see’s this business grow. At the same time, they may also disregard our valuations basis comparing them to industry averages. This belief could be attributed to the uniqueness each business enjoys in this space and how well is an organization’s foothold in a particular market.
Advantages of Merging:
Besides the obvious benefits of entering an industry which is pegged to grow steadily, it makes operational and economic sense to both the organizations. To not go the merger route means huge time and monetary costs for AT&T. And with arduous regulatory issues and depleting cost effective spectrum licenses, AT&T may just not be able to cross the high entry barriers to this industry. At the same time, AT&T could look at acquiring other players in this industry, but with the weak dollar price (less mergers) the action may need to be quick in nature. Besides which as Mccaw is still predominantly a family run business, the transition period could be reduced