Running header: THOMPKINS AUTO GROUPThompkins Auto GroupAmanda PerezKyra SprengerShari SmithAvelyne PrinceKornika DegannesDr. Robert C. ForresterMidwestern State UniversityAdvanced issues in Corporate FinanceSpring 2017
TELETECH CORPORATION AbstractTeletech Corporation is a telecommunications company and is one of the dominant telecommunications services providers. Firstly, this case looks at whether Teletech Corporation should partake in a takeover or not. They were underperforming in the market and some analyst felt like a takeover was needed to recover from their poor performances. A second issue was the hurdle rate and whether Teletech Corporation should have single or multiple hurdle rates. The firm also had to decide whether to sell the Products and Systems segment because this segment was underperforming considerably.
Teletech Corporation 1Teletech Corporation:“Provider of integrated information movement and management;” that’s how Teletech Corporation defined itself. The company, headquartered in Dallas, Texas had two main business segments: telecommunications services, which provided long-distance, local, and cellular telephone service to business and residential customers, and the products and systems segment, which engaged in the manufacturing of computing and telecommunications equipment. In 2004, telecommunications services had earned a return on capital of 9.10%, while products andsystems had earned 11%. The current book value of the company’s net assets was $16 billion, consisting of $11.4 billion allocated to telecommunications services, and $4.6 billion allocated to products and systems. Moreover, an internal analysis suggested that telecommunications services accounted for 75% of the market value of Teletech, while products and systems accounted for 25%. The management applied a hurdle rate of 9.30% to all capital projects and in the evaluation of the performance of business units. Over the last 12 months, Teletech did not do well financially. Their shares did not keep upwith the industry indexes for telephone, equipment, or computer stocks. Teletech had increased competition in telecommunications, while performing poorly in the Products and Systems segment.