Negotiations between AT and T and McCaw

1962 Words Jun 1st, 2011 8 Pages
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
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This risk gains great importance on the grounds, that British Telecom has seen a negative return of almost 50% in its investment (41$ to 24 $), and whether they will be willing to dilute their interest and take a major loss. Finally since McCaw’s aspirations have led it to acquiring a 52% stake in Lin, the future of Lin and McCaw’s relationship could really make or break the fruits of this merger.
Goals: As the negotiator for AT&T, our goal is to ensure that the deal is signed at a price acceptable to us. Another goal for us is to secure this deal during the current market sentiment when mergers are at a low and hence we could enjoy the relative cost advantages. Moving on, we need to get the ideal mix of the cash – equity ratio for financing this deal. With a high debt ratio and the addition of McCaw’s debt to our balance sheets, we need to sign the deal which effects this potentially harmful ratio the least. The goals of people from McCaw would involve driving us to pay the maximum due to our need. Their motive would likely be to have a high cash component while receiving the payment to cover their debt and assets. Craig, being an individual who feels the need to be in control of his companies, and his intention of seeking a partnership, he would look for a position of influence in the new amalgamated firm.
Negotiating Strategy:
The strategy we’d like to adopt is to leverage on the
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