Merger & AcquisitionMerger & Acquisition
FET & KGT Merger Case FET & KGT Merger Case
Study Study
Merger & AcquisitionMerger & Acquisition
FET & KGT Merger Case FET & KGT Merger Case
Study Study Far EasTone Telecommunications Far EasTone Telecommunications
President President
Jan NilssonJan NilssonMay 6th, 2004
2
What is M&AWhat is M&A
MergerMergerCombination of two or more corporations. Combination of two or more corporations.
AcquisitionAcquisition
One company taking control of another by purchasing One company taking control of another by purchasing
a majority or all of the target company's a majority or all of the target company's
outstanding shares. outstanding shares.
by
3
Significant M&A’s WorldwideSignificant M&A’s Worldwide
Citigroup – In 1998, Citibank's US$70 billion merger with Travelers Group, which established the world's largest financial-services firm, was the biggest in history until the AOL-Time-Warner deal
Dec. 14, 2000. FCC approved American-on-Line to acquire Time Warner with US$111B, the largest volume of transaction in the history, to create the world’s largest media company
Feb. 17, 2004, Cingular Wireless to buy AT&T Wireless for US$41 billion in cash (the largest all-cash deal in history)
Jan. 14, 2004, J.P. Morgan Chase & Co. took over of Bank One for US$58 billion in stock make the 3rd largest transaction of the record
4
The merger of Yuan-Da and Core Pacific Security (元大與京華 ) back in Jul 2000 was the prelude of the recent consolidations in financial banking sector in Taiwan
Aug. 2002, Cathay Financial Holding (國泰金融控股公司 ) acquired United World Chinese Commercial Bank (世華聯合商業銀行 ) for NT$115M to become the largest financial holding company in Taiwan who will service the half of total population in Taiwan
Chinatrust Financial Holding(中國信託金控 ) acquired Grand Commercial Bank(萬通銀行 ) in Jul. 2003 with NT$19.6B transaction to become the private-owned bank with the largest assets
M&A Milestones in TaiwanM&A Milestones in Taiwan
In June 1999, UMC’s (聯華電子 ) 5-in-1 merger unveiled Taiwan’s soaring M&A activities afterward by consolidating five of its joint ventures at a time – United Semiconductor Corporation (USC), United Integrated Circuits Corporation (UICC), United Silicon Incorporated (USIC) and UTEK Semiconductor Corporation (UTEK) 聯誠 ,聯嘉 ,聯瑞及合泰
Advanced Semiconductor Engineering Inc. (ASE日月光 ) acquired Motorola’s IC package & testing (封裝測試 ) facilities in Taiwan and Korea in Jul. 1999
5
Different Stages in M&ADifferent Stages in M&A
Why
RationalizeObjectives
Who
IdentifyTargets
How
InitialNegotiation
How Much
DueDiligence
When
DefinitiveAgreement
What
Integration
6
Why Merger & AcquisitionWhy Merger & Acquisition
Empire Building
Asset Stripping
Opportunity
Reduced Uncertainty
Increased Market
Valuation
Monopoly Power
Economics of Scale
Growth
Merger Merger MotivationMotivation
Why
RationalizeObjectives
Who
IdentifyTargets
How
InitialNegotiation
How Much
DueDiligence
When
DefinitiveAgreement
What
Integration
7
Whom to BuyWhom to Buy
Horizontal Merger Horizontal Merger Closely related or the same product/service
B C DA E
Vertical Merger Vertical Merger
Suppler & customer relationship
Conglomerate Merger Conglomerate Merger Concentric Merger Concentric Merger
A
a b cd
B
A
Identical or highly similar with one includes the other Fill in the missing piece of a big corporate
Why
RationalizeObjectives
Who
IdentifyTargets
How
InitialNegotiation
How Much
DueDiligence
When
DefinitiveAgreement
What
Integration
A
B
8
HowHow
Buyer always wants to buy low, but seller wants to sell high!Buyer always wants to buy low, but seller wants to sell high!
