askivy_assessment_center_case_study

(How would you buy the company?) We calculated net debt to EBITDA earlier. Here you can
show a slide that details the net debt to EBITDA ratio calculation, and make an estimate of the
purchase price. Then you can conclude that since the company is so small compared to
Vodafone overall size, Vodafone will pay with the cash that it has on the balance sheet or take
some more debt. A good slide would you the following:
Vodafone Plc
Net debt calculation (£bn):
Aeva
Acquisition price calculation
Long term borrowings 28.4 Avea 2011 EBITDA, Lira bn 0.4
Short term borrowings 9.9 Avea 2011 EBITDA, £bn 0.2
Cash and cash equivalent (8.4) Acquisition multiple 10.0
Net debt, 2011 29.9 Implied value, £bn 1.60
EBITDA 2011 14.7
Net debt / EBITDA 2.04x
And the net debt /EBITDA calculation:
Post acquisition net debt ratio
Vodafone Plc EBITDA 14.7
Avea EBITDA 0.2
Combined EBITDA 14.8
Vodafone Plc net debt 29.9
Avea net debt
0.0 Note: assumed zero due to no information
Add: acquisition debt 1.6
Combined net debt 31.5
Post acquisition net debt / EBITDA 2.12x
Conclusion: recommendations (1 slide)
Here you can decide for or against. There is no right or wrong answer if you can justify it
properly. In this case however, we seem to have many Pros and a few Cons, so I would
conclude like this:
• We recommend that Vodafone go ahead with an acquisition, assuming a 10 times
acquisition multiple, because of the following reasons:
o We believe that the Turkish market is going to do well over the next few years
as evidenced by the positive performance of Vodafone Turkey and turnaround
from Avea in 2011
o The acquisition would help Vodafone better compete in Turkey and boost its
market share
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