Impact of Acquisition on Industry of Vodafone

0 Comment

1.1 In anticipation of Vodafone’s attempt for takeover, Mannesmann acquired Orange. This reduced the chances of the merger because of stock restrictions. Also, a merger of Vodafone with Mannesmann-Orange would invite anti-competitive regulations of the European Commission.
1.2 In response to the bid by Vodafone, Mannesmann undertook two measures to thwart takeover. First measure was to attempt to portray Vodafone’s offer as a value-destroying measure. Secondly, Mannesmann hoped to present technical arguments to call into question the success of the bid. (Hopner and Jackson, 2001) In response to Vodafone’s argument that fixed line networks were a thing of the past, Mannesmann argued that a combination of Fixed-line network and internet was the future of communications technology. If this fact is ignored, then shareholder value would be destroyed. They also criticized Vodafone’s underestimation of internet, and also their strategy to achieve scale through minority participation in many countries.
1.3 Another argument against the merger was the presence of Mannesmann in DAX and Euro-Stoxx. It was argued that the takeover would remove Mannesmann from these indices, leading to a divestment of index funds, which would result in falling share prices.
Mannesmann also raised technical and procedural questions from German company law and EU competition law and takeover code, to resist the divestment of Orange. German tax law was used to show that profits, to shareholders, from share swap would be taxed.
1.4 Mannesmann also used advertising campaigns to win shareholder’s loyalty. The final defensive strategy by Mannesmann was to announce Viviendi as its partner. But it failed.
2 Impact of Acquisition on Industry
2.1 The merger of Vodafone-Airtouch with Mannesmann created a huge Information Technology group with interests in the Americas, UK, Australia, Germany, France, Italy, Japan and Africa. The takeover initiated a flurry of deals among phone companies to compete with Vodafone-Mannesmann.
2.2 The merger has yielded a global giant in the telecommunications industry. It is the fourth largest company in the world by market capitalization (Quigley, 2000) in 2000. The merger accelerated the onset of wireless internet and wireless connectivity over devices like palmtops.
2.3 The merger also gave Vodafone access to a huge customer base on the continent, thus widening substantially its customer base. (Kaub, Guo and Wanzie, 2003)
2.4 After the takeover of Mannesmann by Vodafone, the German Government set about formulating merger and acquisition legislations in order to direct future takeovers and mergers.
2.5 Orange was demerged from the new group and subsequently sold to France Telecom in 2000, leading to the creation of Europe’s second biggest mobile phone group. It had a market capitalization of 150 million Euros.

Höpner, M. and Jackson, G. (2001). An Emerging Market for Corporate Control? The Mannesmann Takeover and German Corporate Governance. MPIfG Discussion Paper 01/4, Sep 2001. [Online]
Kaub, M., Guo, T. amp. Wanzie, T.(2003) Mannesmann and Vodafone –The unfriendly takeover. HMA Mergers amp. Acquisitions, International Business School Groningen.13 June 2003. [Online]
Quigley, P. (2000) Vodafone On The Rise. Wireless Week, Feb 7, 2000. [Online]