Usually, a merger intermediaries are involved in the process of M&A for both buyer side and seller side. These intermediaries are called financial advisors, who are experts in merger and acquisition
Set up initial contacts to match up potential buyer or seller
If there is a match, a Letter of Intent (LOI) or Memorandum of Understanding (MOU) will be signed to agree to proceed with Due Diligence process and exchanging information; usually a off-site data room will be set-up
Kick-off the Due Diligence Process with a Management Presentation of both seller and buyer sides
Proceed with Due Diligence process and fine tune valuation model
Negotiation, negotiation, and negotiation
Why
RationalizeObjectives
Who
IdentifyTargets
How
InitialNegotiation
How Much
DueDiligence
When
DefinitiveAgreement
What
Integration
9
Due Diligence ProcessDue Diligence Process
L e g a l &
R e g u l a t o r yHuman Resource
Financial
B u s i n e s s &
O p e r a t i o nExecution
Due Diligence:Due Diligence:
The process by which persons conduct inquiries for the purposes of timely, sufficient and accurate disclosure of all material statements/information or documents which may influence the outcome of the transaction.
Major areas that should be covered: Corporate records Financial and tax information Indebtedness Employment and labor matters Real property Personal property Trademark & Intellectual property Agreements Supplier and customer information Compliance with law and
information Any other documents which are
pertinent to the functioning of the business.
Why
RationalizeObjectives
Who
IdentifyTargets
How
InitialNegotiation
How Much
DueDiligence
When
DefinitiveAgreement
What
Integration
10
How Much to PayHow Much to Pay
Maximum PriceMaximum PriceMaximum PriceMaximum PriceEvaluateBid below
valuation & negotiate
Internal Factors:Internal Factors:
• Understand financialsUnderstand financials
• Valuation RangeValuation Range
• SynergiesSynergies
• ……………….etc..etc.
External Factors:External Factors:
• Customer loyalty / marketCustomer loyalty / market
• Change in the industryChange in the industry
• Cost of loss to competitorsCost of loss to competitors
• ……………….etc..etc.
Why
RationalizeObjectives
Who
IdentifyTargets
How
InitialNegotiation
How Much
DueDiligence
When
DefinitiveAgreement
What
Integration
11
Enterprise ValueEnterprise Value
Standalone BusinessValue
Potential Synergy Value
Strategic BenefitValue
Where are the values resided in?
Present Value Future Value
Why
RationalizeObjectives
Who
IdentifyTargets
How
InitialNegotiation
How Much
DueDiligence
When
DefinitiveAgreement
What
Integration
12
Valuation MethodValuation Method
Cost Method Discounted Cash Flow
Historical Data Future TrendsPublic Market Valuation
How are they valued?
Past Now Future Others
Market Value Added (MVA) also known as Economic Value Added (EVA): It captures the added value of invested capital year-by-year. MVA should be thought of as capturing value growth, and DCF as capturing income growth.
Deal Structure has also the effects to the valuation – cash only, stock only, or a mix of cash and stock
There is no best valuation method for all cases; it all depends.
Why
RationalizeObjectives
Who
IdentifyTargets
How
InitialNegotiation
How Much
DueDiligence
When
DefinitiveAgreement
What
Integration
13
WhenWhen
Within the agreed time period defined in LOI or MOU (time can be extended with the approvals from both parties), transaction value, deal structure, legal requirement, and timeline need to be finalized.
Definitive Merger Agreement (or Sales & Purchase Agreement):
Transaction – price, deal structure, merger effective date, shareholders’ right
Representation and Warranties – disclose all obligations and ensure all entitlement
Covenant – all other agreements and precedent conditions
Termination and Indemnification – break-away conditions and penalties
Why
RationalizeObjectives
Who
IdentifyTargets
How
InitialNegotiation
How Much
DueDiligence
When
DefinitiveAgreement
What
Integration
14
The Easy Part is Just DoneThe Easy Part is Just Done
Source: “Managing the M&A Process”, Statumen, Mar. 2002
A merger really starts during the integration phase!!A merger really starts during the integration phase!!
