Grupo Ferrovial from Spain acquired BAA PLC, the United Kingdom airport operator, in June 2006 following one of the very interesting battles for control in recent years in Europe. BAA was an extremely successful and profitable company, handling Gatwick and Heathrow airports in London, among others. The A case, Fiscal Strategy at BAA PLC, discusses the construction of the target company and especially its capital structure. The asset base of BAA was very stable, low risk and very well protected from competition. The business was creating significant cash flows over the past few years and had completed some acquisitions at home and abroad. Yet, it was underleveraged, not only according to the simple capital structure theory but compared to its peers.
Therefore, Grupo Ferrovial (and Goldman Sachs, which was competing to acquire BAA) found an excellent value chance by leveraging up BAA's strengths. The B case, Ferrovial Conquers the UK, guides us through the acquisition procedure and in particular through the financing aspects of the deal. The BAA Ferrovial Acquisition received the Financing Bundle of the Year Award by Acquisitions Monthly Magazine. Learning objectives: The case could be utilized with a wide array of audiences and provides opportunities to talk about the basics of capital structure and financial policy; to describe the function of debt markets; to follow a complicated acquisition that went from hostile to friendly; to discuss syndication in the credit markets; and to analyze the challenges that CFOs face to be able to balance the risk of acquisitions with the need for a conservative capital structure. It could be utilized in a basic finance course to introduce debt financing and capital structure. Additionally it may be used with executives generally and with financing teams as a method to go over the complex conditions of the transaction.
PUBLICATION DATE: October 25, 2010 PRODUCT #: IMD438-HCB-ENG
This is just an excerpt. This case is about LEADERSHIP & MANAGING PEOPLE
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