Terra Firma

AT&T Capital

Description

AT&T Capital was the leasing and commercial finance arm of AT&T, employing around 3,500 people in more than 20 countries. It was auctioned as part of the tri-vestiture by AT&T of Lucent, NCR and AT&T Capital.

Strategy

Terra Firma believed AT&T Capital had a very reliable cash flow and identified the opportunity to securitise the company's lease receivables to finance the acquisition at low capital cost. Terra Firma also recognised the potential for operating efficiencies as AT&T Capital had been managed for asset and sales growth, with insufficient focus on managing costs.

Outcome

The AT&T Capital investment has been fully realised. Terra Firma's intention had been to develop AT&T Capital over a five-year period, but it was approached by a trade buyer before the programme to drive through operating efficiencies had been implemented. AT&T Capital was sold in January 1998 in a part stock, part cash deal which allowed both buyer and seller to share the benefits of the yet-to-be-implemented efficiency programme which had been developed by Terra Firma.

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