Transition is usually started way before the so-called “integration” takes place
Step-by-step integration and thorough plans are always preferable; but in reality, parallel run (or even reverse procedure) and fine-tune-while-implantation
Why
RationalizeObjectives
Who
IdentifyTargets
How
InitialNegotiation
How Much
DueDiligence
When
DefinitiveAgreement
What
Integration
15
Combination & IntegrationCombination & Integration
Communication, communication, communication
Undisrupted Operations, Services, and Quality
Integration
Sales and Marketing
Backend support operations and processes – procurement and logistics
System – IT and accounting systems
Organization
Culture
It is all about PEOPLE PEOPLE !
It is not completed yet!
Post-merger performance tracking
Synergy delivery
Why
RationalizeObjectives
Who
IdentifyTargets
How
InitialNegotiation
How Much
DueDiligence
When
DefinitiveAgreement
What
Integration
16
Merger Case StatisticsMerger Case Statistics
-
400
800
1,200
Merger Case 6 107 259 426 339 535 843 1,032 1,177 1,087 117 31
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
In 2003, Asia accounted for 40% of total M&A globally, which was a dramatically jumps from less than 30% in 2002
Taiwan’s completed merger cases over the year
Source: Fair Trade Commission, Executive Yuan, ROC
17
No Guarantee of Success for Every Merger CaseNo Guarantee of Success for Every Merger Case
In average, three out of four mergers fail to achieve their desired financial and strategic goals
AOL-Time Warner deal: Indigestion: One or both companies fail to successfully incorporate their
business models, goals, or cultures into an integrated whole.
The promised payoffs never materialize
Stock price has plunged ever since the merger
Merger announced
No expected synergy Company renamed to change perception
19
FET & KGT Merger ChronologyFET & KGT Merger Chronology
Merger Merger AgreemenAgreement signedt signed
Oct. 7, 2003 Oct. 7, 2003 FET & KGT FET & KGT
signed signed merger merger
agreementagreement
KGT had KGT had the 1the 1stst tender tender offer offer
A 2-A 2-phases phases bidding bidding
process – process – non-non-
binding & binding & binding binding
with with selected selected operatorsoperators
NegotiatioNegotiation failed n failed due to due to price & price &
deal deal structurestructure
Submit bid Submit bid based on based on valuation valuation drew from drew from
KGT’s KGT’s Information Information MemoranduMemorandu
mm
FET&KGT FET&KGT signed signed
LOI LOI
Persistent Persistent efforts of both efforts of both parties to close parties to close the gap before the gap before the LOI signedthe LOI signed
October 2002 May 2004
Nov-02 Dec-02 Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jul-03 Aug-03 Sep-03 Oct-03 Nov-03 Dec-03 Jan-04 Feb-04 Mar-04 Apr-04
Intricate & ever-changing development in FET&KGT M&A deal led to a dramatic outcome of the biggest consolidation in Taiwan Telecom
LOI LOI period period
ExtendedExtended
Agreed the Agreed the extension of extension of
LOI to LOI to complete complete
the processthe process
Jan. 02, Jan. 02, 2004 2004
Merger Merger effective effective
date – first date – first closing closing
datedate
The effective The effective date of date of
merger – merger – transaction transaction
mdaemdae
FET & KGT FET & KGT Merger Merger
CompletedCompleted
Apr. 29, Apr. 29, 2004 2004
Completed Completed all legal all legal
processes processes and and
requirementrequirementss
20
Creating the Largest Mobile Operator in the
Private Sector in Taiwan Creating the
Largest Mobile Services
Distribution Channel in Taiwan
Creating the Largest Network
Capacity in Taiwan
Simplifying the Competitive
Landscape in Taiwan
Establishing Alliance with World-Class
Mobile Operator NTT DoCoMo
FET and KGT MergerFET and KGT Merger
21
Financial Terms
FET and KGT agreed to combine their operations through a two-stage transaction. Post transaction, KGT shareholders will receive 0.46332 FET share plus NT$6.72 in cash for each KGT share.
