The first thing is to determine how the acquisition is going to affect AT&T through financial analysis. The acquisition of Kmart should in the long run increase their overall net present value combined. Since AT&T would be acquiring Kmart's debt, if the totals were combined, their overall long term value would increase 4%. Their shareholder's equity increases a noteworthy 22%. The next step is to determine value of stock and overall implications of acquiring Kmart's assets and liabilities. At this time according to the New York Stock Exchange, the value of Kmart stock is just a bit higher than AT&T's. However, after computing synergy valuation of both companies, we feel that Kmart's stock is actually valued at $26.23 per share. They need to determine how AT&T will pay for the acquisition of Kmart. Based on financial analysis with consideration given to their assets figure and liabilities, we have determined that a stock swap would be the most appropriate. For every one of Kmart's stock, AT&T will give 0.88 of their stock in return and this would be the ideal method because it would circumvent an increase in AT&T's debt. In light of this fact, AT&T needs to determine the tax implications of such an acquisition and calculate the effect of the tax burden on their overall financial portfolio. Therefore, we recommend AT&T to outsource to a company with acquisition expertise with the good and the overall well being of the company in mind to deal with tax issues.