Grupo Ferrovial from Spain obtained BAA PLC, the UK airport operator, in June 2006 following one of the most interesting conflicts for control in the last couple of years in Europe.BAA was an exceptionally successful and profitable company, managing Heathrow and Gatwick airports in London, among others. The A case, Fiscal Strategy at BAA PLC, discusses the arrangement of the target company and specifically its capital structure. BAA's asset base was very stable, low risk and very well protected from competition.
The firm had finished some acquisitions at home and abroad and had been creating significant cash flows over the past few years. Yet, it was underleveraged, not only according to the straightforward capital structure theory but also compared to its peers. Ferrovial Conquers the UK, the B case, guides us through the acquisition process and in particular through the financing aspects of the deal. The BAA Ferrovial Acquisition received the Finance Package of the Year Award by Acquisitions Monthly Magazine. Learning objectives:
The case can be utilized with a wide range of audiences and provides opportunities to talk about the fundamentals of capital structure and fiscal policy; to characterize the operation of debt markets; to follow a complex acquisition that went from hostile to friendly; to discuss syndication in the credit markets; and to assess the challenges that CFOs face to be able to balance the risk of acquisitions with the need for a conservative capital structure. It can be utilized in a basic finance class to introduce debt financing and capital structure. It can also be used with finance teams and with executives in general as a method to discuss the complicated terms of the transaction.
PUBLICATION DATE: October 25, 2010 PRODUCT #: IMD440-PDF-ENG
This is just an excerpt. This case is about LEADERSHIP & MANAGING PEOPLE
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