askivy_assessment_center_case_study

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CONScompanies means that they can combine licences and infrastructures, so they havesavings.• (Diversification): In this case it doesn’t apply because they are selling the sameproducts in the same market• (Increasing market share): yes. You can calculate combined market share of25%+18% = 43%, which is still no.2 but closer to the no 1 firm.• (Improve management of the target firm): probably not, as the target seems to be moreefficient with higher margins. But there is an argument to say that the target will benefitfrom Vodafone’s expertise• (The price paid may be too expensive and there may be a bidding war for the target):you don’t have much info about the price or a bidding war, so you can just say it is aquestion mark.• (Lack of synergies, or unpredictable synergies): doesn’t apply, synergies seem quitepredicable in this case• (Lack of diversification): that is a negative as it is basically increasing exposure toTurkey. But on the other hand, you can say that it improves diversification of VodafonePlc as a whole, because at the moment they are very focused on Europe.• (The target performance is uncertain and volatile): this is a negative because Turkeyjust came out of recession. Looking at past financials, we can see that the business isabout to turn around in 2011• (Poorly performing target due to bad products or reputation): Doesn’t apply, not muchinfo and they seem to be doing for 2011.• (The acquiring company does not have sufficient financial power to acquire the target).Here, you need to calculate Vodafone’s net debt to EBITDA ratio.o EBITDA = 33.1% * 44.5bn (page 6, the margin is mentioned in the text andmultiply by revenue to get EBITDA) = 14.73bn.o Net debt = Long term borrowings + short term borrowings – cash = 28,632 +11,163 – 4,423 = 35,372m or 35.3bn.o Therefore net debt / EBITDA = 2.4 times.o Assuming as a rule of thumb that 4.0 times is the maximum net debt toEBITDA ratio for a company (memorise this number), that means the companycan borrow at least (4.0 * 14.73) – 35.372 = 23.5bn.o A rule of thumb for acquisition prices is multiplying EBITDA by 8 to 10 times(also memorise those numbers). Assuming 10 times Avea EBITDA: 358 * 10 =3,580 turkish lira, which is equivalent to 3,580*.44 = GBP1,575m, or £1.6bn.o We can see that Vodafone could borrow up to 23.5bn, but Avea would onlycost 1.6bn, therefore it can easily acquire the company.26
• (execution risk): you can mention that there might be issued dealing with Turk Telekom,which is government owned. The government might not like a British company tobecome too dominant in Turkey for political reasons• (monopoly and regulations): it doesn’t really apply here because Vodafone would stillbe no.2. If it would become no.1, there might be some issues though if the marketshare is too highPoint 3: M&A considerations (2 or 3 slides)(How does the combined entity look like?)You can either present tables like those:Lira millionVodafone Turkey 2010 2011 2012F Avea 2010 2011 2012F Combined 2010 2011 2012FSubscribers 16.7 15.7 16.3 Subscribers 12.2 11.8 12.7 Subscribers 28.9 27.5 29growth -6.0% 3.8% growth -3.3% 7.6% growth -4.8% 5.5%Revenue 2,815 2,730 2,757 Revenue 2,113 2,504 2,650 Revenue 4,928 5,234 5,407growth -3.0% 1.0% growth 18.5% 5.8% growth 6.2% 3.3%EBITDA 429 136 303 EBITDA 446 354 358 EBITDA 875 490 661margin 15.2% 5.0% 11.0% margin 21.1% 14.1% 13.5% margin 17.8% 9.4% 12.2%Or even better, add charts like those:Revenue growth 2012F4.0%3.3%3.0%2.0%1.0%0.0%1.0%Vodafone Turkey beforeacquisitionVodafone Turkey after acquisitionEBITDA margin 2012F14.0%12.0%10.0%8.0%6.0%4.0%2.0%0.0%11.0%Vodafone Turkey beforeacquisition12.2%Vodafone Turkey after acquisitionYou can then comment on the slides mentioning: The acquisition of Avea will not onlystrengthen Vodafone Turkey’s market share, but it will also improve its revenue growth andEBITDA margins.27
Page 1 and 2: Case Study PracticeForInvestment Ba
Page 3 and 4: What are Case Studies?Case studies
Page 5 and 6: o Don’t use any fancy charts or c
Page 7 and 8: Step 2: Categorising and filling th
Page 9 and 10: Content and JargonFor such a presen
Page 11 and 12: o Extra points for mentioning: exec
Page 13 and 14: There are 3 main ways to pay for a
Page 15 and 16: One important point to understand i
Page 17 and 18: Company 2: German TelekomBusiness D
Page 19 and 20: Company 4: MultiTelBusiness Descrip
Page 21 and 22: • Introduction: mention that you
Page 23 and 24: Strengths Weaknesses Opportunities
Page 25: Note: we have used the structure th
Page 29 and 30: o The combination would create syne
Page 31 and 32: Company 1: Hellas MobilePros:• Ec
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