Vodafone Airtouch

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"Vodafone AirTouch's bid for Mannesmann" (Harvard Business School 9-201-096 - revised on August 22, 2003).

First of all, one has to mention that it is always difficult to evaluate a company. There is no single measure/calculation who can give you the valuation of a company. The value of a company can be different for every single human being. For instance, Vodafone Air Touch will try to calculate a very low valuation of the company because it wants to pay as less as possible, and Mannesmann a very high valuation, because it wants to get as much money as possible. As a result, it often depends on the interest of the different persons who evaluate a company.

In October 1999, Mannesmann offered shares around 157.8€. This was before the acquisition of Orange PLC, a competitor of Vodafone Air Touch in the UK market. After the acquisition, Vodafone offered 266€ per share, 68% more than the 157.8€ per share Mannesmann offered few weeks before. Despite, this very high premium, Mannesmann’s CEO evaluated his company 350€ per share.

Here in this case, I think that the main reason for this high price differences is that with time, Mannesmann’s bargaining position changed. In the beginning, their position was not as strong as in the end when they achieved to acquire Orange Plc, a telecommunication company in the U.K. which was growing faster than Vodafone. As a result, Mannesmann became a stronger competitor for Vodafone and Mannesmann’s CEO knew that. As a consequence, he increased the valuation of his company.

The reason why for instance an analyst from Julius Baar valuated Mannesmann between 250€ and 350€ per share and many other analysts between 174€ and 250€ per share may have some reasons. The main reason is that, as anticipated before, it is very difficult to evaluate a company. Furthermore, it is even more difficult to evaluate how many synergies Vodafone Air Touch would benefit from this takeover. So it is very difficult to evaluate how much this...
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