In total, KGT shareholders will receive approximately 806.6mm FET shares and approximately NT$11,698mm in cash
The implied equity valuation of KGT is NT$29.6 bn and enterprise value is NT$44.9 bn1
The valuation represents 5.3x EV/2003 estimated EBITDA multiple
FET and KGT MergerFET and KGT MergerTransaction OverviewTransaction Overview
Structure and Other Terms
The transaction will be effected through the following two steps.
Step 1: Merger between Yuan Ho (FET’s fully owned subsidiary) and KGT
Step 2: Full share exchange between Yuan Ho and FET
The EXPECTED timing of closing is March 2004 actual completed in April 29, 2004
FET and KGT agreed to form a coordination committee to oversee the integration process
1 KGT total shares outstanding = 1,740,842,496 as of transaction date
22
Merger Structure and ProcessMerger Structure and Process
Merger between Yuan Ho and KGT
Shareholder Meeting expected in Nov 2003
Major regulatory approvals obtained by Closing of Step 1
Expected closing – Jan 1, 2004
Step 1Step 1 Step 2Step 2
FET
Yuan Ho KGT
Cash Consideration + Yuan Ho Shares
KGT Shares
100%
FET
Yuan Ho
KGT ShareholdersFET Shares
(KGT Assets)
Yuan Ho Shares
Share exchange between FET and Yuan Ho shareholders
Shareholders Meeting expected in Feb 2004
Expected closing – April 29, 2004
The two-step process would ensure an optimal transaction structure from the execution regulatory, and business perspectives. Coordination Committee will be established to
oversee the integration process
23
Pro Forma Ownership StructurePro Forma Ownership Structure
FET and KGT MergerFET and KGT MergerTransaction OverviewTransaction Overview
(NT Dollars in Millions 2003 1H 2003E
Revenue
FET NT$ 17,722.236,755.6
KGT 11,605.5 23,626.5
Pro Forma Revenue NT$ 29,327.7 60,382.1
EBITDA
FET NT$ 7,398.0 15,413.6
KGT 4,219.7 8,418.0
Pro Forma EBITDA NT$ 11,617.7 23,831.6
EBITDA Margin
FET 41.7%41.9%
KGT 36.4% 35.6%
Pro Forma EBITDA 39.6% 39.5%
Pro Forma FinancialsPro Forma Financials
Source: Company Financials. KGT 2003 estimated full year results represents annualized Jan-Aug management accounts
23%
77%
24
MBT2.5%
#4KGT
12.7%
#1CHT
34.7%
#2TCC+
TA30.6%
#3FET
19.5%
Source: Ministry of Transportation & Communication1. Based on six months revenue ended Dec. 2003
Strengthened Competitive PositioningStrengthened Competitive Positioning
The merged company will become one of the three leading mobile service operators in Taiwan.
Pre-Merger Market Share by Revenue1Pre-Merger Market Share by Revenue1 Post-Merger Market Share by Revenue1Post-Merger Market Share by Revenue1
Distant #3 & #4 #2:
FET +KGT
32.3%
#1CHT
34.7%
MBT2.5%
#3:TCC+
TA30.6%
Solid #2
25
Significant SynergiesSignificant Synergies
SynergiesSynergies Network and
Capex
Synergies
Revenue Synergies
Operating Cost Synergies
The combined entity is expected to reap cash flow synergiesof NT$ 3-5 bn over the next two years in comparison with the sum of the
original projected cash flow for the two companies
26
Enhanced Product Range Enhanced Product Range and Distributionand Distribution
Combined entity will offer separate brands to target different segments
The wider product offerings range can be tailored towards meeting specific customer needs in various market segments
460 sales outlets combined, constitutes 37% of the total market
Broadened product
offerings to fulfill
customer needs
Hala 900 哈啦 900型
Hala 560 哈啦 560型
EasyTalk 輕鬆打
27
Establishing aJoint IntegrationSteering Committee
Integration ofBackend Operation +Optimization of Equipment andInfrastructure
Roll Out of aCoordinatedMarketing Plan+ Distribution Strategy
Re-focus onFuture ApplicationsandIncreasing ARPU
Smooth Integration Process Smooth Integration Process in Progressin Progress
Clear Roadmap for Smooth Integration
Oct 2003 Jan 2004 March 2004
28Oct’03 Nov Dec Jan’04 Feb AprMar
Merger agreement signedShareholder meeting approved merger
Management Coordination Team
10/14 MCT formedNew Management Team
Organization & location
Propose NewCo 7 division structure
Relocate to Nei-Hu HQsOrganization ready
Legal Process FTC approved
DGT approved
Integrated logistics & procurementNetwork & Technology
3G friendly user trial
Two-way roaming
Sales & Marketing Re-mapping PoP
