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Post-Merge Intergration

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Post-Merge Intergration

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  • March 16, 2013
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What preliminary recommendations do you have regarding:
Q1. Autonomy of the target company within the buyer?
AOL and Time Warner merged claiming to be equal. “The transaction was spun to the world as a merger of equals, but in reality AOL, with its more valuable stock, was acquiring Time Warner” (Tim Arango 2010) meaning, this transaction can be viewed as AOL acquired TimeWarner.

Vancil (1979) describes target autonomy as “the extent to which the acquirer delegates or defers to the expertise of target managers over decision making within target functional activities” (cited in Zaheer, Castañer and Souder 2011,2). Puranam, Singh and Chaudhuri (2009) states: “The target’s routines and processes can be undermined by a lack of post-acquisition target autonomy” (cited in Zaheer, Castañer and Souder 2011,2). As Time Warner’s CEO Gerald Levin is the CEO of the merger, it can be viewed as a somewhat high level of target autonomy. Therefore it is important to achieve “desirable levels of target decision-making autonomy, particularly when the target brings new and thus unfamiliar elements to the combined firm” (Zaheer, Castañer and Souder 2011,2). However, seeing as AOL owns 55% and the AOL CEO Steve Case became chairman of the board, the autonomy appears to be in AOL’s favour. A merger or acquisition is regarded as complementary when the combination of two firms, i.e. Time Warner and America Online, is more valuable than the value of the firms separately (Zaheer, Castañer and Souder 2011). Zaheer, Castañer and Souder propose that “complementarity between target and acquiring firm is a specific condition that calls for high levels of both autonomy and integration because complementary targets bring elements unfamiliar to the acquirer” (2011,3). In acquisitions, complementarity occurs when components of the target, which for this merger would be internal technological components in traditional and digital media, “‘round out’ those of the acquirer to achieve joint...