The trend of M&A was extraordinary and boosted by the new economy hype. Between 1974 and 1994 the average number of reported M&As was approximately 2,400 per year. However, five following years increased this trend by almost 50% each year, with almost 13,500 M&As reported in 1999. According the American Management Association (AMA) fifty percent (50%) of all mergers and acquisitions fail within the first two years. In this report, takeover of the UK based mobile company Orange by the French telecommunication company France Telecom in the end of 2000 has been presented.
The analysis will be based on the annual reports of the two companies and will aim to explain how and why the takeover took place, and how the market was affected by the takeover. It is clear though that the takeover was not hostile and that Orange was in need of a review and boost in its financial strategy. The merger of Orange and France Telecom is a combination of two highly successful companies and management teams that will create one of the world's leading telecommunications groups.
The merger will be based on the principles of mutual respect and cooperation. The successful integration of the two companies' complementary strengths in mobile, fixed and data and Internet services will be the highest priority. When Mannesmann's management indignantly rebuffed Vodafone's initial bid, in November 1999, they were supported not only by their workforce, but also by German society more widely. This was the first ever foreign hostile bid launched for a German company.
It seemed to strike at the heart of Germany's model of capitalism, challenging the industrial and political consensus that had served the country so well over the previous forty years. Since its launch in 1985, Vodafone had grown to be Britain's largest mobile phone operator, with one in eight people in the UK owning a Vodafone by 1999. By 1999, when it acquired Air Touch Communications Inc. of the US it had become a significant world player in the rapidly expanding mobile telecommunications market.
The take-over of Mannesmann catapulted Vodafone into the world's top ten companies, making it the biggest mobile phone operator in the world. Moreover, Orange was sold subsequently in 2000 to France Telecom in a deal worth around 31 billion pounds creating Europe's second largest mobile phone group with market capitalization of 150 million Euro. Former Orange customers under the Mannesmann's name were transferred to France Telecom automatically after Orange was dismissed by Vodafone when taking over the Mannesmann.
Orange was the third largest mobile phone operator in Great Britain in terms of number of clients. It had been created in 1997 and specialized exclusively in cellular telephones. In 1998 it had sales revenues of approximately one and one quarter million dollars, and at the end of 1999 its customer base in the UK was close to 5 million and millions more in newly expanded territory in Belgium and Switzerland. In some segments, such as pre-paid services, Orange had become the leader. Hence, with the acquisition of Orange, France Telecom was assured of a privileged position in the British market.
Ranked number 39 in the FT Global 500, France Telecom is a global telecommunications group. In fiscal 2000 sales totaled $31. 7 billion whilst net income totaled $3. 4 billion. The company's primary focus is fixed line communications in France but it is moving into new businesses and markets, particularly mobile and Internet markets and international business services. France Telecom is headquartered in Paris, France. As of March 2007 France telecom had 329 recorded subsidiaries and 44 recorded shareholders.