Bill payment handled by both stores
Coordinated marketing plans
One-way inter-network roaming
First closing date
Major milestone / Key date
ex-KGT employees joined new co
Business Plans & Budgeting Process
Release Jan. results concur w/ excited market respond
Marketing event with full-scale joint operations
Integrated network ops flows Centralize NOC center
Board approve consolidated business plan & budget
Shareholder meeting approved NEW KGT merger back to FET
OTC approved
Merger completed
Integration ExecutionIntegration Execution
29
Realizing SynergyRealizing SynergyDirect Controlled Channel and Growing GADirect Controlled Channel and Growing GA
FET + KGT successfully acquired 39% GA of total market and 80% of the market’s high rate plan for the first 2 months of 2004
FET + KGT successfully acquired 39% GA of total market and 80% of the market’s high rate plan for the first 2 months of 2004
Jan-Feb’04 Share %
FET + KGT 259,869 39%
TCC + TAT 122,200 18%
CHT 230,000 34%
Others 57,800 9%
Total 669,869 100%
2002 2003 % Growth
FET 163 238 + 46%
KGT 101 195 + 93%
Total 264 433 + 64%
Direct-controlled channels facilitate Direct-controlled channels facilitate mobile data introduction and mobile data introduction and
ensure quality servicesensure quality services
Increasing Point of PresenceIncreasing Point of Presence Promising Post-paid Gross AddsPromising Post-paid Gross Adds
Source: Company source
Source: Company source
30
Realizing SynergyRealizing SynergySeamless Cross-networkSeamless Cross-network
Increasing Network Traffic & Complementary Traffic DistributionIncreasing Network Traffic & Complementary Traffic Distribution
Monthly Total MOU per Region - Nokia/Lucent Network
0
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
400,000,000
450,000,000
500,000,000
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37
Reg
ion
al M
OU
0
200,000,000
400,000,000
600,000,000
800,000,000
1,000,000,000
1,200,000,000
Isla
nd
wid
e To
tal M
OU
North1 North2 Central South Islandwide
20012002 2003
Monthly Total MOU per Region - Ericsson Network
0
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
400,000,000
450,000,000
500,000,000
2001
/01
2001
/03
2001
/05
2001
/07
2001
/09
2001
/11
2002
/01
2002
/03
2002
/05
2002
/07
2002
/09
2002
/11
2003
/01
2003
/03
2003
/05
2003
/07
2003
/09
2003
/11
2004
/01
Reg
ion
al M
OU
0
200,000,000
400,000,000
600,000,000
800,000,000
1,000,000,000
1,200,000,000
Isla
nd
wid
e To
tal M
OU
North1 North2 Central South Islandwide
2001 2002 2003
Provide seamless cross-network coverage in both voice and data services with the largest capacity in Taiwan
Complementary traffic distribution between north and south
Improve service quality through optimized network resources
Turn on national roaming
Redeploy BTS for capacity enhancement
Share selected network elements (i.e.. SMSC, MMSC, USSD, IN, etc)
Integrate to a common core network and/or switch site, data network, and transmission network
Monthly Total MOU per Region – Ericsson Network
Monthly Total MOU per Region – Nokia/Lucent Network
31
CHT$17.3 bn
TCC+TAT$13.3 bn
FET+KGT$15.5 bn
ItemUnit: NT$ Million
Q1 2004YoY
GrowthQ1 2003
KGTService Revenue 5,324 6,487 + 21.8%
Service EBITDA Margin % 35.5% 46.2% + 30.1%
FET+
KGT
Service Revenue 13,478 15,534 + 15.3%
Service EBITDA Margin % 39.8% 46.4% + 16.6%
Realizing SynergyRealizing SynergyPromising 2004 Q1 FinancialsPromising 2004 Q1 Financials
FETService Revenue 8,154 9,048 + 11.0%
Service EBITDA Margin % 42.6% 46.6% + 9.4%
Q1 2004 Service Revenue:Q1 2004 Service Revenue:
Solid # 2Solid # 2approaching #1approaching #1
Source: Company source
32
FET 2004 Big BangFET 2004 Big Bang
Strengthen Distribution Channels via:
Cross-selling products in FET & KGT outlets
Full function service capability
Strengthen Distribution Channels via:
Cross-selling products in FET & KGT outlets
Full function service capability
Offer Middle Rate Plan for cross-net Offer Middle Rate Plan for cross-net
Open 2 way roaming for capacity efficiency
Open 2 way roaming for capacity efficiency
FET Town & Mobile Promotion Van FET Town & Mobile Promotion Van
i-mode on FET network i-mode on FET network
More to come within days….. More to come within days…..
