Mergers and Acquisitions

Case Studies

There are a number of prime examples of the success (and failures) of Mergers and Acquisitions.


Case Study #1: Freeserve Plc


Freeserve: T-Online or Wanadoo?

Freeserve Share Price (Since Flotation)

Freeserve's own romances are proving as compelling as the comings and goings of Caroline, its online drama heroine. After a long and ultimately unsuccessful courtship with Germany's T-Online, the UK market leader in retail internet access is again in negotiations which could lead to an offer - most likely from Wanadoo, the internet subsidiary of France Telecom, though Tiscali is also interested. Freeserve is not facing a cash squeeze in the literal sense, but its options are clearly more restricted with Dixons as its parent than they would be with cash-rich Wanadoo.

Shareholders are unlikely to be cheering in the aisles at the prospect of an all-share bid which Freeserve says is unlikely to be at a substantial premium to the current share price of 148p. Back in June, T-Online appeared willing to offer up to 600p. It is unclear, however, how tangible the offer was. T-Online's management difficulties since then suggest Freeserve did well to avoid that particular morass. In any case, the German ISP was offering its paper - which by now would be worth perhaps 240p a Freeserve share, not 600p.

Despite a superior business performance, Freeserve continues to trade at a 55-65 per cent discount, in terms of enterprise value to revenues, to T-Online or Wanadoo. Narrow that valuation gap and add in possible synergies with other companies in the France Telecom group - Orange and NTL - and the idea of trading in Freeserve shares for a stake in an enlarged Wanadoo starts to look more appealing than an evening in with Caroline.

(Extracts From: -


Wanadoo negotiates to buy Freeserve for 3 billion euros

Following the failure of negotiations with T-Online, the leading UK intent access provider, Freeserve, is in advanced discussions with Wanadoo, the France Telecom subsidiary. The French Telecoms operator is obviously speeding up its move onto the UK market, announcing that Wanadoo is negotiating to buy Freeserve through an exchange of shares.

Freeserve has 2 million subscribers in the UK and is 80 per cent owned by retailer Dixons. Freeserve's market capitalisation has fallen from 4bn in April to 1.47bn, making it an investment opportunity for the French group, which could jump to the top spot in the UK and double its number of subscribers. The price for Freeserve, according to analysts, could be $1.8bn, far below the 6bn suggested in May.

(Extracts From: Les Echos (France) -


French firm in talks to buy UK's Freeserve

Wanadoo SA, the French Internet-service provider 88%-owned by France Telecom, has confirmed it has entered talks on the possible acquisition of UK ISP Freeserve PLC. The talks are taking place amid continued consolidation in the European ISP market, where several second-tier players are seeking new parents. Freeserve has been on the market for several months, and its current owner, the electrical goods retailer Dixons Group PLC, has suggested any bid would be unlikely to be valued above its closing share price on Tuesday of 146p ($2.07). Based on that price, Freeserve's market valuation is around GBP1.5bn ($2.13bn). It is expected the Wanadoo transaction, if completed, would take the form of a share swap.

(Extracts From: The Wall St Journal -


Case Study #2: TadPole Technology Plc


Tadpole: Acquiring Cycle

Tadpole Technology is raising more than 11 million to fund a US acquisition and accelerate the growth of its next generation peer-to-peer technology.

'The fact that we have been able to raise this money at a time when the market is in the state it is, proves that we have a very strong proposition', stated chief executive Bernard Hulme.

Tadpole (TAD) is buying Cycle, a Silicon Valley-based maker of small, rack-mountable high-powered Sun Microsystems computers. Tadpole will pay $8 million (5.6 million) in Tadpole shares. The Cycle business complements Tadpole's existing Sun hardware business, Tadpole-RDI, which makes portable computers based on Sun's designs that run the Sun Solaris operating system and hence all Sun applications. Cycle's products appeal particularly to Internet Service Providers (ISPs), Application Service Providers (ASPs), network infrastructure providers and any large company that needs to fit a lot of high-powered Sun computers into a small space.

The money is not just to fund the acquisition, but also to fund the planned growth of the hardware business, and, more importantly, growth in the company's peer-to-peer 'Magi' suite of software that it purchased from Endeavours Technology early this year.

'We think we have a fantastic product line here and we want to speed our product road-map. We have already taken revenues for the Magi products, but now want to put our foot down on the gas and exploit the market', Hulme said.

(Extracts From: City Wire -

Key Points :

  • The strategic acquisition of Cycle for a total consideration of $8 million (5.6 million) in Tadpole shares to further accelerate Tadpole's growth in the design, development and sale of specialist high-density motherboards and computer systems for the customers of Sun Microsystems, Inc ("Sun").

  • The raising of 11.2 million (net of expenses) by way of the Placing and Rights Issue. Approximately 5 million of the proceeds raised will be used to provide additional working capital for Tadpole's enlarged hardware division. The balance will be invested in accelerating development and roll-out of the peer-to-peer web software products of Tadpole's Endeavors division, as well as extending the division's sales and marketing reach in new geographies and markets. The Placing and the Rights Issue have been fully underwritten by Beeson Gregory Limited.

  • Cycle designs and markets high-density, multi-processor, rack mountable computer systems. They enable Sun's customers in the embedded OEM, telecommunications and networking markets to install Cycle products as part of a corporate computer network infrastructure.

  • Tadpole is already generating revenues from its peer-to-peer technology. It has won an order for MagiDispatch, an intelligent dispatching solution for call centres and field service workers. One of the components of the MagiDispatch solution is MagiWAP, which metamorphoses the mobile phone into a transportable Internet business tool. MagiWAP enables WAP phone users to access, read, move, fax and print documents stored on web-enabled devices, whatever their location, whatever the time, without the need to first download the document to the WAP phone.

  • The MagiDispatch solution complements the software of the Tadpole-Cartesia division and the J-Slate wireless Internet device. The solutions address mobile workforce productivity issues and gains sought by the utility and telecommunications industries. In the past financial year, Cartesia has extended its customer base - GPU Energy, Norweb, ScottishPower, TXU Electric and Gas, and Vivendi's Three Valleys Water are examples.

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