Aol/Time Warner Merger

The AOL/Time Warner Merger Where Traditional Media Met New Media Kamal Kishore Verma

Table of Contents Executive Summary Time Warner History Market Situation Prior Merger Reasons for Merger AOL History Market Situation Prior Merger Reasons for Merger Proposed Synergies Proposed Valuation Reasons for Merger Failure Appendix Works Cited 6 7 8 10 12 13 16 25 2 3 4 5

The AOL/Time Warner Merger Where Traditional Media Met New Media Kamal Kishore Verma

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Executive Summary The merger of AOL and Time Warner has been judged to be a merger between two companies in fear. AOL feared that its business model needed continual adaptation to a changing internet and wanted to ensure broadband access. AOL needed to continue its growth by acquisition strategy in order to justify its high market capitalization. Time Warner feared that its outdated network of traditional media outlets (television broadcasting, publishing, movies, magazines, and newspapers) needed a facelift. Time Warner believed that for it to remain competitive it needed an immediate injection into the internet. But mergers out of fear are rarely successful. The valuation that analysts predicted (above $90 per share) never persisted as the two companies have not been able to fully integrate. AOL and Time Warner have not been able to formulate a strategy which can help the combined company move forward, the managers have failed to win the support of all divisions, and the dynamics and technologies of the internet have changed and have left AOL behind.

The AOL/Time Warner Merger Where Traditional Media Met New Media Kamal Kishore Verma

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Time Warner History The history of Time Warner traces back to Warner Brothers. According to the popular legend, four brothers convinced their father to sell his golden wristwatch and to buy one of the first cinematographs (Edison-cinetoscope). With this cinematograph, the four brothers went from town to town showing films to the rural population. Later, they...