33
Reach Us or We Will Reach YouReach Us or We Will Reach You
Mobile Promotion Car & FET Segway Mobile Promotion Car & FET Segway
www.fetnet.netwww.fetnet.netFET Town, Karaoke Dorm, & 400+ StoresFET Town, Karaoke Dorm, & 400+ Stores
34
Sound Performance in Stock PriceSound Performance in Stock PriceFET’s Stock Price FET’s Stock Price
FET & KGT Merger announced
Effective date of merger
46% growth in less than 6 months
35
Anywhere, Anywhere,
anytime, anytime,
communications enriching communications enriching
the lives of peoplethe lives of people
生活有遠傳 溝通無距離 人生更豐富
36
Q & AQ & AWebsites Email
Investor Relations
Public Relations
Investor Relations
Public Relations
http://www.fareastone.com.tw
http://www.fetnet.net
http://www.fareastone.com.tw
http://www.fetnet.net
For Further Information:
38
Forms of Merger & AcquisitionForms of Merger & Acquisition
M&A
Basic
MergerNew Set-Up
Absorbing / Dissolve
Acquisition
Equity
Business / Operation
Asset
Derivative
Spin-Off
Swap
Tender Offer
Leveraged Buy-Out
Management Buy-Out
39
Strengthens Competitive Positioning in the Taiwan Mobile Market
Creates Significant Synergies in Capex, Opex and Revenues
Enhances Product Range and Distribution
Establishes Strategic Relationship with DoCoMo
A Fair Transaction that Creates Long-Term Shareholder Value
Merger BenefitsMerger Benefits
40
Enhanced distribution network and coordination of marketing & sales, customer databases
Complete range of product offerings (e.g. new data and multi-media services)
Cross-selling at jointly-run retail outlets
Continue to lead in the high ARPU mobile data market
Enlarged combined customer base
Significant SynergiesSignificant Synergies Revenue Enhancement and Leading Data/3G ServicesRevenue Enhancement and Leading Data/3G Services
Super i-Style
GPRS
SMS
Intelligence Commerce
Br@vo
Mobile Multimedia Service (MMS)
i-mode
e-Commerce
Games
eMails
Data and 3GData and 3GData and 3GData and 3G
FET KGT
Dual offering structure that provides maximum opportunity to capture mobile data sector
Enhanced resources of combined entity will enable the merged company to capture leadership position in 3G services
Dual offering structure that provides maximum opportunity to capture mobile data sector
Enhanced resources of combined entity will enable the merged company to capture leadership position in 3G services
41
Combined spectrum: 22.5Mhz in 900 & 1800 Mhz and 35Mhz in 3G
Significant immediate savings in capex in the next two years
Consolidate cell-sites to ensure quality and efficient network coverage
Improved service quality through optimized network resources
Combined spectrum: 22.5Mhz in 900 & 1800 Mhz and 35Mhz in 3G
Significant immediate savings in capex in the next two years
Consolidate cell-sites to ensure quality and efficient network coverage
Improved service quality through optimized network resources
Significant Synergies Significant Synergies Network and Capex SynergiesNetwork and Capex Synergies
NetworkNetwork
Turn on national roaming Redeploy BTS for coverage extension Shared selected service network (i.e.. SMSC,
MMSC, USSD, IN, etc) Integrated to a common core network and/or
switch site, data network, and transmission network
Cell-specific handover around coverage holes of either network
Turn on national roaming Redeploy BTS for coverage extension Shared selected service network (i.e.. SMSC,
MMSC, USSD, IN, etc) Integrated to a common core network and/or
switch site, data network, and transmission network
Cell-specific handover around coverage holes of either network
ITIT
Economies of scale in IT operation and systems Shared Services Elimination of duplicated S/W Leveraging negotiation power in R&M
Opportunity to build disaster recovery at lower cost
Economies of scale in IT operation and systems Shared Services Elimination of duplicated S/W Leveraging negotiation power in R&M
Opportunity to build disaster recovery at lower cost
42
Economies of Scale and Scope
