Valuation of AirThread Connections Harvard Case Solution & Analysis

Valuation of Air Thread Connections Case Study Solution

Situational Assessment


The American Cable Communications (ACC) is looking forward to acquire AirThread Company.  It collectively thought about selling the products according to the product bundling concept.  American Cable Communications was purely a traditional cable operating company; however, AirThread was a cellular provider on regional scale.

American Cable provided internet, landline telephone and video services but did not offer wireless facilitates. This wireless facilitation service gap was being captured by the competitors. The local exchange carriers were cost efficient and reactive to the increasing demand supply gap of wireless technology service.

Furthermore, American Cable faced high competition from mobile applications’ need for wireless network. This is because these advanced technological shifts to wireless networking due to branded cell phones have enabled the customers to make free or cheaper calls through wireless phone and other internet services.

On the other hand, AirThread faced opposite issues as compared to American Cable. AirThread provided wireless technologies but did not offer telephone, landline and internet services.  However, Airthread was facing severe issues pertaining to acquisition pressure due to its limited product portfolio and slow growth rate while operating individually.

Industry Analysis

The cable industry has been increasingly revolving in a robust manner since many years. In order to cater the shift in the overall dynamics of the organization, technological advancements have rapidly turned around the nature of the telecommunication industry. These changes in technologies and development of new markets have resulted in huge investments into the cellular industry.

The companies were integrating and diversifying to eliminate the risks associated with the uncertainties of the robust changes in the telecommunication industry. It was evident in the market that only the key players will prove to the telecommunication industry.  In order to sustain in the market, the companies were integrating with each other to achieve economies of scale from going larger in size by acquiring companies that already have a competitive advantage over others.

The business development group of American Cables has been significantly investing in different companies in order to acquire them and expand the business product portfolio in order to diversify the risk over a larger product portfolio instead of focusing on one product streamline. Focusing on one product streamline would be having adverse effect on the American Cables in instances of major setback for one business unit or major technological advancements.

Decision making criteria

Free Cash Flows With Synergy Without Synergy
Net Present Value 4 3
Terminal Value 5 3
Enterprise value 5 3
Competitive advantage 5 0
Growth 4 1
Sustainability 4 1
EV/Sales 5 1
EV/FCF 3 2
Total Score 42 19
(5) highest, (0) lowest


The criteria mentioned above are critical for the American Cable in order to take a feasible decision with regards to the acquisition of AirThread. The Net Present Value will increase by 5.73% if AirThread is acquired.  However, without synergy even, American Cable has a positive Net Present Value, therefore, the score of 3 is assigned to American Cable operating itself without any acquisition. The terminal value before acquiring AirThread was 5721.2; therefore, assigning a score of 3 for American Cable individually. However, the terminal value would increase significantly by 25.83%, as a result, assigning a score of 5 for acquisition of AirThread.

The Enterprise Value of American Cable operating individually would be 8663.4; therefore, scoring 3 as it is positive. However, if AirThread is acquired the enterprise value would increase significantly by 17.84%; therefore, assigning a score of 5 for synergy with AirThread. The Enterprise value itself is a standalone criteria in decision making process for any organization especially in instances of mergers and acquisitions.

The non-financial factors also have a significant impression while taking important decisions pertaining to acquisitions in order to expand. Currently, it is mentioned that AirThread and American Cable are finding it difficult for growing large in size due to its limited product portfolio. The threats from competition are significantly high in instances of operating separately instead of a synergy.

The competitive advantage is the driving factor of growth for American Cables and AirThread. American Cable only operates in landlines and internet services; whereas AirThread operates only in wireless cellular networks. Separately they both would be threatened by the new entrants and the growing market of the industry, therefore, having a low score for competitive advantage working separately.

Valuation of AirThread Connections Harvard Case Solution & Analysis


However, there are opportunities for extensive growth in the market as the demand for new technological advancement is growing significantly on regular basis. This increase in demand is forcing the company’s management to expand via integration methodology with the help of acquiring AirThread. As a result, this has marked a score of 4 in the growth category if AirThread is acquired and operated with a combined workforce. The growth score is not 5 due to the uncertainties prevailing in the industry of telecommunication.............


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