Lester Electronics Benchmarking

AT&T Inc.

A company that has experienced some similar situations as with the scenario is, AT&T Inc. (AT&T). AT&T was established in 1984 and was previously named SBC Communications (AT&T, 2007, p. 1). AT&T has over 67 million customers and have services nationwide as well as globally. They offer services in wireless communications, long distance services, local exchange services, as well as internet services.

In 2006, AT&T reported revenues of over $63 billion, which is an increase of 44.1% over the previous year (AT&T, 2007, p. 4). In the first quarter of 2007, AT&T reported a 5 year record high of $38.86 stock price. AT&T has increased earnings per share by more than 30%. Both Forbes and Business Week have labeled AT&T as one of the top performing companies in 2006 (AT&T Inc., 2003-2007, Ð'¶18). They have exceeded their competitors ideas as well as their own aspirations of where they would be in the industry. AT&T is constantly outdoing themselves. AT&T's strong brand image has also given them much value in the market and amoung their competitors.

According to AT&T's webpage, they say that, "In the face of dramatic changes to the competitive landscape triggered by the Telecommunications Act of 1996, SBC Communications Inc. embarked upon a series of acquisitions to establish itself as a global communications provider" (AT&T Inc., 2003-2007, Ð'¶58). AT&T's most recent mergers were, Cingular Wireless and YELLOWPAGES.COM, which catapulted them in the industry to be the largest communications holding company globally, based on revenue (AT&T Inc., 2003-2007, Ð'¶1). Because of this merger, "the company delivered more than $88 billion in value to stockholders last year in share price increases, dividends and share buybacks" (AT&T Inc., 2003-2007, Ð'¶2). In most recent months, AT&T has acquired Dobson Cellular One, and have started advertising its name change just in time for the holiday season. AT&T has followed through on their goals to become a world leader in telecommunications, including a global networking deal with General Motors worth over $1 billion in the next 5 years.

Alltel Corporation

Another company that has acquisition and merger experience is Alltel Corporation (Alltel), better known to most, as Alltel Wireless. Alltel was established in 1983 after the merger of Allied Telephone and Mid Continent Telephone (Alltel, 2007, p. 7). Alltel did not actually launch their cell service until two year later. Over the past 22 years and many acquisitions and mergers later, Alltel is the fifth largest wireless carrier in the United States (Alltel, 2007, p. 5). They offer local, statewide, and national plans. Alltel has roaming agreements with other providers, they are an independent partner with four (4) of the national carriers. Alltel's headquarters are in Little Rock, Arkansas, and are on the Forbes 500 list (Alltel Wireless [AW]), Ð'¶ 3).

In 2006, Alltel reported revenue of just under $7.9 billion, which is a 20% increase from the previous year. They have negotiated a multitude of agreements with other vendors to partner with or to purchase. According to Alltel's website (AW, Ð'¶ 2) "At Alltel, our first priority is responsible stewardship of our shareholders' investments. Each day we strive to grow without compromising our financial strength." Maximizing shareholder wealth is a big part of their philosophy. They have increased their customer base by millions, operating income has more than doubled, and their assets have tripled, all within the past 20 years (AW, Ð'¶1). Alltel has maintained the strongest balance sheet in the industry, with a 22% return to its shareholders, year ending 2006 (Alltel, 2007, p.18).

As of November 16, 2007, Alltel closed the merger transaction with two private equity groups, TPG Capital (TPG) and GP Capital Partners (GPCP)(AW, Ð'¶ 2). "Holders of Alltel common stock will receive $71.50 per share in cash under the terms of the merger agreement, which was adopted by Alltel shareholders at a special meeting on August 29, 2007" (AW, Ð'¶ 2). Because of the merger with GP and GPCP, Alltel is not longer its own entity, they no longer can sell stock as Alltel Corporation. During initial talks concerning the purchase or acquisition of Alltel, among the two equity groups were also Verizon Wireless as well as AT&T, which neither came to fruition.

Comparison

According to the text, Ross, Westerfield, & Jaffe, state that there are three ways a company can acquire another, merger