Merger and Acquisition for MasTec

Merger and Acquisition for MasTec

As the new head of Mergers and Acquisitions for MasTec, various factors will be considered in the company’s merger and acquisition strategy. According to Welch et al. (np), merger and acquisition strategy entails different aspects that are important to consider across financial, intellectual property, human resources, businesses, and legal dimensions. Understanding the dynamics around these aspects is important to achieve successful mergers and acquisitions. For this paper, two potential merger and acquisition targets for MasTec are identified and explored in terms of the company’s fitness. Additionally, information regarding the structure of offers to be given to merger and acquisition targets alongside a competitor analysis is provided.

Potential targets for merger and acquisition

AECOM

AECOM is one of the notable companies that operate in the construction industry in the United States. The company is considered a potential target for merger and acquisition because of the huge benefits that can be gained by acquiring the company. Notably, the company is an American Multinational company whose offices are located in Dallas, Texas. The company, which has been in operation since 1990, has grown tremendously and employs approximately 51,000 employees. Since the company is huge, it is anticipated that a merger and acquisition deal between it and MasTec will be record-breaking, defeating its largest acquisition record of $1.1B. The target company has been involved in notable projects in New York, such as One Trade Center and One Vanderbilt Avenue. Despite the vast resources owned by the company, it has faced challenges in the recent past, whereby its revenues have declined. Additionally, the company’s reputation has been negative, with customers accusing the company of complex working structures, slow payment, and retainage issues. Essentially, these weaknesses make the company vulnerable to accepting the option of merger and acquisition.

A merger and acquisition of MasTec and AECOM will draw various benefits that are considered major motivations for the acquisition of the company. First, the company is large in various dimensions, such as the number of employees, areas of operation, and revenues. Therefore, combining with MasTec will attract huge economies of scale that can lead to significant benefits in the market (Ishwarye, 26). Combining the two companies will create an even stronger company in the industry by achieving more efficiency and productivity. Second, the merger will lead to access to the best talent and, thus, more competitiveness in the market. Notably, this is so because when the company is acquired, its top talent will be acquired, which will strengthen MasTec’s competitiveness. Third, the merger and acquisition will alienate risks faced by the merger as mergers and acquisitions are a form of expanding portfolios and reducing risks through diversification. Essentially, these benefits will ensure that the current troubles that AECOM is facing are eliminated and that it returns to profitability, making the company a good fit for merger and acquisition.

Various challenges will be expected in the merge with the AECOM plan. First, not all employees that will be acquired alongside the company may be retained after the merger and acquisition process. As a result, MasTec may be accused of causing unemployment. Additionally, the prices charged by MasTec may not necessarily go down after the merger and acquisition of AECOM due to reduced competition in the market. When these challenges are compared to the potential benefits of the acquisition, the company is a good consideration for merger and acquisition.

Windstream Holdings

WindStream Holdings is an upcoming communication company that is considered a potential target for merger and acquisition by MasTec. Since MasTec is focused on mergers and acquisitions with businesses in the construction and communication industries, Windstream Holding fits well into the selection criteria. Essentially, Windstream Holdings is an emerging company that provides technology solutions to carrier partners, enterprise organizations, small businesses, and consumers. Also, the company provides advanced network communications through digital TV and bundled services. Regarding communication, which is MasTec’s main interest, the company offers local telephone, long-distance, high-speed internet, network access, and video services across various states in the US. The emerging business is expected to grow tremendously in the next five years, considering the significant developments that are taking place in the communication sector. A merger and acquisition with this business will ensure that MasTec becomes part of the anticipated future benefits the company will likely generate.

Acquiring this business is likely to lead to various benefits for MasTec. First, MasTec is likely to acquire innovative and quality staff that have been behind the success of this notable upcoming corporation. Acquiring such talent and skill can help the company succeed even in other dimensions outside the firm to be acquired. For instance, the upcoming business may have technological systems that can complement MasTec’s operations. Second, acquiring Windstream will mean that MasTec will have diversified its product portfolio and thus will enable the expansion of distribution channels. Third, the acquisition of Windstream will help reduce overhead costs via increased purchasing power and shared marketing budgets. Finally, MasTec will reap from the organic growth of Windstream since it is projected that the company will continue growing remarkably into the coming years.

