Mergers, Acquisitions and Takeovers Case Study

The Rise of Private Equity Firms: The Case of Clear Channel Communications Inc.

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Abstract:
On November 16, 2006, Clear Channel Communications Inc., the biggest US radio station owner agreed to be acquired for $18.7 billion by an investor group led by Thomas H. Lee Partners LP and Bain Capital Partners LLC. The media giant planned to sell 448 of its radio stations, all located outside the top 100 markets as well as its 42-station television group, located in smaller markets. Collectively, the properties made up less than 10% of the company’s revenues in 2005. Clear Channel owned and operated 1150 radio stations and also retained a majority stake in Clear Channel Outdoor, the worldwide outdoor advertising specialists. Under the terms of the deal Thomas H. Lee Partners LP and Bain Capital Partners LLC would assume $8 billion of Clear Channel Communication’s debt, taking the overall takeover price to $26.7 billion. The investment group had competition from another consortium made up of Providence Equity Partners, Blackstone Group and Kohlberg Kravis Roberts (KKR). According to some analysts, the tremendous long-term growth opportunities of Clear Channel Communications in both the radio and outdoor business would create value for the private equity groups. The case will present the buyout history and the synergies arising from the acquisition for both the groups. The case further deals with the emergence of private equity firms as the ‘maverick investors’ and the recent flush of mergers and acquisitions by them.

Pedagogical Objectives:

• To understand the US radio industry
• To understand the business model of Clear Channel Communications Inc., the largest radio station company in United States
• To understand the rise and dominance of the private equity companies globally
• To discuss and analyse the potential synergies and challenges arising out of the deal.

Keywords : Mergers,Acquisitions,Alliances Case Study;Clear Channel Communications Inc; Private equity; Bain Capital Partners LP; Thomas H Lee Partners LP; HCA (Hospital Corporation of America); Sungard Data System; US radio industry; Podcast; Digital broadcasting; High definition; Snapple Beverage Group; Mezzanine capital; Leveraged buyout; Telecommunications Act 1996; CBS Outdoor

Contents : 
Radio Industry in United States
Clear Channel Communications Inc
Thomas H. Lee Partners LP
Bain Capital Partners LLC
The Buyout Story
Top Ten Radio Companies in US
Business Divisions of Clear Channel Communications Inc.