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Vodafone: A New M&A Era

 3 min read / 

Vittorio Colao, a 52-year old graduate of Bocconi University and Harvard Business School, became CEO of the British multinational Vodafone in 2008 and redefined the entire corporate strategy. He is known for his cost-efficient approach, his prioritization for profit and he isn’t reluctant to sell or buy other enterprises.

Not so long ago, Vodafone shook up the M&A market with the sale of their U.S. arm to Verizon Communications for $130bn. They sold 45% of their stake in Verizon Wireless, which is the biggest wireless operator in the U.S. The transaction consisted of $60bn in Verizon shares, $59bn in cash and $7.5bn worth of loan notes and reduced liabilities. Vodafone also received Verizon’s 23% stake in their Italian operation, which was valued at $3.5bn. This deal was the second largest corporate deal of all time, following Vodafone’s own $172bn takeover of Mannesman in 2000. This transaction was the biggest deal of that year.

The most important thing about this gigantic deal was that it sparked hope and optimism for the rest of 2013 in the M&A market. The transaction also gave Vodafone the opportunity to start focusing on the European market. The company wanted to grow in Europe, the region where Vodafone makes most of its money, and started seeking out further M&A opportunities.

Vodafone didn’t fail to deliver and several weeks later they acquired Kabel Deutschland, the German cable operator. The advisers were Goldman Sachs and UBS. Shortly after the sale of its U.S. arm, Vodafone already showed that it has a clearly defined strategy. They wanted to improve their telephone, television and internet services to their European customers and they wanted to do it as fast as possible. Some criticized the new, aggressive deal-making approach that defined Vodafone’s new CEO Vittorio Colao, but most of them welcomed it.

The newest acquisition of Vodafone is another cable operator. Last week, on the 17th of March, Vodafone confirmed the acquisition of Ono with the assistance of Morgan Stanley. This time they expanded geographically and acquired a Spanish cable operator. After a long negotiation process, the private equity owners of Ono and Vodafone settled on a $10bn offer. With the acquisition of the second-largest provider of provider of internet, television and telephone services in Spain, Vodafone will have the opportunity to increase their market share in the Spanish market.

With two acquisitions in the last six months, some people criticized Vittorio Colao’s new approach. Although he claims that his company uses a very pragmatic approach in every country with regards to their M&A activity, some people think that his deal-making addiction is too risky. Only time will tell if this is the case, but nonetheless Vodafone’s approach towards redefining its buy and sell strategy will hopefully show other companies that you have to change and take risks if you want to stay a leader in your industry.

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