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

Link: http://www.bloomberg.com

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?