merger & acquisition fet & kgt merger case study far eastone telecommunications president...

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


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


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


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


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


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


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


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


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


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


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


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%


Realizing SynergyRealizing SynergyPromising 2004 Q1 FinancialsPromising 2004 Q1 Financials

FETService Revenue 8,154 9,048 + 11.0%


Q1 2004 Service Revenue:Q1 2004 Service Revenue:

Solid # 2Solid # 2approaching #1approaching #1


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

[email protected]

Public Relations

[email protected]

Investor Relations

[email protected]

Public Relations

[email protected]

http://www.fareastone.com.tw

http://www.fetnet.net

http://www.fareastone.com.tw

http://www.fetnet.net

For Further Information:

37

Thank YouThank You

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.

46

Culture CompatibilityCulture Compatibility

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

merger & acquisition fet & kgt merger case study far eastone telecommunications president...

Documents

merger intermediaries

merger of yuan

horizontal merger

ma slide

ma merger combination

negotiation slide

record slide

process of ma