Case Study: Radio One, Inc.
Case Study: Radio One, Inc.
- Part A Corporate Valuation Date: 21-09-2009 Instructor: Dr. Oliver Spalt Course: 323058
Corporate Valuation
Faculty Economics and Business Administration, Tilburg University
P.W. Segers J.J.T.M. Zegers
779710 722085
1. Radio One’s opportunities and risks with respect to their acquisition policy We have identified four main benefits and five major risks with respect to the desired acquisition of 12 urban stations along with the nine stations in Charlotte, Augusta and Indianapolis. Potential benefits: 1. After the acquisition of the 12 urban stations, Radio One becomes the market leader in the African-American segment. The market leader is usually the most attractive negotiator for advertisement companies since it targeting the audience largely. Therefore, the acquisition can increase Radio One’s advertisement revenues. 2. Radio One describes in its strategy plan the intention to expand its business activity scope in the long run. The acquisition of the 12 urban stations provides greater opportunities for Radio One’s planned expansion into a broader scope of media, such as internet, cable radio and recording. Therefore, the acquisition affects the realization of its strategy positively. 3. The acquisition can create some synergies for Radio One since the 12 target radio stations are in the same line of business as the existing radio stations. Potential synergies can be realized by cutting costs and improve efficiencies. One straightforward way to do this is by merging some of Radio One’s departments, for instance marketing, finance, and etcetera. 4. The African-American audience can be characterized as a high growth market segment with 60% faster population growth and 150% faster income growth than the general population. The acquisition enables Radio One to provide radio services in much more markets for the African-American audience. In this way, Radio One can attract more African-Americans which will become a very
- Part A Corporate Valuation Date: 21-09-2009 Instructor: Dr. Oliver Spalt Course: 323058
Corporate Valuation
Faculty Economics and Business Administration, Tilburg University
P.W. Segers J.J.T.M. Zegers
779710 722085
1. Radio One’s opportunities and risks with respect to their acquisition policy We have identified four main benefits and five major risks with respect to the desired acquisition of 12 urban stations along with the nine stations in Charlotte, Augusta and Indianapolis. Potential benefits: 1. After the acquisition of the 12 urban stations, Radio One becomes the market leader in the African-American segment. The market leader is usually the most attractive negotiator for advertisement companies since it targeting the audience largely. Therefore, the acquisition can increase Radio One’s advertisement revenues. 2. Radio One describes in its strategy plan the intention to expand its business activity scope in the long run. The acquisition of the 12 urban stations provides greater opportunities for Radio One’s planned expansion into a broader scope of media, such as internet, cable radio and recording. Therefore, the acquisition affects the realization of its strategy positively. 3. The acquisition can create some synergies for Radio One since the 12 target radio stations are in the same line of business as the existing radio stations. Potential synergies can be realized by cutting costs and improve efficiencies. One straightforward way to do this is by merging some of Radio One’s departments, for instance marketing, finance, and etcetera. 4. The African-American audience can be characterized as a high growth market segment with 60% faster population growth and 150% faster income growth than the general population. The acquisition enables Radio One to provide radio services in much more markets for the African-American audience. In this way, Radio One can attract more African-Americans which will become a very
References: 1. Impact of Culture On Mergers and Acquisitions: A Theoretical Framework. International Review of Business Research Papers. Mohibullah., Vol. 5 No. 1 January 2009 Pp. 255- 264. 2. Why Do Mergers Fail? What Can Be Done to Improve their Chances of Succes? R. Salame. Key Strategy Papers. January 2006.