Report on Network Services Companies and their acquisitions
Shared by: bharatvij1986
Network Services Companies and Valuation Network Services companies act as a facilitator between the actual service providers and the end customers. They serve across different telecom technologies for addressing the network life-cycle requirements of telecom service providers and technology providers. Network Sevices Companies usually provide the following services to their clients: 1. 2. 3. 4. 5. 6. Network Planning & Designing. Network Deployment. Network Operations & Management. Infrastructure Management. Energy Management. Other Professional Services. GTL Limited GTL Limited, a Global Group enterprise, is a leading Network Services company, offering services and solutions to address the Network Life Cycle requirements of Telecom Carriers and Technology providers (OEMs). GTL’s consolidated revenues for FY 2008-09 ending March 31, 2009 stood at Rs. 1945.09 Crores. Today GTL executes projects across 44 countries, has built over 70 cellular networks, installed and commissioned over 51,000 sites. Global Holding Corporation Pvt. Ltd. is the holding company of “Global Group” that has 6 operating companies, two of which are listed on Indian Stock Exchanges. The Group has Operations across 44 countries, Revenues in excess of US $650 million FY 09E and Balance sheet size of over US $2 Billion. It employs more than 25,000 professionals of 22 nationalities and supports 18 social causes. For over 2 decades Global Group has been partnering with leading telecom operators and OEMs offering its expertise in wireless communications. From 2G Networks to 3G and 4G, Global Group provides complete life-cycle solutions around Network Services. The services include Network Planning and Design, Network Deployment, Network Operations and Maintenance, Infrastructure Management, Energy Management and Professional services. The Group's principal activities are to provide network engineering and customer management solutions, other allied businesses such as Enterprise Networks, E-Business Infrastructure and Software Development. The products and services range from building complex voice and data networks to highend turnkey telecom networks for service providers and utilities in India and abroad. The Group operates in the United States, the United Kingdom, Germany, Singapore, Middle East, Mauritius, New Zealand and Australia. On Dec 2007, the Group acquired ADA CellWorks (Malaysia), Genesis (UK) and Strategic Communications Services in the past few years. These acquisitions has further opened international markets for the group. Valuation A valuation is an assessment of the value of a company. This is measured in dollars and is usually represented as a share price - i.e. the total equity value divided by the number of shares. Business Valuation has become an intrinsic part of the corporate landscape. The corporate landscape has witnessed dynamic changes in the recent years as mergers and acquisitions, corporate restructurings, and share repurchases are happening in record numbers, both in the United States and abroad. At the core of the dynamics of all these activities stands some notion of valuation. The valuation methods are not only necessary for accounting purposes but they also serve as roadmaps for the angel investors, venture capitalists and corporate acquirers in order to know the true value of a company’s assets. Finding a value for a company is no easy task -- but doing so is an essential component of effective management. The reason: it's easy to destroy value with ill-judged acquisitions, investments or financing methods. How a business is valued depends on the purpose, so the most interesting part of implementing the valuation methods will be to see how they work in different contexts -- such as valuing a private company, valuing an acquisition target, and valuing a company in distress. Valuation Methods Valuation is the attempt to determine whether a stock is fairly priced. According to financial theory, a stock should be valued at the future cash flows it will generate, discounted by an appropriate rate. But both future cash flows and an appropriate discount rate are highly uncertain, and thus investors seek additional valuation methods. The most common valuation method is the price earnings ratio (P/E), which is the price divided by earnings per share (EPS). But this valuation can miss the mark because of accounting vagaries and the time-span chosen for EPS. Moreover, an earnings-based valuation won't work for a new company with loads of promise but no profits as yet. Other recognized valuation methods are similarly useful, and similarly flawed. A valuation based on sales recognizes the firm's revenue-generating power -- but bankrupt firms too often have plenty of revenue. A valuation based on book value uses audited accounting figures, but historical asset values are often wrong. Thus investors tend to use a variety of valuation methods to decide whether the current stock price over- or undervalues a stock. Some of the important valuation methods are mentioned below: 1. Assets Accumulation method - All the assets of the company are realised at the market value and outsiders liabilities are deducted from the realised amount. 2. Market valuation - Market value is determined by multiplying the share quoted price of the company with the number of issued shares. 3. Discounted cash flow method - One of the important valuation methods and a strong tool because it measures the cash generation potential of the business. Future cash flows of the company are discounted with the weighted average cost of capital used in the business. 4. Price earning multiples valuation - This is also one of the most widely used tool to value a business. Initially price earning ratio is found and then this price earning multiple is multiplied with the net income to determine the cost of business. 5. Replacement cost and Realisable value method - Replacement cost method is used when a business is to completely replaced by another business. Realisable value method is used at the time of winding up of the business. Also called as Liquidation method. The most suitable method for the valuation of network engineering firms for acquisition would be either discounted cash flows method or price earning multiples valuation method.