Air Thread Reference

Valuation of!
AirThread Connections

J. Zhang Consulting: Mohammad Alkhamis, Marci McCall, Lindsay Ramirez, Sarah Spring, Mavis Yu

ACC


Review of AirThread Acquisition
• Opportunity to acquire AirThread Connections
• Base-Case Valuation of AirThread Connections:
 What our competitor’s will be willing to pay
 Value of AirThread Connections “as-is”
• Upside Valuation of AirThread Connections:
 AirThread has strategic fit with current ACC operations
 Potential synergies for future service offerings
• Recommendation:
 Purchase AirThread Connections for amount between
$8.162 B and $13.525 B.

ACC


Outline of Valuation Steps
• Base-Case Valuation of AirThread Connections:
 Calculate the present value of free cash flows
 Project the terminal value of ATC’s operations
 Calculate the present value of the interest tax subsidy
 Estimate value of non-operating assets
 Determine private company discount, if any
 Proceed with final valuation and terminal value calculation
• Upside Valuation of AirThread Connections:
 Calculate the present value of free cash flows with synergies
 Incorporate data from Steps 2 – 5 as seen above
 Proceed with final valuation and terminal value calculation

ACC


Adjusted Present Value
• Used Adjusted Present Value (APV) valuation method
• Value AirThread assuming 100% equity financing
• Avoids calculating debt-to-equity ratio for consecutive years
• Use “Return on Assets” to discount 2008 – 2012 cash flows
• Return on Assets = 7.82%

ACC


Base-Case Operating FCFs
• Total Present Value of Unlevered Cash Flows 2008 – 2012:
 $1.272 B
 Excludes terminal value

ACC


Calculating Terminal Value
• Common Assumption:
 Future cash flows look like the last FCF, times a growth factor
• Using Weighted-Average Cost of Capital (WACC) we discount all perpetual future cash flows

• Terminal Value of Perpetual Future Cash Flows:
 $6.322 B

ACC