©2013 INSEAD Case Study
Also available: Teaching Note
Bell Canada, a publicly listed Canadian telecom firm, receives takeover offers from LBO (leveraged buyout) firms. A strategic acquirer, Telus, is also potentially interested. The case describes the synergies and efficiency gains available to both types of acquirer, which allows for a discussion about the respective contributions that a financial buyer (PE/LBO firm) and a strategic acquirer could bring to the target firm.
Pedagogical Objectives: (1) To examine the rationale for firms to go through an LBO – industry, financial, resource-based drivers. (2) To compare and contrast the sources of value creation generated by financial vs. strategic buyers. (3) To examine the strategy, notably the internal restructuring actions, that a target can deploy when facing an LBO “threat”. (4) To perform a financial valuation of BCE: (i) as a stand-alone firm (DCF); (ii) with a strategic buyer (DCF); (iii) with a financial buyer (APV). (5) To discuss the role of the different stakeholders (shareholders, managers, bondholders) and how they capture value through an LBO.