AT&T Time Warner Merger Rushil Shah

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School

University of Texas *

*We aren’t endorsed by this school

Course

370

Subject

Finance

Date

Feb 20, 2024

Type

doc

Pages

1

Uploaded by rushilshah02

Report
The University of Texas at Austin McCombs School of Business Fin 370 Grade Sheet Name ____Rushil Shah ____________________________ Section __ Case___AT&T Merger with Time Warner_________ Quantitative and Qualitative Analysis: 1 2 3 4 5 6 Recommendation - Appropriate and Effective: 1 2 3 Quality and Clarity of Writing (including format): 1 2 3 4 Items you have covered are highlighted below: Comments: Strategic rationale: vertical integration by adding content and channels to distribution (2 points); positive synergies – adding exclusive content could increase attraction to distribution; elimination of some corporate overhead; access to advertising revenue (2); negative synergies – Warner Brothers might become less available/valuable if AT&T tries to withhold access; competitors could respond negatively (2); cultural fit horrible – AT&T is in commoditized space with expense control, quality and consistency required; TW is in creative space; expenses are justified by creating differentiated content; star power and inconsistency (2). Intrinsic Valuation : WACC is 9.80% calculated (2). 2016 FCF is $5,245 MM calculated (2). 7% growth in FCF for 5 years, then 3% thereafter is scenario #1; 8% growth for 5 years then 3% thereafter to include synergies for scenario #2. Correct use of Gordon growth yields share price of $90.34 to $95.44 (with synergies). Cannot come up with a base case from scratch – not enough material. (4). Relative valuation methods : EV/EBITDA and P/E ratio . Sum of the divisions required for the EV/EBITDA valuation. (4). Relative valuation – precedent transactions : Exclude outlier and discuss. Price range of $92.51 to $107.09 – control premium is included which accounts in part for the higher valuation. (4) Price or price range must be specified. Not simply whether value is correct or incorrect. (2) Grade _90_________ Scale: 13=100, 12=96, 11= 92, 10=88, 9=84, 8=80, 7=76, 6=72, 5=68, 4=64, 3=60 1
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