Executive Summary
American Cable Communication and AirThread Connections are two companies operating in the telecommunications market in U.S. Following the development of the market both are facing challenges in order to compete in the market with its competitors, who are developing at a fast pace and are able to provide more range of services as compared to both AirThread and American Cables.
Although, American Cables and AirThread are operating successfully with their current services, however, the range of services they are required to provide and compete well in the market are split between the two for which they are looking forward for acquisition and merger possibilities.
In order to compete, the senior vice president of American Cable Communications, Robert Zimmerman, is looking forward for AirThread being a potential acquisition target. AirThread has been operating in wireless communication and has been a large cellular provider. On other hand, American Cable has been operating in sophisticated cable telephone services.
Mr. Robert Zimmerman on idea of Elliot Bianco sees the future takeover of AirThread with three prospects, which he considers will help both the companies to enjoy shared benefits of operating successfully in the market as well as the synergic effects of the possible acquisition. However, the valuation of the company is under consideration, as to what value can be placed for AirThread as the prospective takeover target. So as to evaluate the financial considerations which may take place before or after the acquisition process.
Under this aspect, the company valuation is being done with several valuation techniques, such as, discounted cash flow methodologies, WACC based DCF, etc. This will then eventually assist in decision making, as whether the acquisition would be beneficial or not.
Companies Overview
American Cable Communications
American Cable Communications (ACC) is being one of the largest companies in cable operated communication services having a vast spread of cable networks and having strong customer base using the services provided by ACC.
Along with the development in the cable industry, American Cable Communications also focused on development strategies in order to achieve economies of scale, which will help in competing effectively in the market. Furthermore, they are looking forward toward aggressive acquisitions in order to be the leading firm in the market, providing vast range of services to its existing and potential customers. Therefore the company is looking for possible targets for acquisition and evaluating them in order to estimate likely price of the target which represents its intrinsic and extrinsic values.
AirThread Connections Business
AirThread is also one of the major companies operating in the wireless cellular services in United States, and has acquired more than two hundred markets in five main geographical areas having a strong customer base too.
However, AirThread is working in an intensely competitive market and dude to challenges face by the company such as, having an operating cost disadvantage. These are mainly due to AirThread not having technical and its own transmission equipment which is required to transfer the data from cell towers to switching office. These services are therefore hired from the rival companies for which AirThread have to pay higher operating costs which are 20% higher, directly affecting the competitiveness of AirThread.
Case Analysis
The proposal for acquiring a wireless communication company like AirThread, is being looked forward primarily on the basis of three aspects.
Firstly, the foresight of having greater range of the services being provided to the customers of both the companies. As the competition in market is ever growing, which is leading to difficulties for both the companies. While being merged with each other they will be able to overcome these competitive challenges.
Secondly, the acquisition could also
Analyzing the valuation of AirThread as an acquisition target for American Cable Communications, several techniques have been used which will aid in decision making to the management. These can be referred, for calculations, to the exhibits in excel file attached.
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