A decade ago, America has witnessed its biggest merger of their history when AOL and Time Warner merged for an all stock deal with a combine value of $ 350 billion which also created the world’s largest media and Communication Company, but today I want to re-examine this ill-fated deal and try to explore what went wrong. In an initial statement about this merger and probabilities of new company it was stated that this merger will lead to a speedy development and growth for all its businesses. It will not only provide AOL a new broadband interactive platform, but the companies can also grow their revenue through cross marketing from movies, music, and internet to telephone. Unfortunately, instead of delivering according to the promises made, the merger turns a disaster, which brings a loss of almost $ 100 billion in shareholder value. In my opinion the new company has so many management issues for example; lack of long-term planning, inferior product development, difference in organizational culture which is more prone to imitation then innovation, and most important of all the main players of the deal Mr. Gerald M. Levin (chief executive, Time Warner) and Mr. Stephen M. Case (co-founder of AOL) fail to transform their passion and vision to their people. Before I move any further let’s rewind the whole scenario, and look at the history of the companies as well as the market situation before merger and the reason for the merger;
History of Time Warner
Time Warner belongs to four Warner brothers, who somehow convinced their father to sell his golden wristwatch to buy cinematographs. This was the start of their film journey. In the beginning they use to show films on that cinematograph to the farmers in rural areas and later they register themselves in Hollywood in 1923 and started producing their own movies in 1925, in 1930 they launched their cartoon serious which went very popular among public. The name of their popular cartoon series are Bugs Bunny and Daffy Duck and Looney Tunes. These brothers had won many awards and produced an amazing amount of well-known classic films, which includes a huge number of Hitchcock thrillers and Casablanca. Warner Brother’s got merged with Time magazine to form Time Warner in 1989. This acquisition was made in US$14Billion. This new merger has formed a number of multi-media companies which included record labels, motion picture as well as television production and distribution, studio facilities and film libraries, television networks, book and magazine publishing. In 1996 Time Warner acquired Turner Broadcasting System, and became 2nd largest cable operator. Its printing side had made its prominent place in the printing world and became a dominant figure in 2000.
Market before Merger
The future growing media was considered as the new media sector in 2000. It was believed that successful media business is not just acquiring one media channel. It was considered important to provide the customers high quality information as well as entertainment content which is possible through media including internet. The internet can link all the customers in the world and it is an important partner of modern media. Time Warner has considered that its successful journey needs a major internet player in the market. So the company got a merger with AOL in 2000, at that time internet industry was in boom and most of the companies were overvalued, so the merger with one of the biggest player in the industry was fully justified at that time.
Reason for the Merger
To Time Warner Company, merging with an already existed internet company was a valuable deal as they were gaining world fame through internet channels. It was a wise decision at the end of Time Warner Company to merge with pre existing Internet Company as it could save the company, the cost of building an entirely new internet company. Through an internet facility now the media content was available on internet anytime...
Bibliography: Internet Sources:
1 Mergers, Acquisitions, and Corporate Restructurings. By Patrick A. Guaghan.
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