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Ericsson AB, the world’s largest maker of wireless phone networks, will buy the wireless equipment unit of insolvent Nortel Networks Corp. for $1.13 billion after beating bids from Nokia Siemens Networks and MatlinPatterson Global Advisers LLC.

Source: Bloomberg. com

Date: 7/25/2009

Keys: Asset acquisition, bankruptcy, valuation, planning


Questions for discussion:

  • Why would Ericsson buy these assets from Nortel’s bankruptcy auction instead of developing them on their own?
  • At what point in the business cycle should firms anticipate bargain sales of assets? Explain why this is the case.
  • How should financial managers plan for this phase of the business cycle?

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