Tvw Polish TV Case Analysis Essay Example

defaulting on its debts. At present, the company requires an amount of $7.4mm.

TVW currently has various options to overcome its financing difficulties. These options include: 1. Partnering with DBG Development Capital Eastern Europe 2. Establishing a strategic partnership with Bertelsmann 3. Reselling the regional broadcasting license to Polsat or a similar company 4. Considering a Polish Buyout (Strategic Buyout).

DBG has proposed buying out the remaining stake from Efekt and reinstating Szczerba as President of TVW. This arrangement would make Realbud the minority shareholder in the company. By aligning TVW with DBG under Szczerba's leadership, the company can benefit from capturing the $4 million profit associated with fourth-quarter advertising revenue. Additionally, DBG has access to credible funds amounting to $65 million from multinational investors.

Bertelsmann, a media company based in Germany, proposed aligning with TVW to realize synergies. Their proposal involved buying 19,500 shares of Realbud for $2.5mm and providing funding for the remaining equity required by TVW. Moreover, they would offer additional channels for programming and sports to their network. Alternatively, TVW could sell the regional broadcasting license to Polsat or another private media company seeking a quick entry into the Polish media market. The license's price could be determined based on the potential future TV ratings and the opportunity to capture 20% of the market's advertising share.

LVW's current infrastructure and growth projections make it potentially more valuable to a strategic buyer, such as Polsat, than to the two financial investors interested in the company. In the scenario involving DBG financing, this venture capital fund was created specifically for investing in Central European businesses. If TVW receives funding from DBG,

it is likely to obtain Council approval for foreign investment. Furthermore, DBG has suggested bringing back the past President, Szczerba, which would benefit the TVW brand and company as he is the founding visionary. Based on the required investment capital of $7.4mm and DBG's required rate of return, using the VC method of valuation, DB would need a minimum of 21% ownership in TVW.

DBG's current offer for Efekt's shares in LVW exceeds the price per share of the existing owners at $146.09. After the purchase, DBG will have a 44% ownership in LVW while Realbud will hold a minority stake of 49%. This acquisition also establishes a strategic partnership between DBG and Bertelsmann.

A partnership between Bertelsmann and TVW could result in strategic synergies, offering programming channels and sports networks that are currently unavailable to TVW. However, the suggested price point of $2.5mm for 19,500 shares by Bertelsmann would lead to a lower price per share for the original investors compared to the potential offer by DBG. Furthermore, the proposed price per share by Bertelsmann would increase foreign ownership to 50%, which the Council would not accept. Additionally, the new management proposed by Bertelsmann for TVW may not be favored by the existing owners.

TVW has the option to sell their regional broadcasting license to enhance their position by reselling it to Polsat or similar companies. By doing so, they can withdraw from the media industry. The suggested sale price for the license would be $2mm, which is equal to the debt owed to local Polish banks. This amount exceeds their current licensing fees, which stand at $0.5mm. Considering the limited

number of independent media broadcasters in Poland (only two), this premium price is justifiable.

The current valuation of the company at $69.20mm is higher than the value to DBG, making a buyout by a strategic player in the Polish broadcasting industry a favorable option for existing shareholders. Prior to accepting an offer from a financial investor, LVW should explore the possibility of being acquired by a strategic Polish buyer. This would result in the best payoff for existing shareholders. If a strategic buyer is not available, it is recommended that TVW consider the offer from DBG to secure the necessary $7.4mm funding.