When Your Company Has Been Shopped

By Tom Taulli

Virtually no company has been spared pain in the telecom sector. In fact, many of the companies have gone bust (although, some have been able to re-emerge from the ashes, such as WorldCom).

One of the victims is AT&T. In fact, even when telecom was booming, AT&T had a variety of problems. Although, the biggest problem was its declining core business of long distance.

To deal with this, AT&T went on a spending spree, such as shelling out over $100 billion buying cable and broadband companies.

Execution

Pulling off such deals was the easy part, though. Integrating massive acquisitions is another thing entirely. And, AT&T basically unwound its mergers.

No question, after the turmoil, AT&T is in a weakened state. Itís hard to believe that this once dominant company now only has a market capitalization of $14 billion ñ which, in the corporate world, is really not a big player.

Ironically, AT&T is now up for sale. This is not the official stance, but it is nonetheless clear to Wall Street.

Apparently, there were extensive discussions with BellSouth. However, the potential deal fell to pieces when BellSouth walked away. Actually, BellSouth has a reputation for walking away. Yet, AT&T thought that this time would be different.

Now, the perception of AT&T is that it will be a tough sale.

Conclusion

What lessons to draw from this? It is critical to keep sell-out negotiations confidential. It can be very damaging if your company essentially becomes ìshoppedî; that is, everyone has seen your deal and has passed on it. This lowers the valuation and could also damage the operations.

Also, make sure you do some background checks on the prospective buyers. Have they done deals before? Or do they tend to sniff around and then leave?

In fact, AT&T should have been wary. After all, the regional Bell companies are in a much better position and they can dictate terms. If AT&T wants something that is too attractive, then it should have instead just avoided the selling process entirely with the regional Bell companies.

MergerPlace is pleased to have the esteemed Mr. Tom Taulli as the managing editor of our MergerPlace M & A Advisor™ E-zine.

Tom Taulli is an expert in the M&A process. He is the author of the critically acclaimed The Complete M&A Handbook (Random House) as well as six other books written for publishers such as Bloomberg and McGraw-Hill. Tom also teaches M&A at the USC School of Business.

Tom has been quoted extensively in the press, including the Wall Street Journal, USA Today, Barron's, and The Los Angeles Times, and has provided commentary on CNBC, CNN, and Bloomberg TV, as well as appeared on a variety of top radio stations across the country.

Tom's books are available for purchase in our bookstore.

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