• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Vodafone Group PLC's acquisition of Mannesmann AG.

Extracts from this document...

Introduction

Naresh Sohal SMN224 Financial Management: Mergers and Acquisitions Project Student no.: 0129884 Word count 3117 Vodafone Group PLC's Acquisition of Mannesmann AG The selection of this case study was made due to the nature of the takeover. It was a hostile bid by the biggest mobile phone company in the world for the biggest telecommunications in Europe. It turned out to the largest hostile takeover bid in the world at the time, to create the 4th largest firm in the world. Other factors like a UK company buying a German one were unheard of until the outcome of this takeover. All this influenced my decision to choose this takeover. The deal signed signalled a more aggressive approach to mergers. Until now it had been conducted on a more co-operative basis in Europe than in the UK and the USA. Hostile takeover bids are extremely rare in Germany and at the time was seen to be significant in that other German firms are liable for takeovers, particularly the banks and other telecommunications companies. Many even as far to say that the takeover battle has left Germany's business culture irreversibly changed. Mannesmann was originally a steel firm. Only when it was awarded Germany's first private mobile phone license in 1990 did it come into the telecommunication market. Since then it has set up Arcor, a landline phone business in Germany, created Omnitel, a mobile phone company in Italy, and bought a stake in Cegetal in France, followed by the purchase on tele.ring in Austria. It also bought Orange PLC, which at the time the 3rd largest mobile phone company in the UK in 1999. Before the takeover, the head of Mannesmann Klaus Esser announced that it was to split these two interests into two separate entities. This still went ahead after the takeover, leaving the reputation of Gent intact. If Esser had not announced the split before that takeover, Gent would have been seen to be a "ruthless shark". ...read more.

Middle

He maintained that Mannesmann does not need Vodafone to grow. The chairman of the supervisory board, Joachim Funk, said, "This offer is not acceptable in either form or substance and fails to meet the value test" Esser believes that Mannesmann's strategy of integrating fixed-line and mobile operations was superior to Vodafone's sole focus on wireless communications. . Mannesmann were quite with their intent to defend their firm. Plans to float their Internet arm to show how valuable it was. Investors were disappointed. Strengthen defences by entering talks with Vivendi by acquiring stake in Cegetel - leading to Mannesmann controlling the top mobile firms in the top markets of Europe, i.e. UK, Germany, Italy and France. Esser denied looking for a white knight, but did confirm to be looking for partners around the world (Europe and America) They used Bild, a popular daily in Germany to condemn the bid and called for resistance against the bid. Many politicians shared this view and condemned the bid (see above) Esser has put aside 200m Euros to defend itself against the hostile takeover bid. This would cover an information campaign; including a full-page newspaper advertisement in British and German papers and an international investor road show headed by Esser himself. This is all to convince investors that the company can offer them a better deal on its own. An international road show was needed, as Esser was well aware that although Mannesmann was a German firm, investors abroad already own 60% of the firm's shares. They also complained to the high court that the investor bank, Goldman Sachs were allowed to act for Vodafone as Goldman Sachs had recently worked for Mannesmann during their bid for orange which took place just a few months beforehand. Esser had tried to show the shareholders that resisting the offer by Vodafone was in their best interests. However the shareholders took a different view. ...read more.

Conclusion

Vodafone have not seen the gains that they would like to have seen. The liquidity ratio below shows that the merger has helped liquidity for one year. This may indicate that liability has increased which is not unusual for a takeover. However as the takeover is in its early stages, time needed to see how successful it is. The EPS shown below is following the trend set by the share prices of Vodafone Group PLC and that of the performance of the telecoms sector. Whether it is due to the merger or just a general trend in the sector has yet to be evaluated. The graph belew that the P/E ratio is following the trend set by the share prices of Vodafone Group PLC, i.e. decreasing. A decreasing P/E ratio shows that the expected earnings are not as high as they used to be. As Vodafone is a relatively young company (15 years old), it may be that the prices are just levelling off to what is a normal state and the merger may not have affected the P/E ratio. The P/E ratio by itself is not a reliable test. However, with the other trends all looking negative, it is fair to say that the takeover has not brought about the success that Vodafone had hoped for. But it is important to note that the sector has not been performing well either. As Vodafone is the biggest company in the FTSE 100 and will be the biggest firm in its sector, it will have a significant impact on the sector performance. Unfortunately for Vodafone, the takeover took place eighteen months before the tragedy of the Twin Towers. This had a massive effect and has brought about the economy going towards a slide. So it is not fair to judge whether the takeover has been a complete failure but it can only be judged if compared to others firms in its sector or more fairer when the world can escape this gloomy economy. Page 1 of 10 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Structures, Objectives & External Influences section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Structures, Objectives & External Influences essays

  1. Marked by a teacher

    ASDA's Ownership

    4 star(s)

    They are now both successful in their own ways. These 3 factors have made the public locate to where they are now and they are the 3 main common factors most businesses consider before trading. I think these three factors are common to consider as most businesses do tend to

  2. Vodafone Plc

    � Vodafone provides extra after sales service, which means it aims to provide good help and assistance with its products after they have been sold. Vodafone's objectives have been met by: � Vodafone, for it to maximise profits for example there turnover increased by 39% at the end of the year from �2,088million to �2,901million.

  1. Btec National Business Level 3 Year 1 - Exploring Business Activity

    The core of a business's activity is expressed in its corporate aims and plans. The term is rather misleading because it is not just companies which have these goals. For example, sole traders and partnerships will also, commonly, develop the same kind of long-term vision for their business.

  2. Introduction to J Sainsbury plc

    Dividends are important for Sainsbury's shareholders, as they provide them with a regular return in the form of profits upon their investment. If Sainsbury's are losing many of its customers, then their shares will decrease and the shareholders will be dissatisfied with the outcome.

  1. Explain the purpose of keeping accurate financial records.

    This is how the ratio is worked out: Debtors collection period (days) = Debtors * 365 Sales Creditor Days This ratio is to determine how good other companies are at paying their suppliers on time. This is critical to decide whether or not to offer any credit, for how long and how much.

  2. Tesco financial review

    Since the lowest point in November 05 the share price has nearly increased by 50p by January 07 which means investors will be earning 50p extra for every share they have in Tesco. Whilst I was searching for information on the internet I came across a set of all the

  1. Investigating Business. Tesco PLC. I will be describing the aims and objectives of ...

    The price should be higher than the cost to make the product so that they can make a profit. When looking at the price charged by their competitors, Tesco?s makes comparisons of the prices for their products/ services to their competitors who offer similar services such as Asda as Tesco?s so that they can decide how to price their product.

  2. Legal influences and their impact on Sainsburys Plc

    running of the supermarket, they will be able to keep up to date with things, by calling in for a couple of days. Females are more likely to return earlier to work as they can pass the childcare duties onto the father, where they will take paid paternity leave.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work