Abstract:

Acquisition and merger is one of the growth strategies adapted by all corporations in order to grow faster, large and renowned organizations are also inclined to this strategy for expanding their business and to gain the maximum market share or to ensure their position in the marketplace.

This report is basically based on the valuation of the Air Thread Connection.In December 2007, American cable communication was one of the highest and notable cable operators in the United States, which decided to acquire the largest regional cellular provider, Air Thread Communication. Undoubtedly, this acquisition would benefit the company in number of ways such as cost-saving synergies, stable cash flow and expanded debt.

By having a closer look over importance and benefits of the acquisition, the senior associate Jennifer Zhang was assigned so that she could prepare the preliminary valuation for acquiring this company. Valuation of the company and the present value of the cash flows hasbeen calculated through the weighted average cost of capital and tax synergies are calculated separately and discounted.

Valuation of Air Thread Connections Harvard Case Solution & Analysis

Introduction& Issues Consideration

The American Cable Communication (ACC) Company could get multiple complementary benefits through acquiring Air Thread Company and could expand into the business market. According to the product bundle concept, it has contemplated to sell the products. Air Thread Company is one of the many cellular providers on a provincial scale while American Cable Communication is a traditional cable operating company.

Many services were provided by American Cable Communication Company which primarily include landline telephone, internet and video services to its customers, excluding wireless facilities. The wireless facilities which the company was unable to provide its customers has become a key factor for the competitors to gain a competitive edge. The domestic exchange carriers were reactive to the increasing demand and supply gap as well as the cost efficiencyof the wireless technology services. In addition to this, American Cable had been facing fierce and intense competition from the need of mobile applications for the wireless network. This is becausethe industry were moving to wireless networks due to the branded and exclusive cellphones which enabled the customers to make cheaper and free calls through internet services and wireless cellphone services.

American Cable Communication Company decided to accelerate its growth and wanted to strengthen its position in the market, for this purpose, the company was looking to acquire Air Thread Company, the company was providing wireless technology services but incapable to provide landline, internet and telephone services to its customers, which has resulted in problems, the company did a valuation of Air Thread. Since there are different methods for valuing the company, American Cable Communication was valuing the company based on its investment approach, the company wanted to calculate the exact and accurate value of the acquiring company, according to which, the company would give the purchase price to Air Thread.

In contrast, Air Thread Company was facing inverse the issues of American Cable Communication was. The company had widely provided wireless technologies or services to its customers but it was not offering landline, telephone and internet services. Thus, Air Thread Company was facing extensive issues that were pertaining to the pressure of the acquisition because the product portfolio of the company was limited and the growth rate was slow while operating separately................

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