Jointly source handsets and network equipments to gain leverage over vendors
Increased Market Power
Improved repair and maintenance costing through better contracting terms
Increased bargaining power of content and service providers
Complementary Resources
Back office consolidation including customer service and call center
Joint distribution and retailing with co-branded shops
Reduction in interconnect costs between customers of the combined operations
More Effective Sales and Marketing
Enhanced Information System and Customer Database
Significant SynergiesSignificant SynergiesOperating Cost SynergiesOperating Cost Synergies
43
Investment HighlightsInvestment Highlights
Strengthens Competitive Positioning in the Taiwan Mobile Market
Creates Significant Synergies in Capex, Opex and Revenues
Enhances Product Range and Distribution
Establishes Strategic Relationship with DoCoMo
A Fair Transaction that Creates Long-Term Shareholder Value
A Well Planned Integration Process
44
The Combination Stage
This stage is characterized by an increase in the environmental uncertainty. Several concerns are related to the structure, the culture of the company. Each organization involved creates a planning team that has to look for options for integrating the two partners. Human resource professional should help team to schedule meeting and should play a facilitator role. Together with the planning team, human resource professional should set up standard related to:
- The evaluation of employee skills
- The selection processes of employees of the companies involved.
- The comparison of compensation parity parameters between two organizations involved.
- The integration of employment policies of both companies in order to have one union contract for the whole new company.
45
Culture in a Merger/acquisition environment
The culture of a merger/acquisition should reflect the beliefs, values, and expectation that are share by the organizational members.life. While two companies are in the combination process, the integration of the two cultures are important to the success of the new company. According to Buono & Bowditch, there are four levels of culture types integration.
Cultural pluralism: This approach of culture occurs when the two companies involved do their activities independently. The two companies belong to the same corporate that goal is to spread its risk.
Cultural Blending: This type of culture has a purpose to unify the two distinct organizational cultures. These types of culture are related to two companies that have equal power in a merger environment.
Cultural takeover: This case is usually related to an acquisition environment. The culture of the acquiring firm culture replaces that of the acquired organization.
Cultural resistance: This approach occurs when there is a conflict between the culture of the two organization partners. In this case, it is important to anticipate this eventuality of conflict.
In general, it is important to find out differences and similarities between the two partners in a merger/acquisition environment. This understanding may help the manager to face the cultural resistance.
47
1. where an enterprise and another enterprise are merged into one;
2. where an enterprise holds or acquires the shares or capital contributions of another enterprise to an extent of more than one-third of the total voting shares or total capital of such other enterprise;
3. where an enterprise is assigned by or leases from another enterprise the whole or the major part of the business or properties of such other enterprise;
4. where an enterprise operates jointly with another enterprise on a regular basis or is entrusted by another enterprise to operate the latter's business; or
5. where an enterprise directly or indirectly controls the business operation or the appointment or discharge of personnel of another enterprise.
Fair Trade Act of 1992, Article 6, Paragraph 1
Source: Fair Trade Commission, Executive Yuan, ROC