It is important to consider potential problems that are likely to be encountered in the merger and acquisition of Windstream by MasTec before concluding that it fits well into the target criteria for merger and acquisition. One cited reason behind the merger and acquisition with Windstream is the likely future growth. However, the future is uncertain, and events that were not planned for can happen in the market and prevent the business from attaining the anticipated growth. Additionally, there might be differences in business cultures between the two firms, which can fundamentally influence how compatible their business can be and hinder the process of gains. Despite the challenges, MasTec should consider Windstream as a potential target for merger and acquisition because of the vast experience obtained from the many mergers and acquisitions done in the past.

Structure of the Offer to Potential Targets

For the first company, an offer for a merger will be presented as opposed to an acquisition offer. Notably, this means that the boards of directors for the two companies will seek to combine, and shareholders’ approval will be sought. If the shareholders approve, the two companies will officially merge and undertake the construction business as a single firm. In the offer to the company, the potential benefits that are likely to be acquired from the merger will be highlighted. Essentially, the merger structure will be horizontal, which connotes a situation where companies operating in the same industry and direct competition join together to gain more advantage from the market (Ibrahimi and Hicham, 1400). The following summary will be presented to AECOM.

For the case of Windstream, an acquisition option will be considered. Therefore, Mastec will seek to purchase more than 50% of the company’s stock and thus acquire the company. Essentially, a tender offer will be presented to Windstream whereby the intention to purchase the company’s outstanding stock for a specific price will be made. The offer will be made to shareholders. The offered structure is given below:

Potential Competition in the Merger and Acquisition Process

Competition is expected in the process of merger and acquisition. More competition will be anticipated in acquiring Windstream than merging with AECOM. Notably, this is so because all big businesses in the communication sector in the United States, such as Verizon, Charter Communications, Dish Network, and AT$T, are interested in the upcoming company. However, MasTec will draw a competitive advantage from its vast experience in mergers and acquisitions. Unlike these competitors, none have a vast history in mergers and acquisitions like MasTec. Therefore, the experience will be utilized as a competitive advantage to defeat them in the race to acquire Windstream.

Works Cited

Ibrahimi, Mohammed, and Hicham Meghouar. “Sources of value creation and destruction in horizontal mergers and acquisitions.” Managerial Finance 45.10/11 (2019): 1398-1415.

Ishwarya, J. “A Study on Mergers and Acquisition of Banks and a Case Study on SBI and its Associates.” International Journal of Trend in Research and Development, September 22 (2019): 26.

Welch, Xena, et al. “The pre-deal phase of mergers and acquisitions: A review and research agenda.” Journal of Management 46.6 (2020): 843-878.

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Decide whether you want to be the new head of Mergers and Acquisitions (M&A) so that MasTec can continue executing its M&A strategy. As part of your group project and presentation, you will be required to address the following:

Merger and Acquisition for MasTec

1. Identify two potential M&A targets per team member (business, division, assets) and explain why they would be a good fit. (2 pages per target)

2. Based on the information available and the Company’s overall business, how would you structure an offer for the target? Prepare a short analysis that supports the offer that you would present to the seller, detailing the terms of your transaction and why you would be a good partner.

3. Identify who you believe would be other potential bidders in a sales process. What would be some potential factors that would provide you an advantage in a competitive process?

Project Suggestions
• One of the main objectives of the class is to challenge the students to think analytically, especially as it relates to the M&A market. The group case study is a chance to demonstrate a grasp of the overall concepts from the course and work in a team environment.
• The case study provides an opportunity to present analysis and findings in an executive summary style manner. I would suggest ensuring the slides prepared are short and to the point with key messaging and themes